In This Article
Are you worried about charity fraud? Don’t be – just arm yourself with the right information to protect yourself and your donations! Tiffany is here to help. She explains common tricks used by fraudulent charities and offers tips on how to verify if an organization is legitimate.
Learn why it’s important to check the tax-exempt status and reputation of charities, review their financial statements and annual reports, and more – all with the goal of protecting yourself from scams. Don’t miss out – listen now!
Every Tuesday, Tiffany answers one of your submitted questions. To submit a question for an upcoming episode, visit here: https://www.moneytalkwitht.com/asktiffany
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Intro/Outro: You know what it is. That’s right. It’s time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears. It’s the money talk with Tiff podcast.
Tiffany Grant: Hey, hey, and welcome to another episode of Tiffany’s take where I answer your questions right here on the podcast.
So if you want your question answered, go to www. moneytalkwitht. com forward slash X Tiffany, and I’ll be more than happy to answer. So for today, I wanted to shed light on an issue since we’re coming up on the end of the year. Um, most people like to donate to charities. Um, there’s a few reasons why you would want to do that.
You know, of course the tax deduction, but also just doing good work. So I wanted to shed light on charity fraud because it’s actually a pretty huge issue and it could affect you or someone, you know, so let’s start off with some facts. So charitable organizations are estimated to lose 5 percent of their revenue each year to fraud.
And that’s from the IRS website. So you might be saying 5%, well, that’s not too bad, but fraud losses in nonprofit cases can range dramatically. For instance, in a study of 58 nonprofit cases, losses range from 200 to 17 million with a median loss of 100, 000. Charities are losing on average 100, 000, um, in charity fraud every year.
Now this is crazy and you might think, well, you know, only give 200 or what have you. But if you add that up, um, it could be a significant amount. So unfortunately, when disaster strikes, Americans, you know, we always want to go out and help. But also criminals are more likely to be on the rise when there’s a disaster or there’s an emergency as millions of people who open their wallets, um, they want to be there when you do.
So scammers solicit donations to fake charities and can pose as employees of legitimate charities or federal agencies to dupe disaster victims trying to get disaster relief. So this goes both ways. It could be. that they’re scamming you on the front end, so in donating money, but it also can be that they’re scamming people on the other side, um, as you know, victims or people trying to use the service, uh, are trying to get the help that they need.
They may be getting scammed as well. So in order to help you feel confident that your hard earned money is going to legitimate charities, ones that are making real change in the world, I want to give you some tips to navigate this complex landscape and make smart, informed decisions. So first and foremost, make sure you check the tax exempt status.
Did you know that not all non profit organizations are tax exempt and only donations to IRS registered 501c3 organizations are tax deductible? And so a lot of people don’t know that there’s other forms of organizations. So there’s not just 501c3, there’s 501c4, there’s all different kinds and only 501c3 organizations are tax deductible.
So before you write that check. Just take a minute to visit the IRS’s search, which I’ll have a link to in the show notes. But that is the only way to tell if it is, uh, in fact, an IRS registered 501c3. And it’s a quick way to confirm that your intended charity does have their registration. Now, that’s not enough because you might go and you might say, Oh, I want to give to the Goodwill.
Um, just for instance, and you go and you search and the Goodwill is listed, but guess what? You can still get scammed. So make sure you do your homework. Remember when your high school teacher told you to do your homework? Well, it applies here too. So. Check out websites like Charity Navigator or GuideStar, which I’ll have links in the show notes, but they are fantastic research resources for researching the reputation and effectiveness of charities.
So what I enjoy is that, and I want to say it’s on Charity Navigator, it tells you how effective your dollar is. Um, and so I think that is really, cause you know, nonprofits are able to spend the money how they see fit. So taking the goodwill example as well, a few years ago, a lot of people were outraged, maybe still outraged.
I don’t know, but I heard about it a few years ago, how, um, the CEO of Goodwill is making a ton of money and, you know, they get the donations, then they sell them. Like people were just not happy with how the business model is set up. So to give you an example, I searched Goodwill, um, and I’m looking at the international organization versus just the independent agencies in maybe your neighborhood.
Um, I looked at the, the main one and on Charity Navigator, it gives a full breakdown on, you know, their rating. their impact and results, their accountability and finance, so on and so forth. So, you know, when people were complaining about their financial practices, when I’m looking here, it actually, they check out pretty well and it breaks it down by board members, um, board size, audits, all types of things.
