Questions to ask before you donate
Editor's note: The following Money Management column on personal finance was prepared and distributed by certified public accountants.
Even in a bad economy, people still reach deep into their pockets to help out those who are less fortunate, especially as the holidays draw near. However, in good times or bad, it's important to know that the money you are giving to a charity is truly being put to good use.
Many con artists try to cheat people out of their dollars by pretending to be involved in a legitimate charitable organization.
The Minnesota Society of CPAs (MNCPA) offers these questions to ask to ensure you are avoiding charity scams:
Can you give me details in writing?
A reputable organization should be happy to supply you with written information that covers its address and contact details, what kinds of work it is involved in and whether your donation will be tax deductible. You can also learn more about individual organizations through the Better Business Bureau at www.give.org. If the group refuses to provide you with any information, or gives hazy answers about its mission or its tax-exempt status, don't turn over any money to them.
Should I respond to this e-mail?
Many con artists use e-mail to solicit donations for phony charities, so do some research before sending money in response to an online appeal and never reveal any personal or account information in an email.
How much of my money really goes to charity?
Ask if the person or group soliciting the donation is a paid fundraiser, and how much of your donation will actually go to those in need, rather than paying for salaries or other administrative costs. Go to www.charitynavigator.org to see ratings of various organizations and a full report, including details on how their money is spent.
How long have you been in business?
Every day the news brings compelling pictures of natural and manmade disasters and other problems that leave people in need of help. Charitable groups often seem to spring up out of nowhere to help, but even if their intentions are good, donating to a brand new group may not be the best idea. That's because the group may not have the experience necessary to get the job done. Your charitable dollars may be better spent by an organization with a long history of responding to similar disasters or problems. Remember, too, that disasters often bring out fraudulent organizations trying to take advantage of the public's generosity, so be particularly careful when dealing with an unknown group.
Do I have to donate to win a prize?
Some groups tell you that your donation qualifies you to enter a contest for valuable prizes. In fact, it is illegal to require you to make a donation in order to win a prize. Donations to organizations that use this come-on are probably not really going to those in need. And the "contest" is likely bogus, as well. Find out also whether your donation is tax deductible, as it should be when made to a legitimate charitable organization.
Can you repeat the name of your group?
Many phony operations choose names that sound just like legitimate, well-known charitable organizations in order to con people into trusting them. If you're uncertain about whom you're dealing with, contact the better-known group to see if the solicitation is really from them.
Rely on your CPA.
Your local CPA can offer advice on how to spend your money wisely, whether you're making a charitable donation or putting together a family budget. Turn to him or her with your financial questions.
Information and resources are available to the public on the MNCPA website www.mncpa.org/information and at MyTaxTime.com including tax and financial planning information for individuals and small businesses. A free CPA referral service is also available on the website or by calling 1-800-331-4288. The MNCPA is part of the national 360 Degrees of Financial Literacy campaign to help Americans improve financial literacy. Information and resources are available at www.mncpa.org/360.