It’s a familiar cycle. A disaster like Hurricane Florence strikes, and the airwaves are inundated with news of people displaced and homes destroyed. And shortly afterwards, you’ll see friends and colleagues ‘sharing’ on social media that they’ve contributed money towards relief efforts on crowdfunding platforms such as GoFundMe and encouraging others to give what they can.
For many people, their sense of compassion kicks in and they are compelled to do what they can to help – which often means making a financial donation. In fact, charitable giving in the United States soared to a record $410.02 billion in 2017 according to Charity Navigator.
But CPAs who specialize in financial fraud detection and prevention warn that you should think twice before clicking that DONATE NOW button. Fraudsters often take advantage of people’s good will and look to rip them off as they try to help those in need.
In fact, post-disaster scams are often successful because they create a sense of urgency to act quickly. In the wake of Hurricanes Harvey and Irene, robocall and impersonator scams popped up tricking people into giving up their personal information and their money. And the numbers can be staggering. When Hurricane Katrine hit, it was reported that fraudsters walked away with nearly $500 million in a variety of schemes.
In the aftermath of Hurricane Florence, it’s critically important that people do their due diligence before they donate. To protect yourself from post-disaster scams, CPAs on AICPA’s Forensic & Litigation Services (FLS) Fraud Task Force recommend that you:
- Stick with charities you trust. If you want to donate your hard-earned money to a cause, consider going directly to a well-known and established charity that you’ve donated to in the past. Giving to a trusted source gives you peace of mind, as you’ll know exactly where your money is going when it leaves your bank account.
- Check it out thoroughly before donating. Confirm charitable organizations are actually 501(c)(3) nonprofits. Research the organization using Charity Navigator, GuideStar, CharityWatch or the BBB Wise Giving Alliance. If pledging on GoFundMe, review the company’s guidance on determining if a campaign is legit. You can also verify charitable organizations’ status with the IRS Tax Exempt Organization Search tool.
- Be suspicious of phone calls, texts or emails. If you receive a call, ask the solicitor if the organization is on GuideStar. If the answer is “What’s that?” hang up. The FTC’s website on avoiding charity scams gives additional tips, such as being aware that scammers typically want donations in cash, by gift card or by wiring money, so you’re better off paying by credit card or check.
- Make sure it’s not a knock-off of a real charity. Some fraudulent sources use names that sound very much like a real charity but are not, so be wary of solicitations. Check the name on the website and make sure it matches the web address. Be extra careful when clicking links from email or social media. And don’t trust your caller ID – modern-day scammers can tamper with caller ID to make it look like they’re calling from a different location or organization.
- Find out how Uncle Sam feels about it. Understand how the IRS views charitable contributions. To take a charitable tax deduction, your contribution must be made to a qualified organization. GoFundMe campaigns and related crowdfunding activities may not fall into that category. If the organization is qualified, consult your CPA to find out if there are limits on deducibility and what documentation is needed. As a rule of thumb, always get a receipt for your charitable donations.
The bottom line: Don’t stop giving to worthy causes that you feel called to support. Just be careful and do everything you can to make sure the charity is legitimate. If you suspect a charitable campaign of committing fraudulent activity, the best course of action is to contact your state charity regulator and file an online FTC complaint. Your donations can make a real difference in people’s lives … but only if the money makes it to them.
As mentioned in an AICPA Insights post on hurricane preparedness earlier this month, if you’re an AICPA member facing financial hardship because of a natural disaster, you can apply for assistance through the AICPA Benevolent Fund. And if you want to help others in need, you can make a charitable contribution to the Fund.
Brian Simpson, Manager, Public Relations, Association of International Certified Professional Accountants
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Originally published by AICPA.org