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Investigating Charities

BEFORE GIVING TO A CHARITY, you want to be confident the money will end up helping your favorite cause, rather than being lavished on handsome salaries for the charity’s staff and other administrative costs.

Doing an online search may turn up any complaints about the charity. Your state government or the Better Business Bureau might also have complaints on file. Check out the BBB website for charities and donors at Give.org. In addition, you might review the charity’s Form 990, which it is required to file with the IRS and which might be available on the charity’s website. This will give you details on its finances.

Make sure the organization is not just tax-exempt, but that it carries the Internal Revenue Service’s 501(c)3 designation, which means your contributions will be tax-deductible. The charity’s website should tell you. If you’re uncertain, go to IRS.gov/charities and click on “EO Select Check.”

As you investigate a charity, look for concrete results from the past year, rather than just a nebulous statement of purpose. You might try using CharityNavigator.org, CharityWatch.org, GiveWell.org, GuideStar.org and MyPhilanthropedia.org. CharityWatch.org and MyPhilanthropedia.org list top-rated charities by category. GiveWell.org tries to identify charities that do the most good per dollar spent. GuideStar.org allows you to download a charity’s Form 990. Charity Navigator.org details how much of a charity’s budget goes to administrative expenses and to fundraising costs—and how much to the charity’s programs. The most efficient charities spend 10% or less of their revenue on administration and fundraising.

One tip: If a telemarketer calls seeking a donation for a charity, say “no,” even if you’re inclined to give. Telemarketers often take a large cut of any money they raise. If you want to contribute, give directly to the charity.

Next: Deducting Charitable Contributions

Previous: Having the Talk

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