Tax Law Blog

Fake Charities Are on the IRS “Dirty Dozen List of Tax Scams” for 2016

Each year the IRS alerts taxpayers about potential tax scams, and publishes its list of the “Dirty Dozen” problem areas. In its 2016 list, the IRS warns taxpayers about fake charities, identified as “groups masquerading as charitable organizations to attract donations from unsuspecting contributors.”

According to IRS Commissioner John Koskinen, “Fake charities set up by scam artists to steal your money or personal information are a recurring problem. Taxpayers should take the time to research organizations before giving their hard-earned money.”

The IRS warns taxpayers to be on the lookout for scammers that use a name that is very similar to a well-known charity. Often an imposter charity will also make its website look the same as the organization that it is mimicking.

The IRS encourages taxpayers to use its search tool, Select Check, to research exempt organizations before making a donation.

Scam artists often use natural disasters to take advantage of people’s goodwill and desire to help those affected. There have been a number of high profile and wide ranging charitable scams that have taken place following natural disasters. For example, after Hurricane Katrina, the FBI estimated that more than 4,000 websites were established to raise funds for victims and “many” of them were fake. Over 60 percent were established overseas, “a reason to be cautious,” according to the FBI.

There are a few warning signs to watch out for following natural disasters. The IRS warns that some scammers may contact people by telephone or email to solicit money or financial information, or even directly contact disaster victims claiming to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds. They may also seek financial information or Social Security numbers in order to steal a victim’s identity.

The IRS offers some tips to stay safe when making charitable contributions, including:

• Request the Employer Identification Number of the alleged charity in order to verify its legitimacy via Select Check.
• Don’t provide financial information, Social Security numbers or passwords to a solicitor.
• Don’t give or send cash - use a check or credit card so there is documentation of the gift.

A few of the other scams that have made 2016’s “Dirty Dozen” include:

• Tax preparers that promise large refunds from fictitious rebates, benefits or tax credits.
• Tax preparers that pad or overstate deductions.
• Attempts to use excessive business credits, such as the fuel tax credit or business research credit.

Donating to charitable organizations is a worthy act, and an important tool in reducing tax liability. But, as the IRS makes clear, it’s important to do a bit of due diligence to make sure that your donation is reaching intended beneficiaries, rather than a scam artist.

If you have any questions about the IRS’s “Dirty Dozen” tax scams, or tax issues in general, please contact a Foster Swift tax attorney.

Categories: News & Events, Tax-Exempt Organizations