Fake Charities: One of the IRS Dirty Dozen Scams You Need to Watch For

Introduction:

Scams targeting taxpayers continue to evolve, and every year the IRS publishes its “Dirty Dozen” list to highlight the most common threats. One scam that keeps popping up is fake charities. In this post, Jon Markee, your Builder CPA, explains how bogus charities operate, why they’re especially dangerous during times of crisis, and how you can protect yourself from becoming a victim.

https://www.youtube.com/watch?v=XaV7HARfjnE

What Are Fake Charities?

Fake or bogus charities are organizations created by scammers to exploit people’s generosity. These scams often intensify after natural disasters or major crises, when people are eager to help. Instead of supporting a legitimate cause, donations go straight into the pockets of criminals, who may also collect personal information for identity theft.

Why Donations May Not Be Tax Deductible:

Many taxpayers assume that any charitable donation is tax-deductible, but that’s not always the case. Donations only qualify for a deduction if they are made to a qualified, tax-exempt organization recognized by the IRS. Giving money to an unqualified or fake charity means you won’t receive a valid deduction, even if the organization claims otherwise.

How to Verify a Legitimate Charity:

The IRS provides a 501(c)(3) search tool that allows taxpayers to confirm whether a charity is officially recognized. A legitimate organization should also be able to provide an Employer Identification Number (EIN). In addition, websites like GuideStar allow donors to review financial information and confirm an organization’s status. Taking a few extra minutes to verify a charity can prevent costly mistakes.

Charitable Status Can Be Revoked:

Once legitimate organizations can lose their tax-exempt status. Jon often sees charities continue operating and accepting donations under the assumption that contributions are tax-deductible, even after their status has been revoked. This creates risk for donors who unknowingly give to an organization that no longer qualifies.

The Changing Tax Landscape:

Due to increases in the standard deduction, fewer taxpayers itemize deductions. As a result, many people may not receive any direct tax benefit from charitable giving. While recent tax changes may allow limited charitable deductions even when taking the standard deduction, it’s critical to consult with a tax professional, as tax laws can change at any time.

Why Vigilance Matters During Disasters:

One of the most troubling aspects of fake charity scams is how aggressively they appear during natural disasters. Scammers prey on emotions and urgency, making it even more important to slow down and verify before donating. Unfortunately, these scams often target well-meaning people when they’re most vulnerable.

Conclusion:

Fake charities remain a persistent threat, especially during times of crisis. By verifying organizations, understanding current tax rules, and staying alert, you can protect both your generosity and your personal information. For more details, watch our latest video where Jon Markee, your Builder CPA, discusses fake charities as part of the IRS Dirty Dozen series.

By staying informed and vigilant, you can ensure your donations go to legitimate causes and avoid becoming the next victim of a costly scam.