Sep 05, 2019 - 07:22 PM
There is a great benefit in giving away a portion of your sales to charity. The guidelines to giving to charity however, requires tremendous homework on your part. We have outlined below the things to look out for.
Background, history, reputation and transparency of the charitable institution
Like those people who believe in conspiracy theories, it is important to have a clear overview of your charitable org. Have they filed with the IRS? Are they licensed? Are you sure you are talking to an authorized representative? Do you know where their offices are? Who are on their board? What results have they gained in terms of the advocacy?
You need to do your sleuth-work before you choose an organization. Don’t get tied up with NPOs (non-profit organization) flagged by homeland security, the IRS or those connected to recent scandals or whose board member (s) were caught in the cookie jar.
Transparency on your website
Tell the people about who you will be donating to. If possible, get your site added on their online list of donors and have a link to that list put up on your site. Get their permission to post on your site that you are an official donor, get photos from them that you can add as a slide somewhere on your website.
Have an overview of why you chose your NPO and why. Show your buyers what your NPO has accomplished so far. NOTE: Make sure this is not the main point of your website. Just make sure that people can have a link they can click or look into if they want to check out your NPO.
Make sure they align with your core values
This is important because if you are a pro-organic or supporting animal welfare, you wouldn’t want to get caught red-handed supporting an organization which goes against your values. It will make you look like a sham. It is similar to saying you are pro-animal and then you get caught wearing fur the next day.
Check what category the institution falls under
There are type of institutions that are non-tax deductible.
From the IRS website: In general, contributions to charitable organizations may be deducted up to 50% of adjusted gross income computed without regard to net operating loss carrybacks. Contributions to certain private foundations, veterans’ organizations, fraternal societies, and cemetery organizations are limited to 30% adjusted gross income (computed without regard to net operating loss carrybacks), however the 50% rule applies to four different types of charitable organizations:
- Public charities
- Private operating foundations
- Private foundations that distribute donations to private operating foundations and public charities within 2.5 months from when the contributions are received
- Private foundations that pool contributions and eventually pay them to public charities
The 30% rule applies to private foundations that don't fall under the 50% rule. Again, the details of charitable tax deductions can get a little tricky. It's helpful to know your business's net gross income and to speak with a tax professional. It's better to talk to a qualified tax advisor than make mistakes on your tax forms and deduct contributions that shouldn't be deducted.
Keep track of your donations through written records. If it is not in paper, it never happened. Keep track of the money trail, ALWAYS. This will help you during tax season too!
Lastly, check out your state rules