Guest Blog: Karen Chan on Giving and Donating: Be Smart with Your Support

Karen Chan is a financial educator and speaker. She partners with Illinois libraries to provide programs that help patrons make wiser decisions with their money. Her workshops cover high-stakes decisions such as investing in a 401(k), deciding when to take Social Security benefits and choosing a financial adviser.  Karen has been educating the public about financial topics for more than 20 years, first as a consumer economics educator with University of Illinois Extension and now through her own business, Karen Chan Financial Education & Consulting, LLC.As part of One Book, One Chicago, Karen has been working with Chicago Public Library to present workshops at neighborhood branches on the subject of charitable giving. To make the information available to everyone, we decided to devote a blog post to the topic.

Giving and Donating: Be Smart with Your Support

By Karen Chan

If you donate money, time, used items or valuable assets to a charitable organization, you owe it to the organization and to yourself to be wise about how you provide that support.

There are many reasons why we choose to support causes or groups: we want to better our community or the environment, it makes us feel good or we want the tax benefits. Whatever your motivation, how you provide that support determines whether you and those you want to help get the most benefit from your donation.

Evaluate

Three guidelines can help get the most impact for your dollar.

1. Give directly to a group rather than through a fundraiser to ensure less of your money is siphoned off before reaching those you want to help. According to Consumer Reports, fundraisers take between 40 percent and 80 percent of your donation before the money reaches its intended destination.
2. Choose an organization that uses most of its money for programs, not administration. Information about this is available from online charity evaluation tools:
   • Charity Navigator
   • CharityWatch (Requires donation for full access, but free information is helpful)
   • BBB Wise Giving Alliance
3. Choose programs with documented impact. Read annual reports, visit their websites or make site visits to see what they are really accomplishing.

You can see a great example of how Chicago Magazine applied these ideas in its Guide to Charitable Giving in Chicago for 2012.

Avoid Frauds and Scams

The IRS has named fake charities to their Dirty Dozen Tax Scams for 2016. Use these tips to be sure the group you choose to support is legitimate.

• Get the exact name. Is it one you recognize, or is it a sound-a-like? Search for the charity name online, combined with a term such as “scam,” “fraud” or “complaint” to see what others are saying about the group.
• Ask for details, including their address, phone, website and purpose.
• Verify that your contribution is deductible. Ask for the organization’s Employer Identification Number. Use that number to search for the organization on the IRS list of qualifying organizations, Exempt Organizations Select Check.
• Don’t donate cash or wire money to an organization. Legitimate groups will welcome your check or credit card payment.

If an organization uses any of these tactics, it could be an indication of a fraud or scam:

• Mentions a pledge you don’t remember making.
• Offers to send a delivery service to pick up your donation.
• Guarantees sweepstakes prizes or special treatment by police or other officials.

Scammers like to take advantage of our emotions after a recent tragedy, so be cautious if you’re approached to donate to help survivors or victims of a disaster.

Report Fraudsters

If you believe you have been the victim of a fraud or scam, speak up! There are several government agencies that may investigate an organization if they receive complaints.

• City of Chicago Department of Business Affairs & Consumer Protection: Call 311 or file your complaint online
• Illinois Attorney General: File your complaint online or call
  • Fraud hotline: (800) 386-5438
  • Chicago main office: (312) 814-3000
  • Chicago South: (773) 768-5926
  • Chicago West: (773) 265-8808
• Federal Trade Commission: (877) FTC-HELP or file your complaint online
• Better Business Bureau

Get Income Tax Benefits for Your Donation

Our tax system provides significant incentives for taxpayers who support charitable causes:

• You may be able to deduct the value of a donation if you itemize rather than taking the standard deduction.
• If you donate assets that have appreciated in value since you acquired them (such as stocks or works of art), you may be able to avoid paying tax on the increase in value.
• If you plan to leave some of your estate to charity at your death, choosing which assets to leave to charity and which assets to leave to others can reduce or avoid any income taxes your heirs might owe on assets such as retirement accounts.
• Taxpayers who are 70½ or older can make qualified charitable distributions from their IRAs by having distributions of up to $100,000 per year go directly to a qualified charity. This strategy provides a tax benefit by reducing taxable income, rather than taking a deduction, so it's particularly helpful for those who do not itemize deductions.

Donating to a charity can be as simple as dropping change into a boot at an intersection or a bucket when you enter a store. But it can also be as complex as setting up a charitable gift annuity or a charitable remainder trust. Taking the time to evaluate and choose the best way to make your donation means that you and the recipient will get the greatest benefit from your generosity.