Randolph Law Firm, P.C.

Charitable organizations must have tax-exempt status with IRS

If you like to give to charities during the holiday season, or if you're in need of an actual tax deduction for charitable giving, there are some pitfalls and general principles to follow in order to maximize your experience. First, you should check with the IRS to determine the tax status of the group. A company located in Nevada or elsewhere may be organized as a non-profit, but it may not have tax-exempt status for the purpose of giving donors a deduction for contributions.

You can check a company's tax-exempt status by consulting with the IRS at one of its official online sites. You can also obtain valuable information at the Charity Navigator site on the Web. Because of the vastness of the non-profit sector, all kinds of entities are out there vying for your money -- and right now, for your holiday money.

Naturally, a feeling of wanting to give is enhanced during this season. However, the efforts of unscrupulous non-profit groups are also at a high pitch during the holidays. Of course, you can feel safe dropping money in the Salvation Army Christmas basket, but can you trust the unknown non-profit that sends you a flyer asking for funding?

The only way to know is to do your homework prior to departing with your funds. One thing you may want to look up on Charity Navigator is the percentage of its funding that a group spends on administrative and fund-raising as opposed to how much it spends on actual services. You want to focus on donating to entities that devote at least 75 percent of their funds toward providing services. The IRS in Nevada and elsewhere can also provide information about the status of these groups, including whether it has an approved 501(c)(3) exemption.

Source: The Boston Globe, "Giving to charity? Research your nonprofits before you donate", Brian Kollars, Dec. 9, 2014

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