Every year, Americans donate millions of dollars to various charities. When making these donations, it is important that every donation be used as the donor intended and that the charity is legitimate.
The IRS oversees the activities of charitable organizations. This is a huge job because of the number and diversity of tax-exempt organizations and one that the IRS takes very seriously. The various exempt organizations can make donating a little tricky to understand at times.
Charitable organizations are most often organized as tax-exempt entities. To be tax-exempt under Code Sec. 501(c)3 of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes in Code Sec. 501(c)3, and none of its earnings may benefit any private shareholder or individual.
Tax-exempt organizations must file annual reports with the IRS. If an organization fails to file the required reports for three consecutive years, its tax-exempt status is automatically revoked. You can make sure that your donation is to a qualified charity and tax-deductible simply by looking up the organization in the IRS’s Tax-Exempt Organization Search.
Contributions to qualified charities are tax-deductible. The key word here is qualified. The organization must be recognized by the IRS as a legitimate charity. Using a website like BBB Wise Giving Alliance can also help you determine if your donation will be going to a qualified charity.
It is important that you never let someone pressure you into making a donation as this may be a first sign of an illegitimate charity.
Donations through social media or crowdfunding sites
This day and age, making a donation to a charity is as simple as a click of your mouse. Donation requests through social media or crowdfunding sites like GoFundMe are becoming increasingly popular. It is extremely important to use caution when making donations through these various formats because not all of these requests for funding are legitimate or related to a tax-exempt organization.
It is critical to do some research on your own to verify the legitimacy of these virtual requests. The best way to ensure your donation is going to a legitimate charity is to visit their website directly or access the various internet search tools previously mentioned.
Churches are not required to apply for tax-exempt status. This means that taxpayers may claim a charitable deduction for donations to a church that meets the Code Sec. 501(c)3 requirements even though the church has neither sought nor received IRS recognition that it is tax-exempt.
Most donations made directly to a charitable organization outside of the U.S. do not qualify. However, there are several U.S based charities that support work overseas allowing you to make a tax-deductible donation while helping a foreign country. Before donating to a foreign charity or for foreign purposes, please contact our office and we can determine if the contribution meets the IRS requirements for deductibility.
Please contact our office if you have any questions regarding the rules governing charities, tax-exempt organizations and contributions.