Which Charitable Organizations Are Legitimate?

You might think of charities as organizations that feed the poor and care for widows and orphans, and you are right. But when the Internal Revenue Service talks about organizations that are qualified to receive charitable donations, its definition is a bit broader. The IRS considers a qualified charitable organization to be a community chest, corporation, trust, fund or foundation organized and operated for religious, charitable, educational, scientific or literary purposes, or for the prevention of cruelty to children or animals. The IRS also recognizes war veterans' organizations, domestic fraternal societies, amateur sports organizations, nonprofit cemetery companies, the U.S. government and any of its political subdivisions as qualified recipients of charitable donations.

Some legitimate organizations hold tax-exempt status with the IRS, but that does not necessarily mean they are qualified to receive tax-deductible donations. For example, certain social welfare organizations, business leagues and social clubs might hold tax exempt status under sections 501(c)(4), (6) or (7) of the tax code, but the IRS does not allow a tax deduction for contributions to these organizations, according to the Council for Advancement and Support of Education. You can check the eligibility of an organization to receive tax deductible donations through the IRS's online Exempt Organizations Select Check service.

Wherever there are people willing to donate to a good cause, there are people who are willing to take their money and use it for their own purposes. This can be particularly true after a high-profile disaster, according to the AARP website. Scam organizations might set up bogus websites that mimic legitimate charities in an attempt to siphon off donations, or they might contact you by telephone or email to solicit donations. AARP recommends a close look -- with the help of a reputable charity checking organization such as the Better Business Bureau's Wise Giving Alliance -- any organization to which you have not previously made a contribution.

A legitimate charity should actually use your donations to further its goals rather than to pay its overhead. According to the Better Business Bureau, at least 65 percent of a legitimate charity's total expenses should be for program-related activities, and no more than 35 percent of donations should be spent on on fund-raising. A legitimate charity should be able to provide you with a complete annual financial report that is audited using generally accepted accounting principles, according to the BBB.