Due Diligence is Critical in Charitable Donations
As Americans, we tend to make most of our donations to charitable organizations at the end of the year. However, the fact is that it does not matter when you make a donation to charity; it is important to do your due diligence on the organization before making any donations to it.
Do you give to charitable organizations to assist them with their financial goals? Be sure when you make a donation that the organization is providing proper documentation for donations, and you check them to make sure you are donating to the one you think you are. In order to make the process a bit easier and to make sure that you are getting credit for your charitable donations, here are a few steps to follow:
Check their organization status. 501(c)(3) is the most common type that accepts donations and allows people to write off the deduction. Depending on the type of organization, there are others that also allow this type of donation and deduction combo.
Receipt! Receipt! Receipt! While all donors should automatically get a receipt for their donations, nonprofits are only required to provide them for donations greater than $250.00. So, make sure to ask for a receipt every time.
If you are planning to give to a new organization for the first time, make sure it is legitimate before doing so. Prior to your donation, take a few minutes to research the organization and make sure that they are actually doing the work that they claim. There are plenty of legitimate and illegitimate organizations out there trying to get donors to give to them. Some organizations also make their name sound almost exactly like a valid one, so be sure you’re verified the spelling and that all words match who you think you are giving to.
Ask these questions:
Are they being financially transparent?
Do they explain how their donations are being used?
Is a decent amount of their donations going towards programming?
Check out GuideStar, Give, or Charity.org to find out their detailed financial information in order to see if they are the type of organization you want to be donating to or somewhere with less overhead and more money going into helping their actual programs.
If you are hoping to get a tax deduction on your donation, the funds must be in the hands of the organization by December 31st in order to claim it on this year’s taxes return.
While giving money as a donation is a great way to support them, remember that there are other ways to donate as well such as donating stocks and bonds, or making a charitable bequest to the organization. Before doing that, you’ll want to speak to your favorite organization first to make sure that they are able to accept and handle alternative donations.
It is important to vet a charitable organization before giving; it will make handling it at the end of the year much easier. If you are unsure how donations will impact your tax return, be sure to chat with your CPA. And if you need assistance with bookkeeping to track donations, reach out to us at 310-534-5577 or contact@abandp.com!
Find more information from the source of this article here: https://www.cpapracticeadvisor.com/accounting-audit/article/21220559/due-diligence-is-critical-in-charitable-donations?oly_enc_id=7222G6724501J1L
