Charitable donations are an excellent way to benefit a cause that is close to
your heart. But with so many organizations and fundraising sites (e.g.
GoFundMe) asking for your financial support, it’s imperative to take the time
and find out where your money is going.
Here are a few tips from the
Federal Trade Commission on how to screen the causes you support:
Pay by check so you have a record of your contributions. Also, “know
the difference between ‘tax exempt’ and ‘tax deductible.’ Tax exempt means the
organization doesn’t have to pay taxes. Tax deductible means you can deduct
your contribution on your federal income tax return.”
the charity to provide documentation on its mission and history. “Searching
the name of the organization online — especially with the word ‘complaint(s)’
or ‘scam’— is one way to learn about its reputation.”
Research the financial statements of the charity on CharityNavigator.com. Nearly
every organization will have overhead costs for things like staff, web hosting
and/or office space. Knowing the percentage of donations that support those
overhead expenses versus the percentage that directly benefits the target
audience or cause can help you make informed decisions on who you support.
Proceed with caution. When the charity “name…closely
resembles that of a better-known, reputable organization” (e.g.
America Red Cross instead of American Red Cross), “asks
for donations in cash or asks you to wire money” or “guarantees
sweepstakes winnings in exchange for a contribution.”