Eight tips to make your donation count
More charities will be competing for contributions this year as the economy weakens, threatening donors' incomes. Many of them are legitimate groups that are dedicated to bringing about positive changes; others are mismanaged and fail to meet their goals.
It's not always easy to identify a worthy charity. The American Institute of Philanthropy, a charity watchdog group in Chicago, offers these tips to help you donate wisely.1. Know the charity
Potential donors should have access to a charity's annual report, which includes detailed financial and management information. If a group refuses to provide such information, don't give to it. Reliable charities try to foster donors' interest and will answer questions promptly.2. Find out where the donation goes
Find out how much of your donation goes toward the group's administrative expenses and how much goes toward its programs. No more than 40 percent of a donation should go toward operating costs, unless the group is new.
If you can't figure out the portion spent on administrative or fund-raising costs, ask for other details such as how many people the group has helped or evidence of major accomplishments. The American Institute of Philanthropy also offers a handy rating system to help donors evaluate charities.3. Don't give in to pressure or emotional requests
Some charities pressure potential donors to decide immediately. Others will try to sway them with a sob story about the people the group is trying to help. Don't give in if you're unfamiliar with the charity. Ask for more information in writing, and if you donate, pay with a check.4. Document your donations
Never give cash, and never give a credit card number to an unfamiliar website or telemarketer. Stick to payment methods that leave a record, such as checks. Always get a receipt or a printed record of your donation for tax reasons.
If you make a donation that's more than $250 and want to claim it on your taxes, the Internal Revenue Service will require a receipt from the charity. For smaller amounts, a donor needs to provide a cancelled check, bank statement, or written confirmation from the group.5. 'Tax exempt' doesn't always mean 'tax deductible'
"Tax exempt" means that a group doesn't have to pay taxes. "Tax deductible" means that donors can subtract contributions from the federal income tax they owe.
Be care: You can't deduct all donations from your taxes. Only donations to tax-exempt groups can be deducted. To find out, ask for a copy of the group's tax exempt letter.6. Don't be fooled by a familiar name
Some sketchy groups will lure donors by using a name that's similar to that of an established charity. Always ask for information about the group in writing, and find out if it's registered with the government or tracked by a watchdog group.7. Ask if the charity is registered
Thirty-nine states and the District of Columbia require that charities register with the government each year. Many charities must also file financial information with the IRS. While registration doesn't mean the charity is worthy of a donation, you may be able to learn more about the group.8. Don't give in to gifts
Some groups try to entice donors by providing gifts such as address labels, greeting cards, and calendars. Don't feel obligated to donate if you receive a gift. By law, you're not required to pay for products you didn't order. These items often raise a charity's fund-raising costs, reducing the amount available for advocacy or services.