With all of the world events going on in the recent years, the IRS is pushing harder than ever to make sure taxpayers are not scammed out of their genuine desire to improve their communities. One of the largest scams currently making its way through the United States is false charities seeking to take advantage of the empathetic. We want to give you 3 key details to make sure of before you go to donate to a good cause that may end up pocketing your money instead of improving your community the way you want.
Step #1: Check The Financials
All charities in the United States, that are registered for tax-exempt status and tax-deductible status for contributors, must make their Form 990 available to the public every year as filed. Form 990 is a financial report similar to public corporation filings for the SEC, which alert the donors to the status of charity, and the use of the funds in the charity. The first page of the 990 lists the organization’s goals, revenue of the prior year and current year, and expenses related to the organization. Assuming this is a legitimate charity, most of the revenue should be going towards their mission. Sometimes, however; the charity may have a questionable allocation of donations, such as high fundraising fees that cost more than the actual giving. We would also recommend looking at any auditor’s reports, to see if loans are being made to “related parties” on the balance sheet as that is another way of moving money tax-free from the charity to the owners.
Step #2: What Mission?
The second key detail to look for is “What is their mission?”. Most scammers are careful to select causes that are either out of the United States (sending aid to Africa or an Indonesian country are two popular examples), or causes that are very broad. For example, a popular scam charity would be the “Defeat Diabetes Foundation”. On the surface, this is a great mission for people to get behind, but where are the funds going? There’s no commitment to one organization specifically that can be followed up with to see if the funds donated were received or if they were pocketed by the foundation’s owners. The ST Jude Children’s Hospital donations are a great example of a good charity since we know where the funds are going, we can follow up with the organization to see if the funds were received, and we can verify through their financials how much of the donations are going towards charitable items.
Step #3: Look To Google
The third key detail we want everyone to do, is use free reliable organizations to double-check the charity that you are considering. The two we have used for researching this article are mainly the BBB Wise Giving Alliance, and the Charity Navigator both of which offer great insight into numerous charities from around the world. In your free time, take a look at both of these and search for some charities you have donated to in the past. We believe it is important to make sure organizations are handling your donations responsibly and in the way you had intended.
Summary
Organizations that are truly making a difference in their communities, big or small, can be verified by all three of the options we presented above. Take your time to ensure the charity you want to give money to is using your donation the way you want it to be used. Communities around the world, even in your local areas have been positively impacted by charities seeking to improve everyday life for people. Your donations going to the right charities can and will make all the difference in your local communities.
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