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The Wall Street Publication > Blog > Personal Finance > 7 methods to keep away from getting scammed by a ‘charity’ this vacation season
Personal Finance

7 methods to keep away from getting scammed by a ‘charity’ this vacation season

Last updated: December 6, 2024 12:30 pm
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7 methods to keep away from getting scammed by a ‘charity’ this vacation season
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Just a few years in the past, a heart-wrenching story from New Jersey captured the nation’s consideration. A pair, Katelyn McClure and her boyfriend launched a fundraiser to assist a homeless man claiming he had used his final $20 to help McClure when she ran out of fuel. The story struck a chord with hundreds, resulting in an awesome response on GoFundMe the place donors contributed a staggering $400,000. Nonetheless, this touching story quickly unraveled, exposing a stunning rip-off. The cash disappeared, and it was revealed that the couple had fabricated all the narrative. Their deception finally landed them each in jail, serving time for his or her fraudulent actions. 

This cautionary story highlights the necessity for doing copious analysis when donating to charitable causes, significantly in the course of the vacation season when persons are most inclined to present. Whereas numerous organizations and people genuinely need assistance, there are additionally those that exploit goodwill for private acquire. To make sure your donations make an actual distinction, listed here are some important tricks to keep away from scams and shield your generosity. 

1. Confirm charitable standing with the IRS 

Earlier than donating to any group, begin by confirming its legitimacy by way of the IRS’s Tax-Exempt Group Search software. This useful resource lets you examine whether or not the charity is acknowledged as a tax-exempt entity underneath Part 501(c) of the Inside Income Code.  

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Moreover, affirm that the group is eligible to obtain tax-deductible contributions. These two questions — whether or not the group is tax-exempt and whether or not your donation is deductible — are essential in guaranteeing your funds go to a respectable trigger. If the solutions to those questions are unclear, it’s higher to carry off on donating. 

Examine with the IRS if you wish to decide if the donation you make is tax-deductible. | The U.S. Flag flies above the Worldwide Income Service headquarters constructing on January 3, 2024, in Washington, D.C. (Photograph by J. David Ake/Getty Photos)

2. Analysis the charity’s monetary practices 

Charities usually promote claims akin to “a portion of every dollar goes to…” which could recommend that your contribution instantly helps their mission. Nonetheless, a deeper have a look at the charity’s funds can inform a distinct story. To analyze additional, evaluate the group’s Type 990, a doc that gives detailed monetary data. This kind outlines how the charity allocates funds, together with the proportion spent on packages versus administrative prices, and divulges govt compensation. Understanding these particulars ensures that your donation aligns together with your values and expectations. 

3. Differentiate between presents and donations 

Crowdfunding platforms like GoFundMe have revolutionized charitable giving, permitting people to assist private causes or emergency aid efforts. Nonetheless, it’s important to acknowledge that contributions made to those campaigns usually don’t qualify as charitable donations.  

If the marketing campaign organizer just isn’t affiliated with a registered tax-exempt group, your contribution is taken into account a present and isn’t tax-deductible. To keep away from confusion, at all times ask how the fundraiser is linked to the trigger and the way the funds shall be used. This distinction between presents and charitable donations can assist handle expectations and forestall disappointment. 

4. Use charity rating sources 

A number of on-line platforms present useful insights into the legitimacy and effectiveness of charitable organizations. Charity Navigator is a well-liked web site that evaluates charities primarily based on monetary well being, accountability and transparency. It additionally gives sources akin to trending charity lists, prime ten rankings and donor suggestions.  

Jeffrey Arthur Moynihan Jr., 56, was arrested Tuesday evening and charged with grand theft. (Credit score: Bradenton Police Division)

Equally, GuideStar offers complete data on nonprofits, together with entry to Type 990s and information on neighborhood foundations. By leveraging these instruments, you can also make knowledgeable choices and guarantee your contributions assist respected organizations.

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5. Discover donor-advised funds 

For a extra strategic method to charitable giving, think about using a donor-advised fund (DAF). This methodology lets you contribute to a mutual fund firm, securing a tax deduction for the calendar yr. Your donation is invested and grows tax-free, supplying you with the pliability to distribute grants to charities over time. DAFs are a wonderful possibility for donors who need to maximize their tax advantages whereas sustaining management over how and when their funds are distributed. 

6. At all times request a receipt 

Whether or not donating money or non-cash objects, at all times get hold of an in depth receipt to your data. This step is particularly essential for those who plan to itemize deductions in your tax return. For non-cash donations, you might want to finish Type 8283 to say your deduction. Web sites like satruck.org present valuation guides for widespread objects, serving to you doc their truthful market worth precisely. Protecting thorough data ensures compliance with tax legal guidelines and protects you in case of an audit. 

A number of on-line platforms present useful insights into the legitimacy and effectiveness of charitable organizations. Charity Navigator is a well-liked web site that evaluates charities primarily based on monetary well being, accountability and transparency. It additionally gives sources akin to trending charity lists, prime ten rankings and donor suggestions.  

7. Shield your self in the course of the vacation season 

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Likewise, FedEx and UPS have sources on their web sites to assist distinguish respectable communications from fraudulent ones. When you obtain a suspicious message or fall sufferer to a rip-off, report it instantly to the FBI’s Web Crime Grievance Heart at www.ic3.gov. 

Charitable giving has the potential to remodel lives and create lasting optimistic change. By taking the time to confirm the legitimacy of the organizations you assist, you’ll be able to make sure that your generosity reaches those that genuinely want it. As you unfold kindness this vacation season, stay vigilant in opposition to scams to guard your self and your contributions. 

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

CLICK HERE TO READ MORE FROM TED JENKIN

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