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Deduct Your Charitable Donations… and Don’t Get Duped at Tax Time!

Panic-stricken during tax time, many Americans dig out receipts for last  year’s charitable donations before filing by April 15 – only to discover the  charity they gave serious money to either was a scam or wasn’t eligible for a  tax-deductible gift.

If you’re like me – meaning you routinely file your tax returns at the last  minute – you can save yourself from being duped by a charitable donation gone  awry.

The American Red Cross and Goodwill are just two examples of well-known  tax-exempt charities approved by the Internal Revenue Service. To claim federal  income tax deductions for contributions to such organizations, you generally  need written receipts for cash contributions of $250 or more. For contributions  of less than $250 made by check or credit card, keep the canceled check or  credit card statement to satisfy the IRS.

But what about verifying tax deductions for contributions to less well-known  charities? Good question, says Martin Abo, a certified public accountant with  offices in Mount Laurel and Morrisville.

He suggests we head to the IRS website (www.irs.gov) and search for “Publication 78.”

Abo says he is advising clients to do the following to be sure the charity or  organization is legitimate: Once you have found Publication 78, click on “Exempt  Organizations Select Check.” Then click on the blue “Exempt Organizations Select  Check Toolbox.”

Under “Limit Search to Organizations That (select only one),” call up “Are  Eligible to Receive Tax-Deductible Contributions.”

To the extent you have information, fill in the blanks for the charity, such  as name, and city and state where it is located. Hit the search key.

Once you find the charity you are searching for, click on the “Deductibility  Status” link on the far right.

For example if that status says “PC,” the organization is a public charity  (the most common kind). You can make deductible donations of up to 50 percent of  your adjusted gross income (AGI) to one or more public charity.

If the status is “PF,” the organization is a private foundation. You can make  deductible contributions of up to 30 percent of your AGI to one or more private  foundations. If the organization’s status is “SOUNK,” the outfit is a supporting  organization of an unknown type. You can make deductible contributions of up to  50 percent of AGI to such organizations.

For instance, I did a search for an organization that promotes education of  women in finance, called 100 Women in Hedge Funds. I searched for its foundation  by name, and came up with its identification number and listing on the IRS  website as a public charity (donation is 50 percent deductible).

What if your charity is not on the IRS-approved list?

That is not necessarily a deal-breaker. Sometimes religious groups, such as  churches, synagogues or mosques, aren’t required to apply as tax-exempt  organizations with the IRS.

But you want to be certain. One way is to find out if your charity has had  its tax-exempt status revoked.

On the IRS website, go back to the blue “Exempt Organizations Select Check  Tool” page and select “Were Automatically Revoked.”

Fill in the blanks to the extent you know the requested information for the  organization and hit the search key. For instance, we did a search under  Philadelphia between Jan. 1 and April 9, 2013, and found that Sigma Alpha  Epsilon Fraternity at 3210 Chestnut had its 501(c)(7) status revoked in March  for failing to file the required paperwork for the last three years.

A tax write-off can make you feel good about supporting charities. But don’t  be naive in the process.

 

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