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Tax exempt organizations are the fastest growing sector
in the U. S. economy. Over 68,000 new charities were created between
2006 and 2007. There are nearly 1.8 million nonprofit organizations,
and the competition for funds has become intense.
As charities face inflation, government budget cuts
and an increasing public demand for services, they ask you for more
donations. Increasing numbers of charities use high-tech fundraising
techniques. Mailboxes overflow with fund-raising appeals. Phone
calls pour in from high-pressure solicitors. All this can leave
you confused about which charities are most deserving of your contributions.
Most charities are honest and accountable to their
donors. Unfortunately, a few are not. AIP suggests the following
pointers to help you give more effectively.
1. KNOW YOUR CHARITY
Charities have an obligation to provide detailed information to
interested donors. Never give to a charity you know nothing about.
Request written literature and a copy of the charity’s latest
annual report. This should include a list of the board of directors,
a mission statement and the most recent available audited financial
statements with accompanying notes.
If a charity does not provide you with the information
you request, you may want to think twice about giving to it. Honest
charities typically encourage your interest and respond to your
questions.
2. FIND OUT WHERE YOUR DOLLARS
GO
Ask how much of your donation goes for general administration
and fundraising expenses and how much is left for the program services
you want to support. AIP’s Charity
Rating Guide recommends that in most cases 60% or more of your
charitable donation should go to program services. Less than 40%
should be spent on general administration and fundraising costs.
Keep in mind that newer groups and those that are working on less
popular issues may find it necessary to spend a greater percentage
on fundraising and administrative costs than well-established, popular
groups.
Attempt to seek more information about charities
that identify as “public education” large portions of
their direct mail and telemarketing expenses. This may be done in
some cases to disguise high fundraising costs.
It is difficult to find out the real percentage of
donor dollars spent on program services due to the inconsistent
quality of charitable self-reporting. But you can ask the charity’s
representative for specific information, such as how many individuals
were served annually or what were the major program accomplishments
during the past year.
3. DO NOT RESPOND TO PRESSURE
Do not let yourself be pressured into contributing on the spot.
If you are not familiar with a charity, request additional information
in writing. Inspect it carefully and write a check if you decide
to donate. You have a right to say no. No legitimate organization
will pressure you to give immediately.
4. KEEP RECORDS OF YOUR DONATIONS
Do not give cash. Also, do not give your credit card number to a
telephone solicitor or internet site that you do not know. Be sure
to obtain a receipt or printed copy of your donation so you will
have a record for tax purposes. Read more tips for giving
on-line.
For tax purposes, you will need to keep a record of
all your contributions of any amount. For contributions under $250,
records may be in the form of a bank record, cancelled check, or
written communication from the charity. The written communication
may be in the form of receipt or letter that must contain the charity's
name and the amount and date of the contribution.
For all tax-deductible contributions of $250 or more,
the IRS requires that you obtain a receipt from the charity (a canceled
check will not suffice).
5. REMEMBER: “TAX EXEMPT”
DOES NOT ALWAYS MEAN “TAX DEDUCTIBLE”
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 the donor can deduct contributions to the charity on his or
her federal income tax return. Request the charity’s tax exempt
letter. If the charity does not have a tax exempt letter indicating
its status with the IRS, you cannot legitimately claim your contribution
as a tax deduction.
6. DO NOT BE MISLED BY A
CHARITY’S FAMILIAR NAME
Some questionable charities use an impressive name which closely
resembles the name of a respected, legitimate organization. Ask
for information in writing. Check out the charity with AIP or other
watchdogs or check with your state charity registration office before
making a contribution.
7. DO NOT BE ENTICED BY EMOTIONAL
APPEALS
Beware the pathetic “sob story.” The hard-luck appeal
is a favorite of some organizations. Question phone solicitors or
direct mail appeals which tell you nothing of the charity or offer
vague explanations for spending your charitable dollars.
8. ASK IF THE CHARITY IS
REGISTERED BY FEDERAL, STATE AND/OR LOCAL AUTHORITIES
Nearly all non-church charities with more than $25,000 per year
in income must file financial information annually with the IRS.
Currently 39 states and the District of Columbia require that charities
register annually. Bear in mind that registration in and of itself
is not a stamp of government approval or endorsement of the charity.
Beginning in 2007, charities with annual incomes of
under $25,000 will be required to file very basic non-financial
information annually with the IRS.
9. BEWARE OF CHARITIES OFFERING
GIFTS
Direct mail solicitations are often accompanied by greeting cards,
address stickers, calendars, key rings or other “gifts.”
Charities do this because it can increase donations. But do not
feel that you have to make a contribution to keep these “gifts.”
It is against the law for a charity to demand payment for any unordered
merchandise. Beware that these enclosed items can mean higher fundraising
costs for the organization.
10. CONSIDER GIVING GENEROUSLY
Once you are satisfied that the charity is worthwhile, give generously
if you can. There are many good charities that need your help to
operate valuable programs and provide needed services. When you
give wisely, you will be giving more effectively.
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