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Why It’s Important to Research a Charity Before Donating | Peter Palivos, Attorney

It can be very tempting to donate to a charity that tugs at your heartstrings and elicits feelings of empathy, anger, or sadness. However, no matter how tempting it may be to throw resources at an organization, it’s very important to first do some research. The sad truth of the world is that scams will […]

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It can be very tempting to donate to a charity that tugs at your heartstrings and elicits feelings of empathy, anger, or sadness. However, no matter how tempting it may be to throw resources at an organization, it’s very important to first do some research. The sad truth of the world is that scams will always exist to prey upon the emotions and goodwill of people in any given society. In addition to conning innocent people out of their money, they also harm the intended recipients who will never see a single penny. Any reliable charity will be registered with the Internal Revenue Service (IRS) and provide tax-deductions for donations. A fraudulent charity will offer no such deduction since it’s illegitimate.  

One of the easiest ways to get an organization’s information is to ask for their Employer Identification Number (EIN). This is a unique nine-digit number that is assigned by the IRS. It is given to all businesses operating in the United States as a means of identifying them. With this number, you can do a search on the IRS website to see if they are a legitimate 501(c)(3). The annotations are added to signify a company’s nonprofit status. 

Once you have established the legitimacy of a nonprofit, there is still more due diligence to be done. Many organizations can be legitimate but still be a bad fit for you as a donor. Charity Navigator is a useful website that helps match prospective donors with a cause they wish to support. The website’s third-party, impartial rating system evaluates companies on two metrics – financial health and accountability/transparency. This results in a numerical score that correlates to a star rating system. Four-star organizations are the ones who score 90 percent and higher. 

Some people who have the financial means to support charities on a larger scale tend to have their contributions managed instead of doing them personally. A donor-advised fund is like a checking account that handles everything. After a cyclical contribution is made, the donor receives an immediate tax deduction. The fund also recommends grants over time as the fund grows.

This article was originally published at peterpalivos.net

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