If you are like the rest of us, you can see many opportunities these days for a charity organization to give back to your community and help around the world. Every day, tens of thousands of registered donors support the cause across the United States.
While you may know the names of some of these groups, there may be some you have never heard of. Unfortunately, some of these you may encounter are fraudulent requests made by fake charities. According to the FTC Consumer Sentinel Network, there are more than 4,600 reports of fraudulent fundraising by 2020. So, how do you know if a nonprofit organization for help is legitimate, or is doing what it says?
First, it is important to understand that charitable fraud can take many forms. Fake charity is one of the worst examples. Some do not exist at all.
Others are on paper, but all of their money goes into the pockets of fraudsters. Some charitable acts are committed by acting against the right company, for example, if a charity organization for children decides to steal a gift for personal gain. Other scams include misleading donors by creating charitable names that sound like celebrities but are spelled out a bit differently.
In addition, some organizations claim to be raising money for charities but not supporting any charities or using most of their contributions to manage debt and expenses. If you are in a hurry to search for “charity fraud” in the report section of your web browser, you may be frustrated by how often this type of activity is being performed.
When deciding to donate for a cause, it is important to be careful that you do not accidentally give money to fraudsters. Here is an easy way to tell the difference between the right charities and the fake charities you should avoid:
1) A valid charity has a user identification number (EIN).
These are also called tax ID numbers. Having an EIN does not mean that this organization is tax-deductible, or that your donation is tax-deductible.
Anyway, it lets you know that the IRS knows who they are.
To obtain the EIN, the organizations must provide their contact information with the applicant’s name and telephone number. This will give the option to contact the charity if something goes wrong with the offer. Based on the IRS 2020 list of 12 dirty tricks, the right charities should provide the EIN when requested.
2) Charities must register with the IRS in the applicable state annually.
Anonymity means that charities cannot or do not want to provide more information about their programs. This lack of understanding should be a warning sign.
Also, if they are not registered with the IRS, your donation may not be tax-deductible! If you are looking for a charity, the IRS has a tax-exempt company search tool that allows you to search for an organization through its EIN to see if it is registered (Bureau of Investigation) Exit (irs.gov)).
Many charities list their EIN on their website, or you can apply for it right away from the organization asking you to donate. Charities who fail to register with the IRS each year lose their tax rates automatically over time.
In addition to the IRS, charities are required to register with about 40 state governments annually, depending on the nature of their charitable activities and their fundraising plans.
For example, a charity organization for homeless in every state in the country should register in California if it plans to receive donations from California residents. State registration is a completely different process of filing a tax return with the IRS.
Some charities do not know what is required to register with the state. Labyrinth, Inc. working with a number of charities that do not know what is required to bring them in compliance with federal and state registration laws.
3) Right charities should have the means to donate not only by cash, gift card or wire transfer.
While donating money or gift cards can help those who are unpaid as they try to help the community in need, charities should also have a way of accepting this type of payment.. If they do not, that is a serious warning and a possible scam.
Cash, gift cards, and wire transfers are ways in which criminals can earn money free of charge because they are hard to find. The FBI warns that this could also happen in the case of natural disasters. Qualified charities will have other ways to donate, such as by check or credit card.
If you choose to write a check or use a credit card, it will be easier to make sure your money goes to the right charity.
4) Charity organizations must provide tax receipts for every donation.
While you may or may not opt to receive a receipt, the option to receive a receipt lets you know if you would consider donating to a charity.
If a person or charity is willing to accept your donation without a valid receipt, this organization may not be able to describe how your money is being used. It could be that the scammer is just trying to make more money. If someone says they can’t give you a receipt, consider donating immediately to a charity if the charity can give you one. Just because someone says they raise money for an organization or for a reason does not mean they are doing it.
The donation letter should contain clearly defined information about the charity you donated, including the name and address of the congregation. The receipt should also state the amount of money you have donated, or if you have donated goods, what you have donated.
Without a receipt, it is difficult to deduct your donation from tax. If charities are unwilling to give a recipient, you should be suspicious! Also, receiving your donation does not guarantee that your money will be used properly.
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