As we near the end of 2021, many taxpayers are looking to decrease their tax liability by donating money to charities. (Reminder: the CARES Act allows individuals who take the standard deduction to deduct up to $300 in monetary donations and couples filing jointly to deduct up to $600. 2021 is presumably the last year this will be allowed.)
There’s no better feeling than supporting a cause you believe in AND reducing your tax liability. But be warned: There are scammers out there creating fraudulent charities so they can take advantage of your generosity. It’s especially common after a natural disaster for scammers to request funds over the phone. Be wary of any unsolicited phone calls.
The IRS has released the following tips to help taxpayers avoid fake charity scams.
1.) If a caller pressures you for money, hang up the phone. Legitimate charities are happy to get donations at any time, but scammers will rush you so that there’s no time to think it through or research their claims. If a charity won’t give you time to consider your donation, tell them no thank you.
2.) Don’t trust your caller ID. Technology makes it easy for scammers to fake caller ID information. Calls can look like they come from your local area code or a specific organization when the caller could in fact be anywhere in the world.
3.) Confirm the charity is real. Ask the fundraiser for the charity’s exact name, website, and mailing address so you can confirm it all later. A dishonest telemarketer may use a name that sounds like a well-known charity to confuse potential donors. Look up their tax-exempt status on the IRS website https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations
4.) If the fundraiser says you already pledged, stop and check. They may lie and say that you already pledged to make a donation or that you donated to them last year. Check your records to make sure this is true.
5.) Watch out for sentimental claims with few details. Be suspicious of vague sentimental claims (for example, a charity helping orphans afford cancer treatment or wounded veterans who can no longer work) but won’t give specifics about how your donation will be used.
6.) Be careful about how a donation is made. Don’t pay with wire transfers, cryptocurrency, or gift cards. Scammers ask you to pay that way because those payment methods are harder to track. The safest way to donate is by credit card or check
7.) If you do make a donation, review your bank account and credit card statements. Make sure you’re only charged the amount you agreed to donate and that you weren’t signed up for a recurring donation.
Always keep records of your charitable donations, including the acknowledgment the charity sends (either by email or US post). When it’s time to prepare your returns, list the charities and the amounts you gave them.
Remember, unless Congress extends it, this is the last year that people who don’t itemize will be able to deduct charitable donations, so you’ll want to make sure you claim what you can.