On 10/23/23, the IRS issued a warning to taxpayers regarding Fake Charities scams and how unsuspecting donors may actually be contributing to fake charities and not be able to deduct donations on their tax returns despite the taxpayers response to the donation call to given the tragic crises and natural disasters happening around the globe right now. The IRS wants taxpayers to know that unfortunately, there are criminals soliciting donations and falsely posing as legitimate charities when in reality they are fake charities, and the donations don’t go to those who need the help. Taxpayers who give money or goods to a charity need to understand that they might be able to claim a deduction on their federal tax return if they itemize deductions, but charitable donations only count if they go to a qualified tax-exempt organization recognized by the IRS.
This is the second warning that the IRS has issued in 2023 towards fake charities. Back in 3/24/23, during the release of the IRS Dirty Dozen 2023, the IRS urged everyone to be on alert for scammers using fake charities to dupe taxpayers, especially following major disasters. At that time, the IRS Commissioner Danny Werfel stated that : Whether an earthquake or wildfires, good-natured taxpayers rally to help victims after an emergency or disaster by donating money. Unfortunately, scammers often try to prey on well-intentioned donors by posing as fake charities, hoping to steal money, but also personal and financial data that can be used in tax-related identity theft”.
Victims are primarily exploited via Identity Theft
The IRS states that criminals commonly set up fake charities to take advantage of the public’s generosity during international crises or natural disasters. Typically, they seek money and personal information, which can be used to further exploit victims through identity theft. Fake charity promoters may use emails, fake websites, or alter or “spoof” their caller ID to make it look like a real charity is calling to solicit donations. Criminals often target seniors and groups with limited English proficiency.
Tips from IRS on how to protect yourself against a fake charity scam:
- Verify first. Scammers frequently use names that sound like well-known charities to confuse people. Potential donors should ask the fundraiser for the charity’s exact name, website, and mailing address so they can independently confirm the information. Those who wish to make donations should use the Tax-Exempt Organization Search (TEOS) tool on IRS.gov to help find or verify qualified, legitimate charities. With the TEOS, people can: verify the legitimacy of a charity, check its eligibility to receive tax-deductible charitable contributions and search for information about an organization’s tax-exempt status and filings.
- Don’t give in to pressure. Scammers often pressure people into making an immediate payment. In contrast, legitimate charities are happy to get a donation at any time. Donors should not feel rushed.
- Don’t give more than needed. Scammers are on the hunt for both money and personal information. Taxpayers should treat personal information like cash and not hand it out to just anyone.
- Be wary about how a donation is requested. Never work with charities that ask for donations by giving numbers from a gift card or by wiring money. That’s a scam. It’s safest to pay by credit card or check — and only after verifying the charity is real.
Taxpayers ought to consult a Tax Professional before donating in order to stay away from fake charity scams and ensuring that their giving strategy is legitimate
Taxpayers that discuss the legitimacy of a charitable donation with a Tax Professional are taking a step in the right direction. In order to decide how to donate, when to donate, and how much to donate, taxpayers ought to have a charitable giving strategy in place so that they can get the optimal benefit from their donation and not fall prey to a fake charity scam, as well as give to a charity in ways that are not tax efficient.
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