A time of crisis can bring out the best in people — a desire to help others in need — but it can also bring out the worst. Unfortunately, natural disasters create opportunities for scammers to prey on generous people who are eager to donate to relief organizations and other charities.
Scams tied to natural disasters or emergencies have become so prevalent that legislators enacted the Emergency Disaster Assistance Fraud Penalty Enhancement Act of 2007. Three years after Hurricane Katrina wreaked havoc along the U.S. Gulf Coast, the FBI announced charges against 907 individuals in 43 federal judicial districts across the country for taking advantage of victim assistance and rebuilding efforts.
Before making a donation, follow these tips to avoid being scammed.
Avoid the Scams
For opportunistic scammers, the internet is a perfect accomplice. Here's how to ensure the charities to which you hope to donate are authentic.
- Be wary of social media and email links. Social media can disseminate information quickly, but there’s no guarantee that the information has been vetted. Instead of clicking on a link through your social media feed, go directly to the charity’s authorized website. If you receive an email from an unknown charity, avoid clicking on the donation link.
- Watch out for copy cats. Many scammers cleverly target donors using names that sound official or confusingly similar to well-known charities. After Hurricane Katrina, the American Red Cross asked the FBI to investigate at least 15 fake websites that deceptively mimicked Red Cross pleas for donations.
- Don’t provide more information than needed. Reputable organizations may ask for your name, address, email address and credit card number — but not your social security number or a copy of your Driver’s License. Providing unnecessary personal information may open you up to identity theft.
- Beware of requests to send money overseas. Some scammers operate overseas and ask you to submit payment to a foreign bank. This is highly suspicious, especially for a U.S. disaster.
- Consult a charity ratings website. Sites like CharityNavigator, GuideStar and the BBB’s Wise Giving Alliance provide news updates, donation advice and ratings based on different criteria.
If you think you have found a charity scam, you can report it to your State Attorney General, your local Better Business Bureau or the FTC, which feeds the Consumer Sentinel Network for law enforcement.
It is still possible to find many reputable aid organizations that deserve your support. When making a donation, remember the Internal Revenue Service’s charitable giving rules still apply.
- Deduct only donations made to tax exempt organizations. Gifts made directly to individual victims are not deductible charitable contributions. Gifts must be made to qualified charitable organizations, which include nonprofit social service agencies (like the Salvation Army and the Red Cross); federal, state and local governments (for public purposes); churches, synagogues, temples and mosques; nonprofit schools and hospitals; and certain war veterans organizations. You may use the IRS search tool to determine whether an organization is tax exempt, but note that churches and other religious institutions may not appear in this search.
- Deduct only in-kind or monetary donations. The value of your volunteer time or services is not deductible, although out-of-pocket expenses while providing volunteer services to a qualified charitable organization may be. Out-of-pocket expenses are costs that would not be incurred absent the volunteer service (such as a special uniform needed to be a volunteer, or the cost of gas to travel to the volunteer site). Do not include personal, living or family expenses in these deductions.
- Deduct only the fair market value of donated property. To meet victims’ most urgent needs (e.g., shelter and clean water), emergency relief organizations often prefer to receive money over donated items. Also, if you donate goods to a qualified organization, they are deductible only to the extent of the property's fair market value. There are different rules for determining the value of household goods, vehicles, real estate and other items.
- Submit documentation for larger donations and out-of-pocket expenses. You must substantiate all contributions of cash or property valued in excess of $250 by a written receipt from the charity (a canceled check is not enough). Similarly, when deducting valid out-of-pocket expenses for volunteer service to a charity, you must obtain a written acknowledgement from the charity describing the services provided and other disclosures required for all charitable contribution receipts.
Charities do invaluable work in times of crisis, and every donation helps. By following the guidelines above, you can give generously, but also give wisely and responsibly.