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

A few years ago, a touching story from New Jersey captured the nation’s attention. A couple, Katelyn McClure and her boyfriend launched a fund to help a homeless man saying they used their last $20 to help McClure when he ran out of gas. The story resonated with thousands of people, leading to an incredible response on GoFundMe where donors contributed an astounding $400,000. However, this touching story soon came to light, revealing a shocking scam. The money disappeared, and it turned out that the couple had made up the whole story. Their deception eventually landed them both in prison, serving time for their fraudulent activities.

This cautionary tale highlights the need to do a lot of research when donating to charities, especially during the holidays when people are more inclined to give. Although many organizations and individuals really need help, there are also those who take advantage of it for their own benefit. To make sure your donations make a real difference, here are some important tips to avoid scams and protect your giving.

1. Verify charitable status with the IRS

Before donating to any organization, first verify its legitimacy with the IRS Tax Exempt Organization Search tool. This resource allows you to check whether a charity is recognized as a tax-exempt entity under Section 501(c) of the Internal Revenue Code.

SAVE MONEY THIS HOLIDAY SEASON WITH DIY TIPS YOU CAN COLLECT AT HOME

Additionally, make sure the organization qualifies for tax-deductible donations. These two questions – whether the organization is tax-exempt and whether your donation is tax-deductible – are critical to making sure your money is going to the right place. If the answers to these questions are not clear, it is better to stop donating.

2. Research the financial means of the charity

Charities often advertise claims such as “half of every dollar goes to…” which may suggest that your donation directly supports their work. However, a closer look at a charity’s finances can tell a different story. To investigate further, review the organization’s Form 990, a document that provides detailed financial information. This form shows how the charity has allocated funds, including the proportion spent on programs versus administrative costs, and outlines administrative compensation. Understanding these details ensures that your offer is aligned with your values ​​and expectations.

3. Distinguish between gifts and donations

Crowdfunding platforms like GoFundMe have revolutionized giving, allowing people to support personal causes or emergency relief efforts. However, it is important to note that donations made to these campaigns generally do not qualify as charitable donations.

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

4. Use quality resources from charities

Several online forums provide valuable information about the legitimacy and effectiveness of charities. Charity Navigator is a popular website that evaluates charities based on financial health, accountability and transparency. It also offers resources such as a trending list of charities, top ten rankings and donor tips.

Similarly, GuideStar provides extensive information about nonprofit organizations, including access to Form 990s and public foundation data. By using these tools, you can make informed decisions and ensure that your donations support reputable organizations.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

5. Check donor advised funds

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

6. Always ask for a receipt

Whether you donate cash or non-cash items, always get a detailed receipt for your records. This step is especially important if you plan to itemize deductions on your tax return. For non-cash contributions, you may need to file Form 8283 to claim your deduction. Websites like satruck.org provide valuation guides for common items, helping you accurately list their fair market value. Keeping accurate records ensures tax compliance and protects you in the event of an audit.

Several online forums provide valuable information about the legitimacy and effectiveness of charities. Charity Navigator is a popular website that evaluates charities based on financial health, accountability and transparency. It also offers resources such as trending lists of charities, top ten rankings and donor tips.

7. Protect yourself during the holidays

Scammers often take advantage of the holiday season to take advantage of unsuspecting donors. For example, the US Postal Service never sends unsolicited text messages or emails containing tracking links unless you have specifically signed up for them.

CLICK HERE TO LEARN MORE ABOUT FOX BUSINESS

Similarly, FedEx and UPS have resources on their websites to help distinguish legitimate communications from fraud. If you receive a suspicious message or fall victim to a scam, report it immediately to the FBI’s Internet Crime Complaint Center at www.ic3.gov.

Giving has the power to transform lives and create lasting positive change. By taking the time to verify the legitimacy of the organizations you support, you can ensure that your donation reaches those who really need it. As you spread kindness this holiday season, stay vigilant against scams to protect yourself and your contributions.

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

CLICK HERE TO READ MORE FROM TED JENKIN