American taxpayers: A generous bunch. Each year, we give billions to charities that combat hunger, homelessness, disease, and more. On average, Americans donate 2-3% of their income, and in turn claim deductions on their tax returns for a win-win situation. Unfortunately, scammers know about this common concept and take advantage of it to create the latest scam to stay away from. Learn how to avoid falling into the trap of fake charities below.
Scammers have a few tricks up their sleeve to con people into ‘donating’ money. So, use these three red flags to spot them.
The charity has a similar name to an actual, well-known charity. Unfortunately, this can confuse those who have heard of the legitimate charity. They ask for your Social Security Number. To clarify, a trustworthy charity will never request your personal information beyond what is required to send and receive payments.
It was created in the wake of a natural disaster and they contact you directly. Unfortunately, there have been several reports of scammers setting up ‘charities’ claiming that donations will provide relief for those affected by hurricanes, floods, earthquakes, and other disasters. For example, they often call people directly and target those that live geographically near the disaster.
To report this particular scam (or any other case of fraud), contact the FTC or file a complaint online with the complaint assistant tool. There is a chance your funds will be recovered.
If you provided your Social Security Number to the fraudsters, you should also report this using Form 14039. You can submit it online, by mail, or fax.
The sooner you report, the better; IRS Criminal Investigation works with the Department of Justice.
Use the IRS’s Select Check tool to confirm the legitimacy of the charity you would like to donate to. And, therefore, your tax deductible donations will help those in need.
For payment, do not donate in cash. Documentation of the donation is crucial for both tax purposes and in case the charity turns out to be illegitimate. Additionally, exercise caution when providing your credit card information, making sure the transaction is secure.
Donating to charity offers a feel-god way to reduce your taxable income, but be cautious of what charity you’re donating to and how. Look out for the red flags listed above, and always do your research to spot any inconsistencies with how the “charity” uses the funds or donations.
This fake charity tax scam made the list of 11 scams the IRS warns us to be weary of. Do you know all of the ‘Dirty Dozen’? As tax time draws near, read up on the tactics to avoid and protect yourself and your finances from these common scams.