How to avoid scams when donating to charities this holiday season
The holidays are traditionally a time when many Americans go the extra mile to help people in need. Whether it’s dropping a few dollars into a Salvation Army bucket or writing a check to a preferred charity, many of us will dig a little deeper to help others during this season of giving.
However, it’s important to do a little homework on any nonprofit before you make a donation. While most charities are legitimate and do incredible work to help others, there are unfortunately some that are set up primarily to support the people running them, or that simply aren’t what they claim to be.
Fortunately, there are steps anyone can take that can help you make informed decisions about your charitable contributions. “It’s ideal to donate to nonprofits that are well-governed, have financial stability and are well run,” says Amy Pieper, director of nonprofit services for Commerce Trust, a division of Commerce Bank. “A good place to start is the organization’s website. Many nonprofits will have annual reports online that you can review to see what their impact really is.”
Pieper also encourages potential donors to simply pick up the phone. “Any employee should be able to answer basic questions you might have — and legitimate ones are usually happy to do so,” she says. “Questionable ones may deflect or give you unclear responses, if they answer the phone at all.”
Laurie Boone Noel, a foundation administration specialist at Commerce, notes that the IRS has an online database that allows anyone to verify whether an organization is officially a tax-exempt nonprofit. “Confirming the organization is listed in the database is a great first step to determine whether a charity is real,” she says.
Noel adds that when she is researching nonprofits to determine whether Commerce wants to support them, she will review their tax filings as well. “It’s a way of confirming that they’re using donation dollars in the way they say they are,” she says. “Is it a pet charity that exists only to pay its executives’ salaries, or does it really do good work in the community? Tax filings give you clues in that regard. If executive pay is too much of a percentage of income, that’s a red flag.”
Pieper says another red flag is if you receive an unexpected call or text from someone claiming to be with a nonprofit and asking for a donation. “My antenna always goes up if that happens,” she says. “If they start pressuring you to donate on the spot or want you to donate via a wire transfer or gift card, don’t do it. No legitimate nonprofit will ever do these kinds of things.”
Noel agrees. “I would be leery of phone calls seeking donations,” she says. “If you get that kind of call, ask for their website. If they say they don’t have one, that’s a concern. Or, if they do have one but you can’t find anything on it that says they’re a nonprofit, that’s a clue as well. There are plenty of organizations out there that ask for donations but aren’t actually nonprofits.”
Charlotte Kemper Black, the director of the Commerce Bancshares Foundation, suggests that, similar to being wary of phone calls and texts, you should be cautious with emails you receive that ask for donations around the holidays. “Follow the same guidelines you would for other potentially fraudulent emails,” she says. “If the email is poorly written with many typos and wants you to click a link in the email to donate, stay far away.”
Black does note that some legitimate charities are grassroots organizations and may not always use perfect grammar. “That’s when the IRS listing comes in handy,” she says. “There are always multiple ways you can check on the legitimacy of a nonprofit.”
Pieper says that in addition to the IRS website, she often uses Guidestar.org and Charity Navigator when doing research on nonprofits. “You can use those sites to find all kinds of information about a charity,” she says. “They help you learn whether donations to a given charity are eligible for a tax deduction, who their board members are, what their financials look like, and more. They’re great resources.”
Ultimately, Pieper says, if you’re feeling generous during the holidays, a little homework can go a long way. “Go through the steps of checking up on the organizations you want to help and do what’s best for you and your personal situation,” she notes.
Black suggests having a strategy around your giving. “Decide what matters to you, find charities that do quality work in that area, and support them,” she says. “If you’re donating on your terms, it’s a more meaningful way to get involved and you’re less likely to feel pressure to give to unexpected solicitations around the holidays. You could even donate your time as well. When you take a mindful approach to your support, it creates more opportunity for your generosity to create real structural change.”
Donating to charities is a great way to live out the holiday spirit, and to provide some help to those who are less fortunate. By doing a little research, you can ensure that every dollar you spend is being used to make someone’s holiday season just a little bit brighter.