Create Accounts for Donation

If you have a cause that's close to your heart, you might consider collecting donations on behalf of that cause. When you do collect money, you need to make sure you are keeping it in a safe place separate from your personal funds. One way to do this is by opening a dedicated bank account. The type of account you open and the issues you have to deal with will depend on the cause you are supporting.

Steps

Choosing a Cause

1. Identify preferences. When you start your mission to collect donations, take time to consider the cause or causes most important to you. Are you interested in the environment, poverty, or illness? You also need to identify how broad you want your cause to reach. Do you want to keep your efforts local, regional, or are your interests international?
   • Making these determinations before you solicit funds will help focus your efforts and make it easier for donors to get behind your cause.
2. Choose beneficiaries. Once you have an idea of your preferences, you will want to focus your fundraising efforts as much as possible. To do this, find specific individuals or groups that could benefit from your fundraising. You may already know an individual or group of individuals you want to help. On the other hand, you may have to do some searching.
   • For example, if you are interested in helping a friend with cancer, you could simply let them know you want to help them by collecting donations.
   • On the other hand, maybe you are interested in helping the homeless population in your city. If this is the case, you may have to team up with an organization with that goal or you may have to go out and find some specific homeless individuals to help.
3. Contact the Attorney General's Office (AGO). If you are fundraising for a specific individual, you will most likely not have to contact the AGO. However, the AGO in your state may need to be involved if you are planning on fundraising to benefit the public at large or an indefinite portion of the public. Fundraising for a specific individual, or even a defined population, most likely will not be considered charitable fundraising.
   • If you have to contact the AGO in your state, you may be required to register your activities and file certain documents. If you are not sure about your activities, contact the AGO just to be safe. You can do so by visiting your state's AGO website and using the contact information found there.
   • Even if you are only fundraising for an individual or defined group of individuals, the AGO may get involved if they suspect any fraud or criminal activity may be occurring.

Opening An Account

1. Contact your bank. When you have a specific cause and individual (or individuals) in mind, you will need to create an account so donors feel comfortable making donations. Start by contacting your bank and discussing your options. Most banks, especially larger ones, will know exactly how to help you. While you can start an account with any bank, do some research regarding possible fees and other requirements. Choose a bank that offers good financial services and that is convenient for you.
2. Explain your purpose. As you sit down with a banker, explain why you are opening an account. Giving your banker an explanation of your purpose will help them recommend the right services. In addition, fundraising accounts may require you to fill out paperwork you wouldn't have to were you opening a more traditional account.
   • For example, if you are opening an account on behalf of your friend Jim, who is suffering from lung cancer, tell this to your banker. Explain that you would like to open an account to put donations in to help pay for Jim's medical bills and living expenses.
3. Title your account. Once your banker has an idea of the services you need, you will start the process of opening the account. While each bank will have different steps, you will most likely be required or asked to name the account. The title you choose should indicate who the beneficiary is. For example, you may title your account something like "Friends of Jim Jones" or "The Bethany Smith Fund."
   • In addition, the name will help donors direct funds to the correct account. For instance, if your friend Betty wants to donate to Jim Jones' account, she could go to the bank you opened the account with and request to deposit money into the "Friends of Jim Jones" account.
4. Determine who should have access to the funds. One of the most important determinations you will make when you open the account is who will have access to the funds in the account. You need to make certain that each person who has access will be responsible with the funds. Every person you allow to access the account will be able to make decisions about the account, including withdrawing money and closing the account.
   • If you are raising funds for a single living individual that is capable and competent, you might consider making them the only signatory. If you need to include others, a relative or legal guardian should be good.
   • If you are raising money for multiple individuals, choose a signatory you trust with the funds. Do not allow donors to believe that the bank will manage or oversee the account.
5. Use the beneficiary's Social Security number. If you are going to raise funds for a single individual, you should open the account using their Social Security number. You should do everything possible to bring the beneficiary with you when you open the account. In addition, if you are not a relative or guardian of the individual, you should also ask them to come in when you open the account as well.
   • If the beneficiary cannot be present when you open the account, a notarized statement from them allowing you to use their Social Security number for the purpose of opening an account may be sufficient. Check with your bank for specific rules.
6. Use an Employer Identification Number (EIN) if you have multiple beneficiaries. When you are collecting money for multiple individuals, you should only open one account. This will simplify things, keep costs down, and will make it easier for donors to donate. For example, if you opened an account for every individual, a donor would have to write one check for each individual they wanted to donate to, as opposed to donating to the group as a whole.
   • To open the single account, apply for and obtain an EIN. An EIN is used by the Internal Revenue Service (IRS) for identification purposes. You can apply for an EIN as an individual so long as you have a valid Social Security number. To apply, visit the IRS website and complete your application online. So long as you qualify, your EIN will be issued to you immediately.
     • Using an EIN, instead of one individual's Social Security number, will help avoid confusion about who owns the funds and will help avoid tax reporting issues.
7. Meet your bank's specific requirements. Apart from the basic requirements, each bank may have more specific requirements you need to comply with. For example, if you plan on publishing the account information (i.e., "mail donations to the "Jim Jones Fund" at "ABC Bank" at the following address...") for the purpose of soliciting donations, you may need approval from the bank before doing so.
   • Keep in mind that if you publish the bank account information, it will also be difficult to keep track of donors and donations.
8. Keep accurate records. When the account is created and as you move forward, be sure you keep in-depth records regarding the money you receive, who has donated, where it has been deposited, and any payments you make to the beneficiaries.
   • This information may be necessary for tax purposes or if you get contacted by the government about your activities.

