Naughty or Nice: A Guide for Giving to Charity
Doing the most good with your donation starts with following your heart, and then doing your due diligence.
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It is easy to slip into the holiday spirit when the beautiful sounds and sights of the season are upon us. Many people decide to do their annual giving at the end of the year. According to the National Philanthropic Trust, Americans gave $390 billion in 2016, up 4.2% from the year before.
It doesn't matter how you give — you can give your time, your money or your stock, for example — organizations will benefit from your generosity. But once you decide that you want to give, you have some other important decisions to make.
What cause is dear to your heart?
First off: Which charity is the right choice for you? For me, I have been a devoted supporter of the Parkinson Foundation of the National Capital Area. My dad was afflicted with the disease, and my family chose to support this organization because they help improve the quality of life for patients with Parkinson’s disease right in our community.
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Consumers should reflect on the causes that are close to their hearts to help guide their decisions. To focus your thoughts, consider your priorities: personal, work and community. Personal could be to a larger cause, such as cancer research or helping veterans. For work, many companies ask employees to donate to places such as United Way or Make-A-Wish organizations. Finally, a community could be a neighborhood clean-up, fundraiser or a church fund.
To get ideas on causes to support, you can check out Charity Navigator, which provides tips for donors and top 10 lists of different kinds of charities. It also provides star ratings for different charities. That brings us to the next step in charitable giving: Vetting the charity.
Is the organization worthy of your donation?
Now that you found the cause you’d like to support, you need to ask questions before you open your checkbook. Consider the following questions as part of your vetting process:
Where does the money go? Request information regarding CEO compensation, overhead and programs. Take the time to review the material before you decide to contribute.
How has the charity been effective in a community? Look at its results. How many families did the charity feed, or how much money was raised over the past few years? Information should be available online.
What is the organization’s mission? This should not be difficult for a charitable organization to discuss. Reputable charities understand their mission and communicate the purpose of their fundraising efforts.
What are the charity’s goals for the year? How does it measure its programs’ successes? These are crucial questions for supporters in order to understand both the mission of the organization and the impact of their donation.
Can the people running the charity prove they are reputable? All charities need to be registered in the state in which they are operating. Consumers can contact their state’s attorney general’s office to find out a registration status. Charities also must fill out a 990 IRS form, which details expenses, compensation and other financial information.
Continue your research online. Besides Charity Navigator, here are two other helpful sites:
- GuideStar provides consumers the IRS form 990 of nonprofit organizations, as well as information on a nonprofit's mission, legitimacy, impact, reputation, finances and programs.
- The Better Business Bureau’s The BBB Wise Giving Alliance provides a national-level seal of approval with its Standards for Charity Accountability. There are 20 standards that a charity must satisfy. If some standards are not met, consumers will see that in the charity’s listing.
Vetted, now what do you do?
Now that you’ve chosen your charity and you’re ready to give, here are a few other considerations.
Get a receipt. Some people may want to donate during this festive time to receive tax benefits. Make sure to request a receipt for your donation in order to provide documentation of your gift.
Consider donating your time. Many people are penny-pinching due to the economy or other factors, such as saving up for a big investment. Pay it forward by donating time visiting residents in a nursing home, ringing the red kettle bell for the Salvation Army, serving meals at a homeless shelter or organizing a church event. Organizations are always looking for volunteers and are very appreciative.
Consider the gift of stocks. Instead of giving cash, folks can give appreciated stock, which may be a way to avoid long-term capital gains tax. Another option is transferring some of your own stock to a recipient. You would fill out forms with the company and decide if you want the gift in a brokerage account or dividend reinvestment plan of your own. This type of giving can save money on taxes and support worthy causes. For example, you may be able to use the gift as a tax credit.
My own favorite local resource
Giving locally is always appreciated, so it can be helpful to look for an organization that can connect you with helpful nonprofits in your community. For example, in my area the Catalogue for Philanthropy: Greater Washington is a wonderful, locally focused guide to giving and volunteering. It believes in the power of small nonprofits to spark big change. Its goal is to create visibility for its charities, fuel their growth with philanthropic dollars, and create a movement for social good in the region.
The organization highlights the best local charities, and their work, to show what is possible when caring citizens connect with worthy causes, acting together on behalf of the greater good. Visitors can find causes close to their family’s hearts, such as education, human services, nature and more.
Visit cfp-dc.org/nonprofits to learn more about the amazing organizations featured in the catalogue. You can search for volunteer opportunities and events, as well request information and support your favorite cause.
By performing your own due diligence, you can make your end-of-the-year donations without worry. And you can feel good knowing that your gift will go far to help others.
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