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Don't Get Scammed by Fake Hurricane Charities

by
Gordon W. McNamee
on
9/19/2017
Don't Get Scammed by Fake Hurricane Charities

Turn on the news and you’re likely to see lots of heartwarming stories of people helping with Hurricane Harvey and Hurricane Irma relief. Unfortunately, for all the true helpers who are out there doing good, there are also scammers who try to take advan­­tage of disasters. These grifters play on people’s generosity. They collect donations of cash and goods with the promise that they’re going to distribute them to those in need, then keep what they’ve collected. In some cases the scam involves people portraying themselves as charities that don’t exist, and in other cases the problem is that the organizations that are collecting aren’t actually using the money the way that they promise to.

How Fake Charities Operate

Today, giving organizations use every form of communication to reach out to those who want to help. They call on the phone and solicit funds on sites like Facebook, Instagram and Twitter. They’ll send appeals via traditional mail and email, usually accompanied with images or stories of suffering and damage, and promises of what they’ll do help. These same strategies have been picked up by fake charities that pop up after disasters the way that mushrooms do after rain. 

How to Protect Yourself

You can protect yourself from falling prey to fake charities – or charities that misrepresent their plans for your money – by doing a little homework before pulling out your checkbook or credit card.

  • Stick with organizations whose names you’ve known for a long time, and whose work you are familiar with and respect. If you’ve never heard of a charity, there’s a good chance that it didn’t exist before the latest disaster occurred, and is probably not legitimate. Check out the Charity Navigator website to find vetted hurricane Irma and Harvey charities.  
  • If you’ve gotten a call soliciting funds, take the time to ask some questions. It is perfectly fair to ask whether the person who called is being paid for their efforts, and how much of the money collected is going to the charity vs the fundraising organization. Most real charities will be working through unpaid volunteers and using the majority of the monies collected for the areas of need. If an organization can’t or won’t answer your questions, it’s a good reason to find somewhere else to send your money.
  • Exercise the same level of caution with your personal information as you would with any other unknown caller. Make sure that they’re who they say they are before you give out your credit card number, and don’t ever give out sensitive information like your social security number. If you want to contribute but you’re not sure a caller really represents the organization they say they are, get off the phone, look up the charity’s contact information for yourself, then call back or make the contribution online.
  • Cash is never a good idea when it comes to a charitable organization. Not only are you unable to verify your donation for tax purposes, but you also can’t be sure that your money will ever reach the intended recipient. The same is true of wiring money. Many fraudulent groups will request wire transfers because unsuspecting victims don’t realize they can’t recover funds once they’re sent. In reality, wire transfers are no different from cash.
  • A frequently-employed angle that many scammers use is to claim that the money they’re collecting is going to a specific group like emergency responders or the police. It’s always a good idea to contact the people who are supposed to be receiving the funds to see if the charity is familiar to them and whether they actually receive the money.
  • Take the time to look up every charity’s rating. There are a number of helpful consumer protection sites that provide information about charity efficiency. These include Charity Watch and Charity Navigator. 

Charitable Contributions Are Often Deductible 

The U.S. government rewards contributions to legitimate charities by offering taxpayers deductions for those that are made to legitimate organizations recognized by the Internal Revenue Service. There is a wide range of charities that are included on the IRS list, including religious, charitable, educational, literary, scientific and other groups. These groups fall into the category of 501 (c)(3) organizations, and are thus named because that is the section in the tax code that addresses their deductions. Tax deductible contributions can also be made to certain veterans’ or fraternal organizations, some nonprofit cemetery companies and to local, state or federal government. You are not, however, able to deduct gifts to individuals, homeowners associations, or nonprofits that don’t qualify as charities. These generally include such groups as business leagues or social clubs. 

Documenting a Charitable Contribution

The IRS requires documentation of contributions to charitable organizations, whether they are made via cash or any other format. Whether you’ve simply reached into your wallet and pulled out money or written a check or paid by credit card, you will need some type of proof. This can be a written receipt or communication from the organization as long as it has the organization’s name, the date of the donation and the amount that you’ve given. If you pay via check you can use your canceled check or bank or credit union statement as proof, and if you pay by credit card your lender’s statements will suffice for smaller contributions, but for those that are $250 or more you will also need a receipt from the charity. If you make donations through a payroll deduction through your employer, your payroll records will be needed as proof.

Finally, if one of the reasons you are making a contribution is specifically to claim a tax deduction, keep in mind that only those who itemize are able to make this type of claim. Some people address this by only making donations every other year, grouping them together so that it maximizes their tax benefit.

Gordon W. McNamee, CPA writes for TaxBuzz, a tax news and advice website. Reach him and his team at [email protected].

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Gordon W. McNamee

Gordon W. McNamee

Gordon W. McNamee is a Certified Public Accountant (CPA) based in Rancho Cucamonga, CA. Gordon W. McNamee can assist you with your tax return preparation, payroll, accounting and tax planning needs. <br /> <br /> 2021 is Gordon W. McNamee, CPAs 38th year in the profession. As as a former IRS agent (1984 through 1987), Gordon has been in public accounting since 1987. Gordon specializes in individual, corporate, HOA, trust, estate and payroll taxes. He also prepares financial statements and provides accounting & bookkeeping services. He enjoys making his clients feel at ease while providing a personalized professional service.

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