Tax season will soon be upon us, so if you haven’t made your annual tax-deductible contributions to charity, you’d better get cracking. Or perhaps you need to plan your charitable giving for the year. If you’re thinking this way, it’s a good thing, because charities are reporting an increase in donations, but not enough to meet heightened demand for their services.
So if you want to contribute to an organization that will put your money to good use, you should start by doing your research. The Internet has made it so easy to get information about the finances of nonprofit organizations. But there’s no way to gauge whether an organization is effectively using donor funds, unfortunately.
One of the best-known charity watchdogs, www.charitynavigator.org, is revamping its rating system, which currently relies on financial ratios, like the overall budget amount spent on programs vs. administrative costs. Critics of this say such ratings penalize charities which want to invest money to make their programs more effective.
Aside from that, if you only focus on a charity’s overhead costs, you may miss some worthwhile organizations.
In addition to Charity Navigator, you can also check with the Better Business Bureau’s Wise Giving Alliance at give.org, the American Institute of Philanthropy at charitywatch.org or GiveWell at givewell.org. You should also check the charity’s Web site, and look for evidence of widespread results, not just heartwarming stories.
You should also check the charity’s tax status. You can do so at irs.gov, which provides a list of charities and nonprofits that are eligible for tax deductible contributions.
But this tax season holds a new wrinkle: many small nonprofits lost their tax exempt status this year because they missed the deadline to file an annual return with the IRS. This means donations made to those organizations this year will not be tax deductible.
But don’t discount those. As long as you know they’re doing good work, you should continue to support it.
You can find a list nonprofits at risk of losing their tax exempt status at irs.gov.