Originally Published Dec. 7, 2016
Don’t get taken in by charity scams during the holiday season. Always remember: the stronger your urge to give, the more attractive you are to con artists more than willing to accept your generosity.
The holiday season–reinforced by the gifting traditions of Christmas, Kwanzaa, and Hanukkah–is an especially important time for charitable causes of all kinds. Donors are more likely to respond to fundraising appeals during the holiday season than at any other time of the year.
Our instinct toward giving is a healthy one, not just spiritually, but financially as well. One of the common traits of successful wealth accumulators is their consistent habit of channeling a portion of their wealth in support of the institutions and charitable causes they believe in. They understand that investing their resources in community-sustaining institutions, programs, and causes creates a healthier and more fertile environment for their own wealth-building efforts. This is the rationale behind the biblical principle of tithing to your church.
Unfortunately, the peak season for legitimate charities also happens to be prime time for fundraising scams, bogus charities, and con artists intent on separating you from your money. The key to not being taken advantage of is not to be less generous, but to be more thoughtful, deliberate, and strategic with your charitable donations. Here are some tips to make sure you don’t get taken.
Treat your charitable donations as you would any investment.
If you invest in a mutual fund, you expect a specific return on that investment. In the same way, when you make a donation to a charity, you want to be sure that your dollars will be used to achieve the result–whether it is fighting the spread of AIDS in the black community or providing relief to natural disaster victims–that you intended it to. You wouldn’t put money into a mutual fund without reading a prospectus and learning about the fund’s past performance and investment philosophy. To be sure you don’t get taken, never give money to any charity that you are not familiar with and have not investigated for yourself.
Make sure you get the actual name, address, and phone number of the charity before giving. Then check it out by going to the IRS website at www.irs.gov, which has an updated list of legitimate charities and nonprofit groups, or by calling the IRS toll-free at 877-829-5500. Another useful website is GIVE, part of the Better Business Bureau’s Wise Giving Alliance. Also check out two great websites that review and grade individual charities, Charity Watch
Don’t give on impulse.
Many fundraisers, even legitimate ones, will try to manipulate your emotions (gratitude, guilt, and even
shame) to get you to give, even if you’re not sure you want to–and before you have a chance to check out the charity for yourself. Don’t get taken. Only give when you are familiar with the charity and you truly believe in or are passionate about the cause it serves. After all, you can’t give to every worthy cause. If what you truly care about is tithing at your church and fighting breast cancer, don’t be shamed into writing a check to save the environment. Just because it is a worthy cause, does not mean it’s your worthy cause. You have a right to choose which charities get your money without feeling guilty about saying yes to some and no to others.Watch out for charity scams.
You will avoid the vast majority of fraudulent and/or unethical fundrais
ing efforts simply by following Steps 1 and 2. Also, look out for tricks such as fake charities with names (say, the National Cancer Society, or the American Cancer Association) very similar to well-known, legitimate causes (the American Cancer Society). If you do get taken in by a charity scam, contact the Federal Trade Commission toll-free at (877) FTC-HELP. Also, report the fake charity to the state attorney general where you live and/or where the charity is located.Avoid giving cash.
I believe in only giving by check or credit card. That way, I have a record of my gift, which will be needed if I want to claim the charitable gift as a deduction on my taxes, and especially if I need proof that I’ve been ripped off. Also, I am less likely to give on emotional impulse. Having to take the time to write a check or pull out my credit card will slow me down enough to think about my decision to give before I actually release my dollars. Even after I give, if I have second thoughts, I still have a little time to call my bank or credit card holder to stop the payment. With cash, once it’s gone, it’s gone.
Speaking of taxes, make sure you understand the difference between tax-exempt and tax-deductible.
Don’t get taken in by a group or cause claiming that there is a tax advantage to your donation. When organizations, including many charities, gain tax-exempt status, it means the IRS does not require it to pay taxes on the donations it receives. On the other hand, the donation you make to such a charity may be tax deductible for you when you file your taxes.
Why is this important? First, before you give, you want to get proof of a charity’s 501(c)(3) status, which says that the IRS has deemed it eligible to receive tax-deductible contributions. Don’t just take their word for it.
Second, you need to understand that not every dollar donated to a tax-exempt organization will be tax deductible for you. For example, if you buy a ticket to a tax-exempt charity’s fundraising dinner for $100, and the actual value of the meal is $40, only $60 of your gift may be tax deductible.
The bottom line
Don’t get taken by fake, incompetent, or crooked charities. Your charitable giving should be planned and budgeted for just like all of your other expenses. As soon as the New Year begins, determine how much money you plan to reserve for charitable donations for the year, and which organizations and causes you plan to support. That way, you can ensure that you are giving to the causes you really care about, secure in the knowledge that the hard-earned dollars you donate are being used wisely by legitimate organizations.
Better yet, you can use my guilt-free, foolproof response to unwanted fundraising solicitations: “Our family has already earmarked our charitable contributions for this year. However, if you will send me information on your charity and your cause, we will be happy to consider you for next year.”
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