Giving
money to help disaster victims is a great thing to do. It helps those
in need and it serves as a tax deduction for you. But if you’re not
careful what organizations you’re giving to, you may not get the tax
benefits you think you’ll be getting.
CNN Money recently published an article outlining the dangers of donating to organizations that you haven’t researched.
If an organization hasn’t received the proper approval from the IRS to
become a 501(c)(3) charitable organization, taxpayers aren’t allowed to
deduct donations to it.
CNN’s article presented a case in point. In February, the New Jersey Attorney General filed a civil suit against the Hurricane
Sandy Relief Foundation. The suit alleged that the Foundation had
falsely claimed donations would be tax deductible. It also alleged that
the organization had raised more than $631,000, but had given less than
1% to victims. It also claimed that approximately $13,000 in donations had been
transferred to personal bank accounts, according to court documents.
Even legitimate organizations can cause problems for taxpayers if they haven’t secured proper 501(c)(3) status. Also
keep in mind that funds set up to support or benefit a particular
individual or family (such as those set up for the family of a specific
victim of the Sandy Hook Elementary shooting) don’t qualify for
tax-exempt status.
Before donating to an organization, check it out on the IRS’s search tool to
make sure it is a legitimate organization that it is eligible to receive
tax-deductible contributions. And remember that to claim a contribution
greater than $250, you must receive a letter from the organization
acknowledging the donation.
If
you try to deduct a donation to a non-eligible organization, you’ll
need to pay a penalty and any unpaid taxes, as well as interest. It’s
not worth risking.