So you can really dig in deep to these charities and see how they’re using their money. Uh, it also gives. their liabilities to assets ratio. It says whether their tax forms are posted on their website and so on and so forth. Um, and so it’s really good to check out these websites for any charity that you’re thinking about and see if they have a profile and you know what their breakdown is.
Also, I looked at Goodwill on GuideStar and GuideStar actually provides like their mission statement, their programs and results, who they serve. All of that type of data. So it’s good to use both options when you’re doing research on the organization that you’re trying to support, use both websites to do a cross check and see what they have for you.
They’re like the consumer reports of the nonprofit world. All right, so moving on, um, there’s also would love for you to review their financial report. So if you’re like me, you want to know where your money’s going. So most reputable charities will publish their financial statements and annual reports online.
Look for them, review them and ask yourself, is this charity spending a reasonable percentage, at least 75 percent on its mission? If the answer is no, and it’s going to all the employees and you know, other stuff, maybe expenses, what have you, then maybe that might not be the best way to spend your money.
And you might want to do some additional research. So just see how they’re spending your money. And if it aligns to what you believe next, let’s talk about the impact. Make sure you understand the impact that the organization is having. Don’t you want your donation to have the biggest impact possible? Of course.
So make sure you look behind beyond. The glossy brochures and the heart tucking stories. I know y’all remember those commercials. Ask the charity for tangible evidence of what they’ve accomplished. Metrics matter. And if they are interested in your dollars, they will be more than happy to provide that for you.
Now, make sure you keep records. Now, this is more than just good housekeeping. It’s about protecting yourself. Always ask for and keep a record of your donations. This also is handy when it comes text time. But this could be a bank statement, a credit card statement, or a written acknowledgement from the charity.
You want something proving that you made this donation and it went to the organization that you chose. Next, verify the certifications of the organization. So legitimate charities often have certifications from membership or association organizations. Make sure you verify these. Anybody can post anything on a website, but if you verify, maybe go to the accrediting body or what have you, and then search for the organization there.
They most have a database. That’s just another layer of assurance that your donation is going to a legitimate place. Okay. So those are some tips to think about when you’re donating money and just a few things to keep in mind. But I also want you to keep scammers tricks in mind. So some things that they’ve done before to scam people out of money.
So now that you have some tips to make sure that how you’re donating your money is going to the right place and making sure that the organization is legit. I also want you to be aware of some scammers tricks that they actually do. And these are some things to keep in mind. So legitimate charities do not ask for gift cards, cash or wire transfers.
They just do not. So if anybody asks for that, then it may not be legitimate charity. Now I’d have heard of, um, some. organizations wanting gift cards. For instance, we have a local organization here and they are a safe haven for youth that maybe have ran away or what have you. And so they do ask for gift cards to provide to the kids as like an incentive, if they have good behavior, they’re doing good in schools on and so forth.
So I would say. But typically that is not the case. So if you are going to provide a gift card, make sure that it’s in person. That’s a way that you can, um, you know, kind of guard against. that scam. So with this particular charity, I actually went up there and talked to a representative and that’s what they told me.
And so when I get the gift cards, I’ll go back up to that representative and provide her with the gift cards. So make sure that you are, if it is something related to gift cards is something that you do in person, but they usually do not. ask for gift cards, cash or wire transfers. They usually want something that is traceable as you should to.
So stick to checks, um, or money orders, maybe something along that line where you have a, where you have an actual paper trail that you can follow if things go south. Scammers may claim to work for the IRS or another government agency. We should know by now that the IRS does not reach out via phone. If they need to reach you, they will reach out to you via mail, snail mail at that.
Not even email, snail mail. That’s the only way that the IRS communicates with you, unless you call them, okay? These may also pose as a representative of a legitimate charity to ask for money or private information from well intentioned taxpayers. So anytime you get a call from a quote unquote charity, make sure that you do your due diligence in, in what I typically do when I get calls like that.
And I am interested in donating. I’ll hang up and just go to their website or I’ll hang up and call back, you know, the number that. they have on their website or what have you. So that way I can make sure that it is from who I think it is because scammers can change their caller ID and make it appear that they are a legitimate organization calling from a legitimate phone number.
So you can never go by, Oh, well, this is the right number that they’re calling from because there are ways to change your caller ID. Scammers can make vague and sentimental claims but give no specifics about how your donation will be used. Make sure you’re asking, okay, how exactly is this donation being used?
