How to Identify A Fake Charity

We all like to be charitable and give back when we can, but in February of 2016 the Internal Revenue Service (IRS) reminded us once again that it is important to do your homework before selecting a charity to donate to. There are people and organizations out there happy to take your money as part of an illegal scam disguised to look like a charitable organization. Every year, the IRS releases a “Dirty Dozen” list of tax scams that are attempting to defraud the public at large and the long standing issue of fake charities has again made the list. While this is a significant issue year after year, there are things you can do as the donor to ensure that your money is going where you intend it to go.

The easiest way to avoid these scams when donating is to give to a charity that you already know, or one that has a well established reputation. In addition, there are websites like guidestar.org or charitynavigator.org which evaluate and give you more detailed information about charities you might be interested in giving to. But in a case where you are being solicited or are looking to donate to an organization that you may have just happened to hear about, the IRS has given you three tips to avoid being the victim of a tax scam.

The first tip the IRS offers is to be cautious if the name of the charity soliciting from you sounds very similar to another charity you have heard of or is nationally recognized. These groups are using names and messages that sound familiar to pawn themselves off as legitimate charities, when in fact, they are just scammers. The IRS offers a service on their website called “Exempt Organizations Select Check” (EO Select Check), which allows you as a donor to verify the organization can receive tax-deductible donations, verify the organization has not had their exempt status revoked and verify whether or not small organizations have filed a Form 990-N. The easiest way to use the free tool provided by the IRS is to ask the person soliciting money what the EIN or tax identification number of the organization is. If they are unwilling to provide this information that should be a red flag to you.

The second tip the IRS offers is to be protective of your personal financial information when dealing with people soliciting money from you. Information such as Social Security numbers or personal passwords should never be shared, and while you may use a credit card to donate money, please do not do so until you have verified that the organization the solicitor works for is a legitimate charity.

The third tip the IRS offers is to not send or give cash as a donation. For the security of your money and for the purpose of keeping better tax records, it is recommended you donate using a check or credit card, which provide you with clear documentation of a gift.

We all love to give back when we are able, but before we give to people or organizations it is important we make sure our money is going where we intend for it to go. Please take the extra time to verify an organizations status and ensure you do not fall victim to a tax scam.