Charity work is essential for helping individuals in need, advancing global causes, and bringing awareness to important issues. However, widespread concerns about the legitimacy of charities and individual worries about how to account for donations during tax preparation may keep people from giving, even if they want to. This guide discusses how to donate to charities effectively.
4 Tips for Making Charitable Donations
1. Find Legitimate Organizations
If you’re passionate about a cause, then chances are that you’ll find multiple charities that are actively seeking out donations. Sadly, it’s common for fraudsters to use fake charities to perpetuate illegal schemes, so you need to do your homework before donating. Be wary of any organization that only allows for cash donations, doesn’t provide information on what they’re doing, or guilts you into giving. Charities that use these tactics may not have the right motivations. You can also look at organization ratings if you need help finding a legitimate charity.
2. Decide How Much to Give
The structure of your charitable giving is entirely up to you. Many people view charitable donations as an investment, so they’ll designate a certain amount or portion of their income to charity each month. Following a structure keeps things simple for tax preparation and helps you build a habit of giving. However, you can choose to donate on a one-off basis or rotate the charities you give to depending on your preferences. No matter what you do, be sure to track your donations.
3. Look for Transparency
Honest organizations are often willing to post reports that show exactly what donations were received and how the funds were used. A common complaint about charitable giving is that donations are often used to partially offset an organization's administrative fees or operating expenses. Understandably, you want your funds to go directly to the cause you support, so look for charities that allocate most of your donation to helping those in need. If you have questions about how funds are used, reach out to the charity.
4. Plan for Tax Time
Charitable donations are tax-deductible, but it’s important to maintain records to have a log of who you donated to and when. Get an itemized receipt for all donations so that your tax preparation professional can properly account for your charitable giving. Consult with them to see what forms you’ll need to submit to the IRS since paperwork can vary depending on how much you’ve donated.
If you’ve made charitable donations, it’s essential to report these properly on your tax forms. Tax professionals at The Callen Accounting Group, PLLC, in Mountain Home, AR, can assist you with tax preparation. They’ve helped individuals and businesses in the Twin Lakes area with tax needs since 1973. Visit their website to learn about their services, or speak to a representative at (870) 425-6066.