Choosing a Charity Wisely For Your Small Business
After setting up and successfully running your own small business, itâ€™s an empowering and fulfilling thing to know you can give back to your community or really support a cause in which you believe. In addition to giving back to the community, you can also take advantage of tax deductions for your charitable contributions during tax season. However you choose to give as a small business, you should make wise choices in giving that will give you a real sense of satisfaction, reflect positively on your business, and also not cheat you on your generous dollars.
Before you write that check, set a plan in place for how much you would like to budget for charitable giving each year. That way you can spread out your charitable contributions and provide a framework for what types of charities and the total annual amount your business can afford to give.
Here are some safety tips to guide you:
Choose a charity or cause wisely. If you are not very familiar with a charityâ€™s work, investigate the group before you make your donation. Overall, it is best to contribute to an organization that you already know. You may also inquire about the exact service or activity your funds will end up supporting. Honest charities should be willing to communicate with their donors about their spending activities. Additionally, it does pay to do a little research on your chosen charities to be sure that they are legitimate nonprofit organizations. Try using online verification sites such as Charity Navigator to review ratings and check the status of your prospective nonprofit with objective feedback from other users.
For tax purposes, ensure that the charity is tax-deductible. Some nonprofit organizations participate in political activities that prevent them from accepting tax-deductible donations. If you donate to these organizations, you will not be able to deduct your donation on your federal tax return. If the organization is â€śtax exempt,â€ť this simply means that they do not have to pay taxes, but it does not necessarily mean that your donations are tax-deductible. Ask the organization for its tax status to be clear and look for a nonprofit 501c3 federal status.
Be sure to obtain and keep a record of your donation. In addition to helping you properly manage your bookkeeping and cash flow, having a record for your donation will also be needed to deduct taxes at year end. If you contribute less than $250, you may present a bank record, a cancelled check or a receipt or letter from the charity. The receipt or letter must have the organizationâ€™s name, the date, and the amount that you donated. If you contribute more than $250, the IRS will not accept a cancelled check alone â€“ you will have to furnish a receipt from the charity.
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