By Mike Geeslin, CPA
This week the city of Houston and surrounding areas suffered a tremendous tragedy. Hurricane Harvey dumped up to 50 inches of rain in some areas, with damage estimates as high as $190 billion. The recovery process will not be completed swiftly, but every contribution that is made should help those who are hurting from the storm.
One of the central American values is generosity and compassion when disaster hits. We will provide money, supplies and help to international catastrophes, but the American people are steadfast in helping our neighbors when disaster arrives on our shores. In response to Hurricane Katrina, Americans gave private donations in excess of $2.7 billion.
Helping our fellow Americans and those who are in need is the right thing to do and sending financial support has never been easier with the options to give online through countless platforms. Unfortunately, there are individuals and groups that will try to take advantage of Houston’s needs and the generosity of those who wish to help. Internet charity scams are on the rise and in order to make sure that contributions have the most effective impact, there are a few matters to be aware of before hastily texting a $5 contribution or giving to a crowdsourcing page.
In our heightened sense of emotion and desire to help those we have seen wading through the flooded streets of Houston, it is easy to give to the first organization we find. In order to make sure that the organization you select to contribute to is actually going to provide aid rather than use your contribution for their administrative expenses or simply pocket the money, take a moment to research the organization. The most effective way to do this is by searching one of the sites below and checking the registration status with the IRS:
https://www.irs.gov/charities-non-profits/tax-exempt-organization-search
Any organization recognized by the IRS from the links above is classified as a 501(c)(3) organization, named after the IRS code section for non-profits and charitable groups. This designation does not guarantee a charity’s effectiveness but it increases transparency by requiring yearly financial filings. This information at least limits the chances of being taken advantage of by opportunistic individuals or hastily established groups. Guidestar, Charity Navigator and Give.org are considered the leading sites for information related to non-profit organizations and can provide additional details on how effective a charity has used its funding in the past.
By giving to a 501(c)(3), the contribution is eligible as a tax deduction. If your contribution is greater than $250, a letter of acknowledgment must be received from the charity no later than the date you file your tax return to claim this tax deduction. Make sure to request this acknowledgement, as it is the responsibility of the donor and not the charitable organization.
This advice is meant to increase the likelihood of donations going directly where they are intended and is not meant to limit how and where people give. Money given to an ineffective or illegitimate group is money that cannot help the people of Houston.
If you have questions about charitable giving and the tax implications for you as an individual, or you represent a non-profit looking to improve your financial reporting and management, please contact Geeslin Group.
Our thoughts and prayers are with the people of Houston during this difficult time. If you know someone personally who truly needs help, by all means, please help them as you see fit. The following suggestions apply to contributions given to help in general through a charity or fundraising organization. We hope you will consider contributing to the recovery process.
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