Legitimate Tax-Deductible Charity or Scam?

With the holiday season approaching, and with the great need for aid in the wake of the recent hurricanes and wildfires, you no doubt are being solicited for donations. However, do not be fooled by the scammers who come out from hiding whenever there is a disaster and during the holiday season. The last thing you want to do is get ripped off; not only will your charitable dollars go to waste, but you will also lose your tax deduction, as contributions are only tax-deductible if they are to qualified charities.

Soon, your physical and electronic mailboxes – not to mention your voicemail box – will be filled with charitable solicitations. Before you break out your checkbook, however, be sure to do your homework, especially if you are contemplating a donation to an organization that you are not already familiar with. The Federal Trade Commission suggests avoiding any charity or fundraiser that:

  • refuses to provide detailed information about its identity, mission, and costs, as well as how your donation will be used;
  • will not provide proof that your contribution would be tax-deductible;
  • uses a name that closely resembles that of a better-known (more reputable) organization;
  • thanks you for a pledge that you do not remember making;
  • uses high-pressure tactics to get you to donate immediately;
  • asks for donations in cash or asks you to wire money; or
  • offers to send a courier or overnight delivery service to collect a donation immediately.

Numerous websites can help you to check the validity of a charity. The IRS provides one, but it is rather cumbersome to use. Charity Navigator allows you to search for a charity name and provides details about that charity’s function. When in doubt, take the time to verify a charity’s legitimacy.

If you plan to itemize your deductions – after you have determined that you are not contributing to a scam operation – ensure that your charitable donations meet the requirements for being tax-deductible. The recipient organization must be one or more of the following:

  • a church, synagogue, mosque, or other place of worship;
  • a tax-exempt educational institution or hospital;
  • a federal, state, or local governmental unit, if the contribution is used for public purposes;
  • a publicly supported corporation, trust, fund, foundation, or community chest that is organized and operated only for charitable, religious, educational, scientific, or literary purposes; to prevent cruelty to children or animals; or to foster certain national or international amateur sports competitions; or
  • a certain type of private operating foundation or agricultural research organization.

Substantiation – First and foremost, you must receive substantiation of your cash gift in order to deduct it on your tax return; you also must itemize your deductions rather than use the standard deduction. Cash contributions include those paid by cash, check, electronic fund transfer, and credit card. However, you cannot deduct a cash contribution, regardless of the amount, unless you can document the contribution in one of the following ways:

  1. A bank record that shows the qualified organization’s name, as well as the date and amount of the contribution. Eligible bank records include a. a canceled check, b. a bank or credit union statement, or c. a credit card statement.
  2. A receipt (or a letter or other written communication) from the qualified organization showing the organization’s name, as well as the date and amount of the contribution.

Cash contributions of $250 or more – To claim a deduction for a contribution of $250 or more, you must provide a written acknowledgment of the contribution from the qualified organization. This acknowledgment must include the following details:

  1. The amount of cash contributed
  2. Whether the qualified organization gave the taxpayer goods or services (other than certain token items and membership benefits) as a result of the contribution, including a description and good-faith estimate of the value of those goods or services (not counting intangible religious benefits)
  3. A statement that you received no benefit (other than an intangible religious benefit)

The value of any goods or services received in exchange for a donation must be subtracted from the amount claimed as a contribution. If the acknowledgment does not show the date of the contribution, then you must also supply one of the bank records described above to verify the contribution date. If this acknowledgement includes the contribution date and meets the other requirements, it is not necessary to provide other records.

The acknowledgment must be in your hands before the date you file your tax return but not later than the April due date for return (or the extended due date of October if you filed an extension).

Christmas Kettles – It is quite common for charitable organizations to collect cash donations at malls during the holiday shopping season. Consider writing a check to place in these kettles rather than using cash so that you will have the substantiation required for a tax-deductible contribution.

Needy Individuals – You may wish to help out a needy family; although that is a very kind thing to do, no charitable deduction is allowed for such gifts to private individuals (either directly or as through a charitable organization).