And they should be able to give you an answer. If not, then that may be your red flag. Now, scammers can also set up bogus websites using names that sound like real charities. So if you are on a website, look at the URL at the top. Make sure you’re taking a look at… what the name really says. Sometimes they’ll just throw an extra character in there or, you know, something that you won’t pick up on.
So just make sure you are really doing your due diligence when you’re on these websites. The best thing to do is check that URL because you really can’t change a URL. So for instance, instead of it being Google, it might be Google said. com or something like that. So just make sure that you are on the legit website.
And then bogus organizations often claim a donation is tax deductible when it is not. But if you go back to our first tip, you should be able to tell. If it is tax deductible or not by using the IRS organization search. And I’ll have that link in the show notes. So anyway, I hope that this is helpful for you because you don’t want to have your money go to the wrong cause, especially with these disasters happening.
And then also the end of the year coming up, people are trying to get their taxes, tax deductions in. Make sure that you are setting yourself up, self up for success and are not giving to a bogus charity, a scammer or any other ill intentioned characters. So anyway, if you would like your question answered on the podcast, please go to www.
moneytalkwitt. com forward slash X Tiffany, and you can submit your questions there. I see that I have more and more questions coming in. So thank you so much for actually doing it. Um, I. Are answering your questions. They are so fun and usually the highlight of my week . Um, so thank you so much for doing that and also be sure that you are subscribed to the podcast and if you haven’t left a review yet and you enjoy my episodes, please leave a review.
It really helps us expand our reach and find other people like you that would love to learn about money talk as well. Um, so anyway, that’s enough with the promo , I hope. Hope you all have a wonderful rest of your day and I’ll see you next week. Bye.
Intro/Outro: Thank you for listening, joining, and being a part of the Money Talk with Tiff podcast this week.
You can check Tiff out every Thursday for a new Money Talk podcast, but if you just can’t wait until next week, you can listen to previous podcast episodes at moneytalkwitht. com or follow Tiff on all social media platforms at Money Talk with T. Until next time, spend wise by spending less. Than you make a word to the money-wise is always sufficient.
Are you worried about falling victim to charity fraud? Well, you’re not alone. According to this episode, charitable organizations lose an estimated 5% of their revenue to fraud annually, based on IRS data. But fear not, because host Tiffany Grant has your back with some essential tips on how to recognize and avoid charity scams.
In this informative episode, Tiffany delves into common tricks used by fraudulent charities and offers practical advice on how to verify if an organization is legitimate, ensuring your donations go to the right place.
Familiarize Yourself with Common Scams
One of the most effective ways you can protect yourself from charity fraud is by familiarizing yourself with the common tactics scammers use. Tiffany highlights that fraudulent charities often:
- Ask for gift cards, cash, or wire transfers instead of verifiable payment methods
- Pose as government agencies or legitimate charities to deceive donors
- Set up websites with similar domain names to well-known charities to mislead donors
Verify the Tax-Exempt Status
Before making a donation, check if the charity in question is an IRS-registered 501(c)(3) organization. This means that it’s a tax-exempt nonprofit and your donations are tax-deductible. Tiffany recommends using the IRS’s search portal for this purpose.
Use Reputable Resources
To examine a charity’s reputation and effectiveness, Tiffany suggests using resources such as Charity Navigator and GuideStar. These platforms offer comprehensive information about charities, their financial health, and their impact on the causes they champion.
Review Financial Statements and Annual Reports
Analyzing a charity’s financial statements and annual reports is another tip from Tiffany’s podcast episode. She states that at least 75% of donations should ideally go towards the organization’s mission and operational expenses. Transparency is a key indicator of a legitimate charity.
Understand the Organization’s Impact
To measure a charity’s accomplishments, don’t hesitate to ask for tangible evidence of their work. Understanding the organization’s impact is vital to ensure that your donations are used effectively.
Keep Records of Donations
For both personal protection and tax purposes, always maintain a record of your donations. This can include bank statements, canceled checks, or credit card statements.
Tiffany encourages listeners to verify any certifications or affiliations a charity claims to have. It’s essential to ensure the charity is an active and legitimate member of any association or membership organization it belongs to.
Be Mindful of Caller ID Spoofing
Finally, be aware that scammers can change their caller IDs to seem like a legitimate charity. If something feels off, don’t be afraid to hang up and call back the organization using a verified contact number.
With these tips from the Money Talk With Tiff podcast, you’re well-equipped to protect yourself and your donations from scam charities. Remember, do your due diligence and spread the word to family and friends.