You can tell that it’s hurricane season. Currently, the National Hurricane Center is issuing advisories in the Atlantic Ocean for Subtropical Storm Debby and in the Pacific Ocean for Tropical Storm Kristy and Hurricanes Hector and John. It’s been mostly quiet on the U.S. coasts, but according to the National Oceanic and Atmospheric Administration (NOAA), the U.S. averages one to two hurricane landfalls each season. We’re roughly halfway through hurricane season, which runs from June 1 to November 30.
But it’s not just the winds and rains that you should be watching out for: Criminals and scammers often try to take advantage of taxpayers who want to help victims of major disasters. The Internal Revenue Service (IRS) continues to remind taxpayers to be alert for scams that will “undoubtedly pop up when and if a hurricane occurs.”
This isn’t a new worry. Fraudulent schemes involving fake charities are so pervasive that they were included on the list of the IRS “Dirty Dozen” scams for 2018. The Dirty Dozen is compiled annually by the IRS and lists a variety of common scams taxpayers may encounter at any time during the year. You can see read about the schemes here.
When it comes to fake charity-related scams, they usually start with unsolicited contact. That might be a telephone call, social media post or message, e-mail, or even in-person leading to phishing schemes, identity theft, or financial loss.
You can be charitable following a natural disaster without becoming a victim. If you’d like to help out, here are a few tips to keep in mind:
- Be smart. Be wary of personal solicitations. Make sure that gifts made by checks or credit card gifts are secure—and don’t send money by text or using apps like Venmo without first verifying the organization and the contact information. If you don’t want to donate online or by text, most organizations have alternatives, like donation forms that you can mail together with a check. Never send cash through the mail, and never hand over cash in person without getting a receipt.
- Do your homework. Check out the credentials of a potential charitable organization before you donate. Charity Navigator is useful for gathering information about existing charities. Forbes has a list of the largest charities in the U.S., complete with details on revenues, fundraising efficiency, and more. And you can always confirm charitable status through the IRS website using their new online tool, the Tax Exempt Organization Search (TEOS). Remember that some organizations (like churches) may not be listed, so don’t be afraid to ask organizations that don’t appear on the list for more information.
- Use caution when donating to individuals. For tax purposes, you can only deduct contributions to qualified tax-exempt charitable organizations. Donations to individuals are never deductible for tax purposes even if the individuals are deserving. But there’s another, nontax reason to use caution: Money solicited for individuals could be part of a scam, and even if it’s not, the money might not be spent as advertised. Keep in mind that once you hand over the cash, you have no control over how it might be used.
- Rely on oldies but goodies. There is something to be said for those that have been around for some time, like the Red Cross. New organizations may not have the facilities in place to offer the most effective relief—or they could be scams. If an organization is brand new, use caution.
- Check with the organization first. While most organizations prefer cash or cash equivalent, some may solicit in-kind donations. Check with the organization before you send or drop off anything. And if you’re planning to claim a tax deduction for any in-kind goods, be sure to keep receipts showing what you paid for the items.
- Keep excellent records. Always keep records of donations since the IRS requires that you do so for tax purposes. Asking the organization for documentation is a good way to gauge their responsiveness and legitimacy (if they balk at doing so, it should be a red flag).
- Pay attention to the rules. The rules for charitable giving apply even in extraordinary situations. If you have questions, ask your tax professional for more information.
(For more tips on making your charitable donations count for tax purposes, check out this article).
Remember: If in doubt, assume it’s a scam. There are plenty of legitimate relief efforts, so don’t waste your time, energy, or money on something that feels “off” to you.
If you are certain that you’re being solicited as part of a charitable scam, hang up the phone or delete the email. Don’t engage (trust me).
Finally, if you have been affected by a natural disaster, and you have questions, help is available. You can call the IRS toll-free disaster assistance telephone number (866-562-5227) for more information about tax relief or disaster-related tax issues. You can also find details online on the disaster relief page on the IRS website.
Let’s be safe out there.
