In United States tax law, a 501(c)(3) is a type of nonprofitable charitable organization. If you donate money to a 501(c)(3), you can deduct the donation from your taxable income if you itemize your deductions. If you donate to an organization thinking it is a 501(c)(3) and it is not actually exempt, you won't get the donation, so it's good to verify 501(c)(3) status before making a donation.
Understanding 501(c)(3) Status
An organization can be granted 501(c)(3) status if it meets certain criteria and applies to the Internal Revenue Service. Once the application is approved, donors to the organization can deduct their donations from their taxable income in accordance with tax law and IRS rules. Many states also allow you to deduct charitable donations from your taxable income and some give other preferential treatment to charitable organizations, such as exempting them from state and local property taxes.
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Once a 501(c)(3) organization is set up, the organization must continue to adhere to the laws governing charitable groups and it generally must file annual returns with the IRS. Usually, these returns will use IRS Form 990 or one of its variants. Unlike personal and business tax returns, these returns of charitable groups are usually public, and you can obtain them from the IRS or from other organizations that collect them and put them online. Some states also require charities to file paperwork on a regular basis outlining how they're taking in money and how they're spending it.
Charitable groups are subject to regulations that don't apply for for-profit businesses, including rules to keep them from diverting money to the people who run them.
Check 501(c)(3) Status
If you are giving to a charitable group and expecting a tax deduction for your donation, and it's not a nationally known group or one you know well, you will often want to make sure that it does, in fact, have 501(c)(3) status. You can use a 501(c)(3) lookup tool to search for the organization on the IRS website. You can either use the group's name or its employer identification number, the type of taxpayer ID that the IRS assigns to companies and other entities other than individuals. You will see the group's status, the name of its principal officers, its mailing address and often information from its tax returns.
Make sure that when you search for a group, the results make sense based on what you know about the group so that you can be sure you aren't finding a group with the same name. If someone contacts you soliciting money or other donations for a charity and you aren't sure that person is really affiliated with the group, you can consider reaching out to the organization separately to make sure you aren't part of a scam.
You can donate to an organization that's not tax-exempt if you choose, but you should make sure you understand why it chose not to or failed to acquire 501(c)(3) status, since this can be a red flag, and keep in mind that you won't get a tax deduction. Donations to needy individuals and families are usually not tax deductible.
Using IRS Form 990
IRS Form 990 provides a lot of information about a charitable group's activities, including its sources of income and how it spends its funds. You can often also get information about its executives' compensation and basic information about how to contact the group and where it's based.
You may want to take a look at a group's IRS filings when deciding whether you think it is a worthy cause to support. You can get 990 forms and information derived from them through the charity itself, through the IRS or through various other 501(c)(3) search websites that aggregate them, including the charity analysis organization Guidestar and the nonprofit news organization ProPublica.
Other organizations also track how charities compare to their peers, including how much they spend on administrative costs versus their overall missions.