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Find out all you can about charities before giving

12:00 AM CST on Monday, November 29, 2010

The holidays are the time when you’ll get many appeals for charitable donations.

Most are legitimate needs from legitimate organizations, but some are wolves in sheep’s clothing seeking to take advantage of your generosity.

“At this time of the year, when people are in the giving mood, it might make it easier for someone to use a phony e-mail or website to get your attention,” said Jeannette Kopko, spokeswoman at the Better Business Bureau of Metropolitan Dallas Inc.

You must separate the emotional tone of the appeals from the legitimacy of the organization making the appeal.

The key questions you want answered, and answered clearly, are: What are you going to do with my money? What’s the nature of the charity’s programs?

“However you decide to give, it’s important to stop and take the time to research the charity thoroughly to make sure that your dollar stretches the farthest it can in this tough economy,” said H. Art Taylor, president and chief executive of the Better Business Bureau’s Wise Giving Alliance.

“The emotion-laden appeals for help are very compelling,” added Thomas Tighe, chief executive of Direct Relief International, an organization that provides medical assistance to victims of poverty, disaster and civil unrest. “Get as many points of reference as possible before you part with your money.”

Find out how long the organization has been in existence. The longer it has been around, the more likely it will continue to exist.

“They’re doing something right,” Tighe said. “At least it has a track record that a consumer can assess.”

You can deduct charitable donations from your taxes only if you make them to a qualified organization. Most organizations, other than churches and governments, must apply to the IRS to become qualified.

Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific or literary in purpose, or that work to prevent cruelty to children or animals.

A good place to start your research is the Internal Revenue Service’s Publication 78, which lists organizations eligible to receive tax-deductible charitable contributions.

But some entities, such as churches and certain affiliated organizations eligible to receive tax-deductible charitable contributions may not be listed in Publication 78. Specifically, churches, their auxiliaries, conventions or associations of churches, and public charities whose annual gross receipts don’t exceed $5,000 may be treated as tax-exempt without filing an application.

Also, many churches are included in group exemptions, so they may not be listed in Publication 78.

Another IRS document you should obtain is a charity’s Form 990, which tax-exempt organizations – with the exception of religious institutions and certain church-affiliated charities – must file each year. Organizations that do file a 990 are required to provide a copy to anyone who requests it.

The form provides information on the organization’s expenses and program accomplishments and will show how much money is going to charitable activities vs. administrative expenses. You want to see more money going toward actually helping people.

“How is a charity translating donated money into good works?” Tighe said. “How do you evaluate if your money will do some real good? It is important to donors to be able to believe in a cause for emotional reasons and how to balance that with the actual impact the charity is making on those issues. Both are important.”

Many charities use programs in which a portion of a consumer’s purchase goes to the charity.

The Better Business Bureau says such promotions should clearly disclose:

• The actual or anticipated portion of the purchase price that will benefit the charity. For example, it should say, “Five cents will be contributed to ABC charity for every XYZ company product sold.”

• How long the charitable campaign will last.

• Any maximum or guaranteed minimum contribution amount.

Remember that this is your money you’re donating out of the kindness of your heart. It should go to a charity whose works match your values.

“It should be the good works that are rewarded, not just the marketing of the good works,” Tighe said.

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