Fake Charities Can be a Real Tax Problem!

Picture this: a natural disaster strikes, and you want to help, so you decide to donate to a charity you find online. But hold your horses before you give your hard-earned money to just any charity that says they’re helping — the IRS has sounded the alarm about a sneaky scam that’s been popping up more often lately – fake charities.

These scammers pose as charitable organizations, preying on the generosity of well-meaning donors. Not only do they take your money, they also try to nab sensitive personal and financial information for tax-related identity fraud. Pretty awful, right?

Danny Werfel, the IRS Commissioner, put it bluntly: “We see repeated instances of scammers using major disasters as a way to prey on well-meaning taxpayers. In these tragic situations, many people want to help, but con artists too frequently come in posing as charitable groups to take advantage of the situation, stealing money and personal information.”

It’s a sad reality that in times of crisis, when people are most eager to help, there are others looking to exploit that kindness for their own gain. It’s important to be vigilant to protect yourself – and your taxes – from people looking to profit from someone else’s pain.

Profiting from Pain

These fake charities are the brainchild of scammers looking to capitalize on people’s generosity. They’ll create organizations that seem legitimate on the surface, but they’re nothing more than fronts for identity theft and financial fraud. It’s a despicable practice that preys on the kindness of others when they’re at their most vulnerable.

Now, here’s where things get tricky from a tax perspective. When you decide to donate money or goods to a charity, you might be eligible for a tax deduction, but there’s a catch: you have to itemize your deductions. And more importantly, your donations must be directed towards IRS-recognized tax-exempt organizations. If you give to a charity that’s actually a scam, you may be anticipating a tax write off that won’t fly with the IRS – among other concerns. Luckily, there are steps you can take to make sure the charity you are giving to is legit.

Protect Yourself!

The IRS has got your back with the Tax-Exempt Organization Search (TEOS) tool available on IRS.gov. This nifty little tool lets you verify the legitimacy of any charity before you hand over your hard-earned cash.

But the scammers aren’t just lurking on street corners with donation jars. They’ve gone high-tech, using email and caller IDs to trick unsuspecting donors into parting with their money.

So, how can you avoid falling victim to these heartless schemes? Here are some tips to keep in mind:

  • Don’t let anyone pressure you into donating. Genuine charities appreciate any support they receive and won’t resort to shady tactics to get your money. Take your time, do your research, and make an informed decision.
  • Be cautious when making donation payments. Avoid any charity that asks for gift card numbers or wire transfers. Stick to paying by credit card or check, and only after you’ve confirmed the charity’s authenticity.
  • Double-check the legitimacy of the charity. Scammers love using names that sound eerily like well-known charities to confuse donors. Before you donate, ask for the charity’s name, website, and mailing address so you can verify its authenticity independently. And don’t forget to use the IRS TEOS tool to confirm its tax-exempt status.
  • Keep your personal information safe. Scammers are after more than just your money; they’re also after your personal data. Never give out sensitive information like Social Security numbers or credit card numbers unless you’re absolutely sure the charity is legit.

By staying vigilant and following these tips, you can ensure that your generosity goes to those who truly need it, and not into the pockets of scammers looking to make a quick buck. The next time you feel compelled to donate to a cause, remember to do your due diligence. Let’s keep our generosity flowing to those in need, but let’s also keep an eye out for those who would take advantage of it. Stay informed, stay safe, and you can outsmart the scammers! And to make sure your taxes are safe and secure from this and other scams, consider reaching out to a Certified Tax Planner today – they’ll make sure you’re getting all your tax savings the right way!