7 ways to avoid getting scammed by a ‘charity’ this holiday season

A few years ago, a heartbreaking story in New Jersey gained national attention. Caitlin McClure and her boyfriend have launched a fundraiser to help a homeless man who claims he used his remaining $20 to help McClure when he ran out of gas. The story resonated with thousands of people and generated an overwhelming response on GoFundMe, with donors raising an incredible $400,000. But this touching story soon unraveled, revealing a shocking fraud. The money disappeared and it was revealed that the couple had made up the entire story. their deception In the end, both were sent to prison, but They will serve prison time for their misconduct.

This lesson highlights the need to do thorough research when donating to charity, especially during the holiday season, when people are most likely to donate. There are countless organizations and individuals who truly need help, but there are also organizations and individuals who misuse good intentions for personal gain. To ensure your donations make a real difference, here are some top tips to avoid scams and protect your generosity.

1. Check your charity status with the IRS

Before donating to an organization, first check its legitimacy using the IRS' tax-exempt organization search tool. Use this resource to find out if your charity is recognized as a tax-exempt entity under Section 501(c) of the Internal Revenue Code.

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Additionally, make sure the organization is eligible to receive tax-deductible donations. These two questions, whether the organization is tax-exempt and whether your donation is tax-deductible, are important in ensuring that your funds go to a good cause. If the answers to these questions are not clear, it is best not to donate.

2. Investigate the charity's financial practices

Charitable organizations often promote claims such as “A portion of every dollar is donated to…” This may suggest that your donation directly supports their mission. But a closer look at a charity's finances might tell a different story. To investigate further, check your organization's Form 990, a document that provides detailed financial information. This form provides an overview of how the charity allocates its funds (such as the proportion of expenses spent on programs and administrative costs) and also reveals executive remuneration. Understanding these details will ensure that your giving aligns with your values ​​and expectations.

3. Differentiate between gifts and donations

Crowdfunding platforms like GoFundMe have revolutionized philanthropy, allowing individuals to support personal causes and emergency relief efforts. However, it is important to recognize that contributions to these campaigns often do not qualify as charitable contributions.

If the campaign organizer is not affiliated with a registered tax-exempt organization, your donation will be considered a gift and will not be tax deductible. To avoid confusion, always ask how the fundraiser relates to the cause and how the funds will be used. This distinction between gifts and charitable donations helps manage expectations and prevents disappointment.

4. Use charity ranking resources

Several online platforms provide valuable insight into a charity's legitimacy and effectiveness. Charity Navigator is a popular website that evaluates charities based on financial health, accountability, and transparency. We also provide resources such as trending philanthropy lists, top 10 rankings, and donor tips.

Similarly, GuideStar provides comprehensive information about nonprofit organizations, including access to Form 990 and community foundation data. These tools will help you make informed decisions and ensure you are contributing to a reputable organization.

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5. Consider donor-recommended funds

For a more strategic approach to charitable giving, consider using a donor-advised fund (DAF). This method allows you to donate to a mutual fund company and secure a tax deduction for the calendar year. Your gift is invested and grows tax-free, giving you the flexibility to distribute grants to charities over time. DAFs are a great option for donors who want to maximize their tax benefits while controlling when and how their funds are distributed.

6. Always ask for a receipt

Whether you donate cash or non-cash items, be sure to get detailed receipts for your records. This step is especially important if you plan to itemize deductions on your tax return. For non-cash donations, you may need to complete Form 8283 to claim the deduction. websites like satruck.org Provides valuation guides for common items and helps accurately document fair market value. Keeping thorough records ensures compliance with tax laws and protects you in the event of an audit.

Several online platforms provide valuable insight into a charity's legitimacy and effectiveness. Charity Navigator is a popular website that evaluates charities based on financial health, accountability, and transparency. We also provide resources such as trending philanthropy lists, top 10 rankings, and donor tips.

7. Protect yourself during the holiday season

Scammers often use the holiday season to take advantage of unsuspecting donors. For example, the United States Postal Service will not send you unsolicited text messages or emails containing tracking links unless you have specifically registered.

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Similarly, FedEx and UPS have resources on their websites to help you distinguish between legitimate and fraudulent communications. If you receive a suspicious message or become a victim of a scam, report it immediately to the FBI's Internet Crime Complaint Center. www.ic3.gov.

Philanthropy has the potential to transform lives and create lasting positive change. Taking the time to verify the legitimacy of the organizations you support will ensure that your generosity reaches those who really need it. As you spread kindness this holiday season, always be on the lookout for scams to protect yourself and your donations.

Ted Jenkin is CEO and co-founder of Oxygen Financial and president of Exit Stage Left Advisors.

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