Making a donation to a nonprofit is a good deed that many people want to do. You must also believe that those behind the organization are good people and trustable to make changes to the world, mustn’t you? Or is there also a group of people who pretend to be on a mission when they are just a bunch of scammers? Hold on, you need to investigate before giving out donations. It’s a shame that some of the nonprofit organizations are fake charities making fake requests.
According to FTC Consumer Sentinel Network statistics, around 4,600 reports of fraudulent applications were submitted in 2020. There’s always an opportunity to do that. Then as a donor, what should you do and how to check if a nonprofit is legitimate?
How to Check If A Nonprofit Is Legitimate
The form of charity fraud itself, not only occurs in a fake charity. But, there is also a fraud committed by charity employees asking fake requests for their personal purposes. There are also scammers who deliberately make the name of their organization similar to other well-known charities. And there are also charities that spend most of the donated money on overhead and other non-charity expenses.
Always be alert if you want to donate to a nonprofit organization. Here are ways on how to check if a nonprofit is legitimate.
Checking if a nonprofit is legitimate with Employer Identification Number (EIN)
EIN is also popular as the taxpayer identification number. To get one, a nonprofit needs to provide the contact information, name, and phone number of the applicant. Because, if something goes wrong with the donation, there will be an option to contact the charity. So there is no EIN then the charity is not valid.
Organizations always register annually with the IRS
If you want to make sure that your donation is tax-deductible, you need to check whether the charitable organization you are making a donation to is qualified to receive deductible contributions. The IRS maintains a database of qualified organizations, which you can check through the Exempt Organizations Select Check Tool (irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check/).
The IRS qualifies religious and government organizations to accept donations. If a charity is not or fails to register, this could mean that they are unable to provide information about its activities. They lack transparency and it is also possible that your donations are not tax-deductible if they are not registered with the IRS.
By being registered with the IRS, you can find out if a charity is tax-exempt based on its EIN (irs.gov). In essence, if the nonprofit is not registered with the state government or with the IRS, it means you have to donate elsewhere because the IRS is one of the main ways on how to check if a nonprofit is legitimate.
Donate with cash, gift cards, or wire transfers
Another way on how to check if a nonprofit is legitimate is to investigate different types of payment methods. A legitimate non-profit organization always has various types of payments for the donations they receive. If they only accept payments in cash, gift cards, or wire transfers, they may be scammers because these types of payments are difficult to track.
If they are a legitimate charity, they usually have check or credit card payment options. Also, if you intend to donate to a charity using a check, make sure the check is addressed to the organization and not to individuals. Also, make sure you are careful about giving out your credit card number over the phone. Legitimate organizations usually have secure donating options.
They provide donation receipts for tax deductions
Sometimes, when we give, we don’t want our help to be visible or we choose to be anonymous when donating. But what you need to pay attention to is whether this nonprofit has the option to provide a receipt of your donation to the charity. If a charity is willing to accept your gift but doesn’t have a professional-looking receipt, this could indicate that they are not transparent about how they use the donated funds.
Without a receipt, it will be difficult for you to get a tax deduction for your donation. If they don’t want to give you a receipt, this is the time to be suspicious. Make sure your receipt has specific information about the charity you are donating to, such as the name and address of the organization. The specific information in the receipt is also one of the ways on how to check if a nonprofit is legitimate.
They tell you what they will do with your donation
Even if a nonprofit is already legal, it won’t hurt to check out charities inspection pages like BBB Wise Giving Alliance, Charity Navigator, CharityWatch, or GuideStar to get an idea of ??how much spending is actually being spent on the program. Here’s an overview of the online charity evaluator resources you can use.
BBB Wise Giving Alliance
The BBB Wise Giving Alliance evaluates an organization based on the 20 standards they define, such as governance, effectiveness, finance, demand, etc. Each standard has one point, if they get a score of 20 from the BBB Wise Giving Alliance, then the organization is a good one.
Charity Navigator provides assessments based on the financial health, accountability, and transparency of nonprofit organizations. They have evaluated more than 8,000 tax-exempt charities, and if your chosen organization is not in the evaluation, you should find out why.
Charity Watch assigns a rating based on their criteria. These pages provide advice, articles, and basic information to the general public, but they also give members special access to specific charities.
GuideStar has information about nonprofit organizations, they evaluate the legitimacy of a nonprofit organization. In the organization’s financial documents, there is information about where and how they have spent the donations. It is crucial for nonprofit organizations to have these documents available to the public. If this isn’t available to you, you may need to reconsider your donation to a nonprofit.
So, make sure they are open about their finances, how they use the donation fund and how much of the remaining donation they have used for non-charity purposes. You also need to understand that a charitable organization also has administrative costs, ask them about that too. If a nonprofit claims that your donation will go fully to the needy, you may need to investigate further.
Broadly speaking, those are the ways on how to check if a nonprofit is legitimate. But you can also be on the alert and be wary of charities urging you to make a donation. It’s natural that you need some time to evaluate the legitimacy of a nonprofit organization. You can also ask for information about the organization and its programs before deciding to give. So, be careful if they urge you to make a donation immediately. It could be an alarm for you to stay away from them.
Another thing to take into account, there are also charities that suddenly appear immediately after a disaster occurs. Fake nonprofit organizations may pretend to solicit donations for disaster relief. Even though in the end the donations from donors never reach the victims.
- Five Ways to Tell if a Charity is Legitimate
- How to Tell If a Charity Is Legitimate
- How to Tell If a Charity Is Legitimate: Tools and Tips for Donors