How to Avoid Getting Ripped Off by a Charity Scam
Don't Fall for These Tricks
The most frequent questions I get about charitable organizations are, "How do I know if an organization is legitimate?" and "How do I report a possible fraudulent nonprofit?"
Start first with safety. Don't let your gift fall into the hands of an organization that is at best poorly run and at worst fraudulent.
4 Easy Ways to Check Out a Charity
- Look the charity up.
The IRS provides a search for IRS-approved charities. Don't stop there, however. Even if your charity is listed, you may need to hunt further to get information about how effective and efficient the charity is.
- Ask the charity.
You may also verify an organization's tax-exempt status and eligibility to receive tax-deductible charitable contributions by asking to see an organization's IRS letter recognizing it as tax-exempt. There are many types of nonprofits; not all are tax-exempt. Look for the 501(c)(3) designation for any nonprofit you wish to donate to, especially if you want to take a tax deduction for your donation.
- Use a charity watchdog.
Charity watchdogs are third party organizations that keep an eye on the charitable world. Some just make information available so you can make your own judgments. Some rank nonprofits in various ways or give seals of approval. Get acquainted with these three top charity watchdogs:
- Charity Navigator rates charities based on their efficiency, transparency, and accountability. Charities receive up to four stars, providing an easy way to find the organizations where your contributions will be safe and effective.
- GuideStar.org lists more than one million nonprofits in its database, all of which have met IRS criteria for exempt organizations. On this site, you can find the most recent tax forms that a charity has filed with the IRS. If there are no 990s or no current ones, that is a good indicator that you may want to stay away.
- The BBB Wise Giving Alliance is a division of the Better Business Bureau. It provides information about charities, publishes a quarterly guide to wise giving, issues scam alerts, and gives a national charity seal to vetted charities for display on their websites and in their fundraising materials. The BBB also lets consumers complain about a charity should they feel misled.
- Check with state and federal law enforcers.
Your state attorney general's office investigates fraud, including fraudulent practices of nonprofits or groups that claim to be nonprofits. If you have a complaint against a nonprofit in your state, this is the place to go. The National Association of Attorneys General maintains a list of each state's Attorney General with contact information.
If you think that you've been solicited by an organization that is illegally claiming to be a nonprofit, you can file a complaint with the Federal Trade Commission.
It is important to know that not all charitable causes are registered with the IRS. If you give to a small, local cause that is not tax-exempt, just make sure that you know something about the people who are asking for your money. Remember too that a donation to a non-registered organization will not be tax deductible.
Many causes spring up, run their course, and go away. That doesn't mean that they are illegal or fraudulent. When you get your car washed by a group of local high school kids to help them take their band to the Rose Bowl Parade, that may be just fine. When you donate on one of the crowdfunding sites to help an individual, that may be ok too.
Just be sure that the car washing group has the backing of a school or other institution and that you know the person raising money on one of the online websites or you can verify that the need is legitimate.
How to Handle Telephone and Email Solicitations Safely
In an age when you just don't know who sent you that email or who called you on the phone, it's best to be super cautious.
Telephone fundraising is especially dangerous as some charities hire professional companies to make those calls. Much of the money received goes right to the solicitors, not the charity or the people served.
The Tampa Bay Times and The Center for Investigative Reporting have done groundbreaking investigations into these bad practices. Check out the worst charities in America and a list of fake charities to make sure you are avoiding these bad apples.
Email is prone to phishing scams where crooks masquerading as a charity steal your private info and even your credit card details.
Here are some tips for handling telephone calls and emails from charities:
- When phoned, just say no. That is what I do unless I know the charity very well. I say that I do not respond to telephone solicitations. I suggest they send me a letter, or I say that I will donate in my way. Having a plan for your yearly charitable donations helps in these situations. You'll know where your donations will go, how they will be done, and when.
- Never divulge your credit card or bank account number over the phone unless you initiated the call.
- Never respond to email solicitations unless you know the organization personally or have opted in to receive its communications. Don't give your credit card information through an email. Go to the charity's website and look for a secure page where you can donate safely. Beware of phishing emails that might look like they are from a charity you know.
- Be aware of bogus charities that may use names which sound like reputable organizations.
- Contact your state attorney general or secretary of state to learn which charities are licensed to operate in your area or to report suspicious solicitations.
We want you to keep giving. It is a cherished American tradition. Just don't get ripped off. Make sure your charitable donation is going where it can do the most good.