GoFundMe – Through this website (and others like it), people raise funds for good causes such as starting a business, paying medical bills or funeral costs, replacing damaged or destroyed homes. However, these websites are not qualified charities for the purposes of claiming a charitable contribution on your tax return.

Special Contribution Rule for Taxpayers Age 70½ and Over – The tax code includes a special provision that allows taxpayers who are at least 70½ years old to directly transfer up to $100,000 from an IRA account to a qualified charity. Instead of receiving a charitable deduction, that person instead gets the benefit of the IRA distribution being nontaxable and counting toward the required minimum distribution for the year. This is especially beneficial for people who receive Social Security benefits and those who take the standard deduction. Although this is generally considered a good tax-saving strategy for those who can afford to make large donations, there is actually no minimum for this rule, so it will likely even benefit individuals in lower tax brackets.

Bunching – When taxpayers’ itemized deductions are only marginally different from the standard deduction, they can consider the method known as bunching. In this technique, the taxpayer make two years’ worth of donations in a single year and then skips making donations in the next year. For example, if you annually contribute $5,000 to a house of worship but have total itemized deductions that are consistently a few hundred dollars less than the standard deduction, you can instead double up by donating $10,000 in a single year. That way, you will be able to claim itemized deductions for the year when you make the donation and can then take the standard deduction in the following year.

For large donations, there are limitations based on adjusted gross income, and there are other available techniques, such as donor-advised funds. This article also did not covered donations of noncash items, such as used furniture or household goods; these have additional substantiation requirements. Please call us if you have questions, or if you would like to set up an appointment to strategize about maximizing the tax benefits of your charitable contributions.

They Are Phishing You. Don’t Take the Bait!

You are probably as tired of hearing about ID theft, phishing, phone scams and other schemes as you are of the political infighting in Washington. However, for most people, protecting themselves against these fraudsters is a far more serious issue than the congressional rhetoric we have to endure.

Just about every day the IRS issues notices to taxpayers and tax preparers warning of new scams seeking access to individuals’ financial information and ID information, which the scammers want to use to file fraudulent tax returns, gain access to bank accounts, or steal credit card information to make fraudulent purchases. I know of one fall update instructor who lectures to hundreds of CPAs, Enrolled Agents, and tax preparers. Each year for several years, he has asked his students if they have encountered ID theft or false returns being filed using their clients’ IDs. At first, just one or two raised their hands in each class. Each year the number has increased, and last year close to half the students in the various classes raised their hands.

ID thieves are both domestic and foreign and are very creative (or should I say devious?). I could write a small book about all the schemes that are out there, and the number increases daily. So while it is impossible to detail them in this article, the following tips can help you avoid being scammed, regardless of the scam or phishing premise:

  • Emails from unknown sources that request you to click on a link (for any number of reasons, some of which may sound legitimate) may be tricking you into installing malware on your computer or device that would then allow the scammers access to it and all the financial information on it. Don’t get hooked!
  • The IRS and most state taxing authorities never contact taxpayers by email. Their standard method of contact is U.S. mail. So simply delete any email claiming to be from the IRS. But if you feel uncomfortable ignoring the email, contact us and forward it to us so we can double-check it for you. It is always wise to have us to review any tax agency correspondence. One simple mistake can result in an enormous amount of grief that could take years to straighten out. Always be suspicious.
  • Some scammers, as bait, will contact you and tell you that you are entitled to a prize, jackpot, lottery winnings, tax refund, foreign or domestic inheritance, or something of value (the scammers can be very creative) to trick you into taking some action that will allow them to scam you out of your hard-earned money or steal your identity. Remember the old saying: If it is too good to be true, it most likely isn’t!
  • If you receive email, mail or a phone call from an unknown source with a message that provokes your curiosity, think twice before responding. By responding, you validate your contact information and invite further contact. The best action to take may be to take no action at all. Don’t let your curiosity get the best of you. That’s what scammers are counting on.
  • Try to avoid forwarded emails from friends or associates that contain jokes, links and pictures they have downloaded from the Internet. Unbeknownst to the sender, these emails may include embedded links that can install malware on your computer.

