Holiday giving guide: How to avoid holiday charity scams

Money, News

The holidays bring out the generosity in people, whether that means buying the perfect gift for a loved one or giving money to a nonprofit organization. Approximately 40 percent of charitable contributions come in December, according to Slate, right in time for the holidays (and to qualify as year-end, tax-deductible contributions).

Sadly, there are also those who are all too ready to take advantage of this admirable impulse. As donations increase in December, so do charity scams.

Common holiday charity scams

Some common kinds of charity fraud include setting out phony spare-change canisters by store registers, using a fake name that sounds similar to a well-known charity and soliciting donations by email or phone for a non-existent organization. You should also be suspicious of “charities” that withhold information from you or insist that you donate immediately.

Does that mean you shouldn’t donate? Absolutely not. It just means you should do your research first.

Choose charities wisely, with a little research

The Federal Trade Commission (FTC) recommends that you confirm the charity’s nonprofit status through the IRS to ensure that it is a registered 501(c)(3) nonprofit organization, which means that your contributions are tax-deductible.

The FTC also recommends finding out more about the charity on sites like Charity Navigator, Charity Watch, GuideStar and the Better Business Bureau.

When evaluating a charity, things to look for include:

  • The percentage of income that goes to the program, as opposed to administrative or fundraising costs. The rule of thumb says this amount should be 75 percent or more.
  • Whether the CEO’s compensation is reasonable. The average is $150,00 per year, according to Charity Navigator.
  • Transparency around the charity’s accounts and practices, which you can learn about on the above charity review sites.

You can also look to see how long a charity has been in operation. However, just because a charity is young doesn’t mean it should be avoided. Many worthy groups are relatively new — Charity: Water and come to mind — and they may just spend a bit more on infrastructure costs than more established organizations.

Looking for charity suggestions? Be sure to read our article on 21 charities that deserve your donations this holiday season.

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