Consumer Law

Donating to Charity the Smart Way

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Anytime there's a national or international emergency, people are quick to open their wallets to help others. However, on the flip side, there are many people waiting to take advantage of that generosity as well.

Before breaking out your checkbook or signing your savings over to an anonymous charity fund, use your common sense and do some investigating. According to the Federal Trade Commission (FTC), the best thing you can do is give to an organization that you're familiar with.

Where to Donate

Some places are generally safer than others. For example, choose to give to:

  • Your company's charitable foundation. Not only will the charity get your help, but you company may even match your donation  
  • The local chapter of the Red Cross
  • Some other organization with a mission and management team you can trust, like your church or other religious organization 

Beware that familiar groups may not sponsor funds with similar names. For instance, a fund called "The Red Cross Trust For Freedom and Peace" may not be affiliated with the Red Cross.

There are also ways to text your donation, but be sure the receiver is verified.

Research before You Give

If you're not sure about a charity, check it out before sending money. To research potential charities, contact:

Don't be afraid to ask questions before sending money. Make sure your donation will be used the way it's intended for: To help those in need. Scam charities have been a problem for years. Sometimes scammers keep the money for themselves, other times donated funds are used for illegal activities. In some instances, the lion's share of money donations goes to promoters and solicitors, with only a small percentage of the money going to the people in need.

Federal agencies such as the FBI and IRS investigate charity abuses, as do some state agencies. However, you are the first line of defense in keeping charities honest.

Ask for Proof

Follow the steps above when considering a donation. Also, ask for written materials about how the charity spends the money it receives. How much goes to expenses and how much actually goes to help the people in need? The American Institute of Philanthropy (AIP), a renown watchdog organization, suggests that 60% or more of your donation should go directly to the people you're trying to help, with the remainder going toward the charity's administrative and fund raising expenses, such as paying staff, mail costs, etc.

The AIP and other watchdog groups, such as the Charity Navigator, offer help in selecting charities that "do the most good" with the dollars you send and what to look for in a charity. And they remind us that charities should be willing and able to give you detailed information about their operations.

Phone Solicitations

Take the same cautious approach when someone calls you on the phone.

It's probably best to give your donation directly to the organization or charity. That's because solicitors cost money - money that doesn't go to the victims or their families.

If you do donate over the phone, give absolutely no personal or financial information. If someone asks you for details, such as your social security number or bank account information, hang up and contact the organization directly to report this incident. The last thing you want is to give to a charity and have your identity stolen in the process.

If you get a call from someone claiming to be from the police or fire department, keep in mind that even if the caller claims to have ties to your community, there's no guarantee that your money will be used locally or even for neighborhood safety programs.

Don't be tempted by promises of special treatment for donating - you're still getting that ticket for speeding whether you donate or not. Although there are many noble causes sponsored by police and fire departments, no solicitor should make you feel pressured into donating. Ironically, any one who does should be reported to the authorities.

Ask questions and demand answers. Request written information about the charity and how it will use your money.

In the end, make your check (don't send cash!) payable to the formal name of the charity.

Tax Deductibility

An important issue to bear in mind, especially at the end of the year, is whether your gift is tax deductible. A gift to a tax-exempt group (one that doesn't have to pay taxes) may not be deductible from your federal income tax return. So, ask if the organization is tax-exempt and whether your gift is deductible. Always ask for a receipt showing the amount of your contribution and how much of it's deductible.

Remember - giving a gift to charity is worthy, but making sure that your gift is used for those in need is priceless.

Question for Your Attorney

  • I keep getting phone calls from a particular charity. I don't want to give a donation and have told them, but they keep calling. What should I do?
  • I gave a donation to a tax-exempt group, how does this affect my tax return?
  • Is there any chance of getting my money back if I made a donation to scam charity? Is the donation still tax deductible?
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