Be Charitable, But Cautious

'Tis the season for giving.

More than half of all charitable contributions by Americans are given during November and December. That total amount for 1997 was over $140 billion. But the fact of the matter is, there are many unscrupulous people out there ready to take advantage of our good deeds.

With approximately 35,000 new charities created each year, it's becoming increasingly difficult to ensure that your charitable dollars are being properly used.

There are certain things to look out for as you evaluate a charity:

• Don't respond to pressure or overly emotional appeals if you are not familiar with a charity. Be wary of the "hard luck" strategy; that is, appeals that tell you nothing of the charity or offer vague explanations of how they'll spend your money. These are appeals that make you cry, not think.
• Don't let yourself be pressured to contribute on the spot or over the telephone. Any reputable charity will give you ample time to evaluate them before you give. The charity that needs your gift today will still welcome it tomorrow.
• Don't contribute cash to any charity. If you've checked out a charity, a donation by check or money order makes sense for keeping tax records.
• Never give your credit card number to anyone over the phone. Don't be a victim of identity theft.
• If you're sent free greeting cards, key chains, address labels, or other gifts that charities include in direct-mail solicitations, don't feel obligated to send money. It's illegal to demand payment of any unordered merchandise.

• It's important to ask the charity how much of your donation goes for general administrative and fund-raising expenses and how much is left for program services. In most cases, 60 percent or more of your donation should go towards program services - directly to those in need.
• If you'd like to do some serious detective work, find out if the charity has revenues of more than $25,000 annually. If it does, it must file an audited report for the IRS. This Form 990 includes details on the group's financial health, including the compensation of top management and what it spends on fund-raising activities. If you request one, the charity must furnish you with a copy. If they won't, forget it.

• Fortunately, it's fairly easy to check up on a charity if you're willing to make the effort. The National Charities Information Bureau (NCIB) is an excellent source. It evaluates charities that make national solicitations and have annual budgets of at least $500,000.
• To meet NCIB standards, a charity must be financially sound, provide annual audited statements, have an independnt board of directors, and spend at least 60 percent of its money on program services.

• There is a simple way to check. First, ensure that it states on the charity's membership or dues forms that contributions are tax-deductible. And, if you want further proof, consult IRS Publication 78, Cumulative List of Organizations. This is available at your public library.
• Money spent on products linked to charity usually isn't deductible. If you buy $500 of mail-order steaks and 5 percent of the purchase price is promised to charity, you can't deduct $25 from your taxes. You can only take a deduction if you're paying fair-market value.

• You don't have to limit yourself to giving cash. You can donate artwork, a car, books, appreciated securities - almost anything that a charity can use or sell. If you're donating stock, donate the shares and avoid paying capitol gains. So if the stock went up since you've owned it, you can take a deduction on the full profit.
• For other non-cash contributions, such as clothing or books, the IRS allows you to deduct an item's fair-market value - what you would get if you sold that item.

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