Elderly individuals seem to be the most susceptible to phishing, scams and ID theft. They may be unfamiliar with modern modes of communication and can easily be taken advantage of. If you have an elderly parent or relative, it may be appropriate to sit down with them and make them aware of the dangers of modern-day communications and the Internet.

The IRS has special provisions for victims of ID theft, so if you ever believe your identify has been compromised, call us immediately so steps can be taken with the IRS to protect your tax filings. Always call us before acting on or responding to the IRS or other taxing authorities. It’s better to be safe than sorry.

Along with Tax Season Come the Scams; Don’t Be a Victim

One thing we can count on when tax season begins is the scammers coming out from under their rocks with schemes to try and trick you so they can steal your ID and file returns under your Social Security number (SSN). Or, they may even email or call you pretending to be IRS or state tax agents and attempt to intimidate you into sending them money to pay fabricated tax liabilities. These crooks take advantage of individuals’ natural fear of the IRS and use it to coerce their marks into making payments without first verifying the validity of the liability.

Don’t be a victim of these unscrupulous predators. The only way to protect yourself is to understand their tricks and what to do (actually, what not to do). This article includes a variety of plots that have been employed in the past. But, keep in mind these lowlifes can be very clever, intimidating, and aggressive, and come up with new schemes all the time, so you need to be vigilant.

ID thieves prize three things: your name, Social Security number, and birth date. You should always be very careful about divulging your birth date and SSN. Don’t use them unless absolutely necessary, and always question the requester’s need to know.

You should also be aware that the IRS never initiates contact in any way other than by U.S. Mail. So, if you receive a phone call from out of the blue demanding payment, you can be assured it is a scam. Simply hang up the phone without providing any information. If you receive an email from the IRS, do not click on embedded links or attachments. That could cause malware to be installed on your computer, allowing scammers to access your computer. The first thing you should do is call this office.

Additionally, it is important for taxpayers to know that the IRS:

  1. Never asks for credit card, debit card, or prepaid card information over the telephone.
  2. Never insists that taxpayers use a specific payment method to pay tax obligations.
  3. Never requests immediate payment over the telephone.
  4. Will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior written notification of IRS enforcement actions involving IRS tax liens or levies.

Email Scams & Phishing – Every tax season, the scammers become very active. They create bogus emails disguised as authentic emails from the IRS, your bank, or your credit card company, none of which ever request information that way. They are trying to trick you into divulging personal and financial information that they can use to invade your bank accounts, make charges against your credit card, or pretend to be you to file phony tax returns or apply for loans or credit cards. Always be skeptical! If the email is related to taxes, call this office before doing anything. If it is supposedly from your credit card company, your bank, or another financial institution, call the organization to verify the authenticity of the email.

One scam last year was an email sent to taxpayers requesting that they click on a link in the email to verify their identity before their tax refund could be released. The link took them to the ID thief’s website, made to look like the IRS’s, where victims entered their names, SSNs, and birthdates. Others used the same scheme, pretending to be an individual’s bank or credit card company.

Phone Scams – Very aggressive scammers will call, claiming to be an IRS agent, and tell the person answering the call that they owe money that must be paid immediately or their home will be seized, their wages will be attached, or even that they will be arrested. After threatening the victim with jail time or driver’s license revocation, the scammer hangs up. Soon, someone else calls back pretending to be from the local police or DMV, and the (rigged) caller ID supports their claim.

These are frequently thieves from outside the U.S., and once the money is transferred, there is no chance of getting it back.

In 2016, the police in Mumbai, India, busted a phone center that was calling U.S. taxpayers with just such a scheme and bilking U.S. taxpayers to the tune of $150,000 a day. They demanded payment by credit card, debit card, or gift card.

