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As a business owner, most likely you’ll be asked for donations to charitable events and organizations from time to time. While your heart might be in the right place, you probably can’t afford to donate to them all.
But how do you decide if your business should give to charity? Should you decide to give, how much is appropriate?
Verify the Organization is Legitimate
Vetting the organization is one thing to help you decide if your business should give to charity or not. It’s too bad companies have to be vetted to determine their legitimacy. However, many so called charities are actually scammers out to take your money.
All too often in recent years such schemes have come to light making businesses wary of giving. To prevent being taken in by these fake charities you can check their IRS tax status.
Another option is to check with the Federal Trade Commission. They have some good information that can help you verify if the organization is legitimate.
Choose Who Should Receive Charitable Donations
Deciding if your business should give to charity and how much can be a dilemma. Choosing who should receive charitable donations is another matter. Again, you probably can’t give to them all, so how do you decide?
Your business could pick charities that are active in your community. This allows you to see the impact of your giving firsthand. It can be rewarding to know you’re helping groups or individuals near to you in real need.
Of course, you can also give to causes that are related to what your business does. For example, if you own a hardware store you could donate to a group that provides housing for the poor. Or, if you own a fabric store, give to a local youth 4H program working on clothing construction projects.
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Decide How Much to Give
When trying to decide how much to give to charity there are some things to consider. For one, how much money can be deducted on your business taxes. To find out, check with the IRS. Obviously the amount could change from year to year as new tax rules and regulations are put into place.
According to the U.S. Small Business Administration, the average charitable giving is around 6% of business profits. Nonetheless, that doesn’t mean your business can’t give more.
Keep Accurate Records
Keeping accurate records is important if you decide your business should give to charity. This will help your tax preparer when completing your business tax return.
Ask for a receipt for the donation your business gave. Make sure it is completed with your full business name, address, date, and description of what was given. This way you have a paper trail should there ever be questions about your giving.
If your business donates services rather than tangible goods or money, you can’t donate the labor. But if supplies or other items were used as well, those could be tax deductible.
There’s a lot of satisfaction to be gained by giving to charity. When deciding if your business should give to charity, use some of these tips to make a wise decision.