Dealing With Special Issues

1. Memorialize a deceased beneficiary. When you raise money to memorialize someone that has passed away, special issues may arise. You will not be able to use their Social Security number to open an account, so you may need to obtain an EIN. In addition, the name of the fund should describe your purpose, for example "The Sarah Smith Funeral Fund."
2. Provide gifts to minors. Raising money for minors can be particularly difficult. One issue you might run into is that the minor may not be able to use the funds for the purpose you have raised them for. For example, if you raise money for a child's college expenses, the child will not be able to use that money until they go to college and incur some costs. Generally, you will want to have the child's parent or guardian open the account so they can ensure the money is used properly.
   • In this situation, you may want to consider starting a trust. When you do this, you will transfer any money raised to a trustee who will manage the money for the benefit of the child. For more information on starting a trust look at https://www.wikihow.com/Set-Up-an-Irrevocable-Trust.
3. Research tax consequences. Recognize that donations made to your cause will not likely be tax deductible for the donor. Unless you have created a 501(c)(3) nonprofit organization, the donations you receive will be considered gifts. Depending on the amount donated, donors may even be responsible for paying a gift tax.
   • In addition, you should understand the tax consequences the beneficiary may face. In general, the money raised will not be taxed as income because it is a gift. However, there are exceptions to this rule. Talk with an attorney if you have any questions.
   • Also, if you are holding the money in an account that earns interest, there may be some tax liability for that interest you earn. Again, talk with an attorney if you have any specific questions.

Collecting Donations

1. Solicit directly. After you choose a beneficiary and set up an account to collect donations, you will need to start raising money. One of the most effective methods of doing so is to contact possible donors directly. This will give you an opportunity to create a direct and personal connection with the donor. To solicit directly:
   • Draft and send appeal letters. These letters should remind the possible donor what your cause is, what your goals are, how the money will be used, and how much money you are looking for from each person. This letter should be personal and might include a story, a description of your efforts, and a clear summary of your operation.
   • Be sure you include specific directions regarding how the person can donate. This may include your account information or other ways to get money to the cause.
2. Use social media. One way to reach a large mass of people is to use social media for fundraising purposes. This means using Twitter, Facebook, and Instagram. Using social media can increase your exposure, offer instant gratification (i.e., people will see your message immediately), and can be flexible (i.e., you can change messages any time you want). To use social media:
   • Engage often, which means make posts daily if possible.
   • Post your wish lists, which means be direct about what you are asking for.
   • Consider crowdfunding, which means directing people on social media to a website where they can donate.
   • Link your social media sites to other sites relevant to your cause.
   • Make sure you make donating easy and worry-free.
3. Use fundraising sites. Apart from opening a bank account, try collecting donations online as well. In today's world, you can choose from an endless number of websites that offer the ability to advertise a cause that can be directly donated to. This type of fundraising can yield immediate and large results.
   • For example, you can set up a PayPal account specifically for personal fundraising. If you do so, you can collect donations quickly and get the word out easily. Once you open a PayPal account, you can solicit donations and have donations sent directly to your online account.
   • Another example is GoFundMe. If you use this site, you will be able to set up a profile that describes your cause. After you create your account, people can donate to you directly by simply clicking on a "Donate Now" button on your GoFundMe page. You can also link up your social media sites with this one to reach a large number of people.

Related Articles

• Set up an Account for Donations

Sources and Citations

See also

• Start an Employee Donation Matching Program
• Distribute Leaflets Effectively
• Give to Charity when You Have Debt
• Ask Businesses for Donations
• Overcome Poverty
• Raise Money
• Calculate Clothing Donations for Taxes
• Write a Letter Requesting Sponsorship
• Start a Private Foundation
• Plan a Fashion Show to Raise Funds

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• Accept Donations Online