ID Thieves – These rip-off artists file phony tax returns using stolen IDs and counterfeit W-2s and have the refunds directly deposited into their bank accounts, which they then clean out before the victim or the IRS discovers what happened. If the IRS rejects your return because a SSN on your return was previously used to file, that is a good indication your ID has been stolen, and you should contact this office for instructions on notifying the IRS. Once your ID has been compromised, the IRS will issue a special six-digit Identity Protection number that can be used in conjunction with your SSN to file your return.

If your ID has been compromised, or you suspect it might have been, contact this office immediately so we can assist you in notifying the IRS, so that they block returns filed with your SSN but without the special six-digit filing number.

We also urge you to educate others in your family who could be scammed.

If you have questions, please give this office a call.

Ingenious Scam Targets Taxpayers

Crooks have tried all sorts of e-mails scams, but almost everyone has figured out that the IRS does not send out notices by e-mail. So crooks have changed their tactics. Now, there are reports of taxpayers receiving by mail (or email) fake notices requiring immediate payment to a P.O. Box. The P.O. Boxes are located in cities where the IRS has service centers, but of course are not IRS P.O. Box addresses.

These scammers have duplicated the look of official IRS mail notices, which to the untrained eye would lead one to believe a notice was really from the IRS.

So be extremely cautious of any notice you may have received from the IRS. If a notice is demanding immediate payment and there has not been any prior contact by the IRS over the issue, then the notice is probably from a scammer. Reports indicate the initial letters were numbered CP-2000.

Here is a sample fake IRS CP-2000 supplied by Iowa State University.

cp2000

Scammers Impersonating IRS Agents Called You Yet?

The Treasury Inspector General for Tax Administration (TIGTA) is making significant progress in its investigation of the IRS impersonation scams that are sweeping the nation. These scams have caused reported taxpayer losses of more than $36 million and averaging more than $5,700 per taxpayer. To date, TIGTA has logged approximately 1.2 million calls reported by taxpayers, and nearly 6,400 people have reported that IRS impersonators have fleeced them.

In one instance, a taxpayer was so convinced the scammer was an IRS agent he rushed off to make a payment and was involved in a traffic accident. He was so worried about the scammer’s threats of legal action that he actually left the scene of the accident so he could promptly get the funds wired to the scammer. In this case TIGTA was able to trace the victim’s wire transfer and ultimately nabbed a ring of five scammers.

But these stories generally don’t have happy endings. It is important for everyone to understand that the IRS never demands payment by wire, MoneyGram, debit cards etc., and always makes initial contact by mail.

Protect Yourself and Loved Ones from Being a Scam Victim:

  1. Hang up on callers claiming to be IRS agents, IRS collection agents or state taxing authorities demanding immediate payments. They are not legitimate.
  2. Take the time to educate your loved ones, especially those who might be vulnerable, about these scams and take steps necessary to protect them from scams.
  3. Call this office if you need assurances or wish to confirm you do not have an outstanding balance with a tax authority.
  4. Report scams and attempted scams on the TIGTA website.

Protect Against Identity Theft

In addition to scammers, watch out for those ID thieves out there looking for vulnerable IDs to steal. You may think it will never happen to you, but if it does, it could take years to straighten out. Protect yourself against ID theft by limiting the exposure of your personal and financial information as much as possible.

What do ID thieves need to create havoc for you? Your name, Social Security number and birth date!

Here are some tips to limit your ID exposure:

  • Don’t carry your Social Security card – or any document that includes your Social Security number – in your wallet, purse or briefcase. Your Social Security card combined with your driver’s license provides scammers with the three pieces of information they need.
  • Don’t give out either your SSN or your birth date without questioning the need and making sure it is a legitimate request and really necessary.
  • Limit the number of credit cards and credit accounts you have. Each account has your SSN, so the more accounts you have, the greater the chance you’ll be caught up in a data breach and your ID will be compromised. It is far easier to deal with one credit card company than several if your ID is breached.
  • Be proactive and periodically change the passwords for your online accounts that include sensitive financial information. It is a pain, but it could avoid you a major headache.
  • Although only the last four digits of your SSN are used on most financial documents, you should still pay close attention to documents that include your full SSN or birth date. Limit their duplication and distribution and ensure they are properly disposed of when you discard them.
  • Never include your SSN, birthdate or other sensitive financial information in an e-mail or in documents attached to an e-mail.

