Double Check A Nonprofit's Tax-Exempt Status
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Often times, the IRS allows taxpayers to deduct part of the amounts they give to charitable donation. However, the rules have recently changed the tax-exempt status of thousands of organizations. NY1's Consumer Watch reporter Asa Aarons filed the following report. Hundreds of thousands of worthy causes attract millions of dollars in donations. Some are huge, like the Red Cross, but smaller groups might include the local church or homeless outreach center.
The vast majority have a tax-exempt status from the Internal Revenue Service called a 501c3, making them registered non-profit organizations able to accept tax-exempt donations.
However, a 501c3 does not necessarily make an organization legitimate.
For example, the Navy Veterans Association, a group operated from a Florida storefront and post office box, collected millions for its 85 non-existent trustees. Six state attorneys general are searching for the group's founder, to try to determine how he got a 501c3 rating.
So whether the charity is big, small, credible or questionable, in order for a donation to be tax-exempt, a charity needs a 501c3.
That has been made more complex because the IRS, acting on orders from Congress from a few years ago, now requires all charities to re-register. Those that failed to had their tax except status revoked, and 275,000 of them now have no rating.
Just as having a 501c3 is no guarantee of honesty, having it revoked does not make an organization dishonest.
Tony Martignetti, a consultant to non-profits, says many of the groups on the revocation list are small with little time for administrative tasks.
"Make sure they didn't lose their tax-exempt status. Use Google, IRS revocation list, and make sure the charity you are giving to is not on that list. If it is, you better talk to that charity," Martignetti says.
The IRS Revocation list can be found at www.irs.gov.