Question:

What should I look out for when deciding to which charities to give?

Ignore your Heart, Sometimes

Unfortunately, many charity scams focus on events or subjects that pull at your heart strings, such as disasters, issues of patriotism, children, animals or other vulnerable groups. If you are not familiar with the organization or the cause, or if the appeal seems overtly emotional or uses statistics that seem unreal to you, take the time to get more information. Do some research on the cause, and ask the organization for documentation.

In many cases, these appeals will be legitimate and you will choose to make the donation and help the cause. In other cases, you may find that the appeal was not legitimate, and you can focus your energies on finding an organization that will help the cause. At the very least, be skeptical of extremely emotional appeals just so that you are sure that you are making a clear choice to give; no charity should be the result of emotional trickery!

Let Your Fingers do the Walking

If you receive a solicitation from a third party, such as a volunteer or a professional fundraiser who says he or she is calling on behalf of an organization, call the charity to find out if it is aware of the solicitation and has authorized the use of its name.

If a telemarketer claims that the charity will support local organizations, call the local groups to verify. If the answer to either of these questions is "no," this should raise a red flag.

Donation Due Diligence: Get Receipts

It's better to be safe than sorry, and you will need documentation for tax purposes. Ask for the organizations to which you donate for a receipt showing the amount of the contribution and stating that it is tax deductible.

If you received any principal in return for your donation, or if you donated material goods, make sure that the amount that is tax deductible is also provided on the receipt.

Donation Due Diligence: Get Advice

When considering making a donation, particularly a large one, or one of any size that will put a strain on your own finances, be sure to discuss the donation with a trusted family member or friend, or with a financial advisor, before committing the funds.

Some sophisticated but underhanded organizations can really have their acts together, and an objective perspective can be valuable in identifying the flaws in their pitch.

Donation Due Diligence: The Money Comes Last

It may seem obvious, but if you have any questions about the legitimacy of the organization from which you have received a solicitation, or if you are just not sure yet whether you want to give to a cause, or how much to donate, do not provide any credit card or bank account information to the organization.

Once you have reviewed all information from a charity and have made the decision to donate, then work with the organization to get them the money.

Use Due Diligence Before Donating

Aristotle said, "Giving away money is easy. Deciding whom to give it, how much, when and how, is not." Choosing among the many worthy causes can be a challenge and, unfortunately, the choice is made all the more difficult by organizations that are not necessarily on the up-and-up.

Sadly, there are many charity scams out there, to such a degree that the Federal Trade Commission (FTC) advises citizens to undertake due diligence and get as many facts as possible before donating. This research will help ensure that your donation dollars benefit the people and organizations you want to help, and doing such research is a good practice whether you are contacted by an organization's employees, volunteers or professional fund-raisers, and whether the solicitation for donations comes by phone, mail, the Internet or in person.

Do not be Misled by a Familiar Name

Some questionable charities use an impressive name which closely resembles the name of a respected, legitimate organization. When you receive a solicitation from an organization that sounds familiar but that you don't know well or with which you do not have an existing relationship, ask for information on the organization in writing.

Check out the charity with the Federal Trade Commission, charity ratings providers such as CharityWatch, Charity Navigator or GuideStar, and/or your state charity registration office before making a contribution. You might also want to check IRS publication 78 to confirm that the organization is eligible to receive tax-deductible contributions.

Donation Due Diligence

Not all charities soliciting for good causes are eligible to receive tax-deductible contributions. "Tax exempt" means the organization does not have to pay taxes. "Tax deductible" means you as a donor can deduct contributions to the charity on your federal income tax returns. In the United States, organizations designated by the IRS as a 501(c)(3) organizations are both tax exempt and can receive tax-deductible contributions.

Generally, humanitarian, religious, medical, and educational organizations qualify, while political organizations and other nonprofits do not. Be sure to ask for charity's tax exempt letter, which should specify whether they can accept tax-deductible contributions.

*Refer to IRS publication 78 for a listing of current 501(c)(3) registered nonprofit organizations. Note that this only matters if you want the tax deduction: not having a 501(c)(3) status does not mean that the organization is not promoting a good cause. Just be informed, so that you make the decision and the donation that is right for you.

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