Use common sense and follow the “need-to-know” rule when disclosing your financial information. Careless safeguarding of your information can lead to big problems.

Think Your ID Has Been Compromised? You should immediately:

  • File a complaint with the Federal Trade Commission at www.identitytheft.gov and complete a report. The site will develop an ID Theft Affidavit that you can use when reporting the ID theft to creditors and others. The site will also walk you through various steps to be taken depending upon the specifics of your ID theft.
  • Contact one of the three major credit bureaus to place a “fraud alert” on your credit records and review your credit report for fraudulent activity:
    o Equifax, www.Equifax.com, 1-800-766-0008
    o Experian, www.Experian.com, 1-888-397-3742
    o TransUnion, www.TransUnion.com, 1-800-680-7289
  • Contact your financial institutions and close any financial or credit accounts opened without your permission or tampered with by identity thieves.
  • Report any fraud to your local police and retain a copy of the police report to use when reporting fraud to other agencies or creditors.

Contact us

Steps can be taken to avoid fraudulent returns being filed using your SSN. Even if someone has already e-filed a return and claimed a refund under your SSN, your refund may still be safe.

However, you cannot e-file and instead must file a paper return with the proper documentation. You will ultimately receive the refund you are due, but it will be severely delayed. Once the IRS recognizes that your SSN was used to file a fraudulent return, it will block your SSN from filing. You’ll be assigned an alternative filing number for the subsequent year.

For more information on how and what to file when someone else has filed using your SSN, please contact this office.

Don’t Be a Victim to IRS Phone and E-Mail Scams

Thieves use taxpayers’ natural fear of the IRS and other government entities to ply their scams, including e-mail and phone scams, to steal your money. They also use phishing schemes to trick you into divulging your SSN, date of birth, account numbers, passwords and other personal data that allow them to scam the IRS and others using your name and destroy your credit in the process. They are clever and are always coming up with new and unique schemes to trick you.

These scams have reached epidemic proportions, and this article will hopefully provide you with the knowledge to identify scams and avoid becoming a victim.

The very first thing you should be aware of is that the IRS never initiates contact in any other way than by U.S. mail. So if you receive an e-mail or a phone call out of the blue with no prior contact, then it is a scam. DO NOT RESPOND to the e-mail or open any links included in the e-mail. If it is a phone call, simply HANG UP. 

Additionally, it is important for taxpayers to know that the IRS:

  • Never asks for credit card, debit card, or prepaid card information over the telephone.
  • Never insists that taxpayers use a specific payment method to pay tax obligations.
  • Never requests immediate payment over the telephone.
  • Will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior written notification of IRS enforcement action involving IRS tax liens or levies.

Phone Scams

Potential phone scam victims may be told that they owe money that must be paid immediately to the IRS or, on the flip side, that they are entitled to big refunds. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy. Other characteristics of these scams include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.

Scammers may be able to recite the last four digits of a victim’s Social Security number. Make sure you do not provide the rest of the number or your birth date.

  • Scammers alter the IRS toll-free number that shows up on caller ID to make it appear that the IRS is calling.
  • Scammers sometimes send bogus IRS e-mails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up. Soon, others call back pretending to be from the local police or DMV, and the caller ID supports their claim.

DON’T GET HOODWINKED. This is a scam. If you get a phone call from someone claiming to be from the IRS, DO NOT give the caller any information or money. Instead, you should immediately hang up. Call this office if you are concerned about the validity of the call.