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5 things to do before you donate

(MoneyWatch) From hurricanes to floods to fires, natural disaster season is under way. And that's certain to inspire generosity -- and create opportunities for fraud.

Americans are among the most generous people in the world, and they swing into action the moment there's a call of distress. Con artists know how to capitalize on that generosity, launching emotional appeals that will empty your pockets before you realize that both you and the cause you hoped to help have been robbed.

If you are tempted to send money to help victims you've seen on the news, here are five things you should do first:

1. Determine the percentage of your gift going directly to the cause: Every legitimate charity must file forms with the Internal Revenue Service that spell out how much money is going to programs versus paying salaries and fundraising. Good charities spend 75 cents on the dollar (or more) on their programs. However, if you get a call from a professional fundraiser, there's a good chance that only 5 to 15 cents on the dollar is supporting the program. The rest goes to those administrative costs. That's a miserable return on your investment.

If you're approached to donate, ask the charity for a copy of its 990 form (that's the nonprofit version of a 1040) or to provide a link to where it is posted online. Then divide the amount of program expenditures by their total expenses to arrive at a percentage. (Remember that, for example, 0.50 is the same as 50 percent.) If you do the math and the resulting figure falls short of the 75 percent mark, donate elsewhere. And, of course, if the charity cannot or will not provide Form 990 data, find one that does.

2. Understand the cause: Charities may spend too little on programs because they include education about a cause as part of the program. Thus, when they send you a letter and address labels asking for money, the cost of that solicitation is part of their "program" and part of what you would be supporting by donating. Not what you had in mind? Then make sure you understand just what the charity does and how it tracks its success.

3. Check their track record: There are many well-established organizations that have long track records in dealing with disaster situations from the Salvation Army and Red Cross to Catholic Charities. If a group is new -- formed to help with a particular disaster -- consider it a red flag. Some are scams. Others are groups of well-meaning people, but they may spend a lot of time (and your money) trying to figure out the best ways to provide aid when more established groups are ready to go.

4. Get details: How will your donation be used? Even some established charities have drawn heat for soliciting money in the wake of a disaster, but using the funds for other programs and services. If you are dealing with a large national organization but trying to help a specific group of people -- or provide a specific type of aid -- ask whether your donation can be earmarked for the specific aid you hope to provide.

5. Know whether it's deductible: In some cases, an individual family or group will set up their own fund for donations. In many cases, these private funds are not charities, so you cannot deduct the cost of your gift. Ask whether the cause you are giving money to is a registered charity. If not, you can still give, but it's like giving money to a friend or relative. It's a personal expense, not a deduction.

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