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Beware of Scammers Preying on Your Generous Nature

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Beware of Scammers Preying on Your Generous Nature

The IRS and numerous other nonprofit agencies are warning Americans to be weary of scammers trying to take advantage of their generosity after major catastrophes like Hurricanes Florence and Michael.

 

“We applaud our client’s desires to want to help in times of crisis,” says Steven Feinberg, CPA and owner of Appletree Business Services. “What we want to avoid is unnecessary stress and even criminal charges if that client makes a donation to a criminal organization instead of a truly reputable and worthy cause.”

 

Fraudulent schemes normally start with unsolicited contact by telephone, social media, e-mail or in person using a variety of methods.

  • Pose as representatives acting on behalf of charities or private institutions to solicit cash donations.
  • Bogus websites using names, branding and colors similar to legitimate charities to trick donors to send money or provide personal information such as bank account routing numbers, credit cards or other data.
  • Claim to be members of the IRS working to help victims to file casualty loss claims and get tax refunds. The IRS will never solicit taxpayers for this purpose.

 

What can you do?

If you are a disaster victim and need information on tax relief or other disaster-related tax concerns, call the IRS Special Services Help Line at 866-562-5227. Details on accessing additional information can also be found on the disaster relief page on IRS.gov.

 

Donate wisely.

If you wish to donate, make sure they are real charities. You can verify the prospective charity, by visiting the IRS website at IRS.gov and using the Tax Exempt Organization Search feature. Here you will be able to find or verify qualified charities.

 

How much goes to the charity?

Before you click ‘donate’ take a minute to research the charity online. You can do this by searching on the charity’s name plus key phrases like, “review”, “compliant”, “rating” or “scam”.  The consumer section of the Federal Trade Commission’s website also recommends the following organizations to view reports and ratings for nonprofits:

 

  • BBC Wise Giving Alliance
  • Charity Navigator
  • CharityWatch
  • GuideStar

Know the Scammers M.O.

Scammers and criminals always have a pattern to their schemes. Look out for some of the following tell-tale signs and just say, No!

 

  • Don’t let anyone rush you into making a contribution. No matter what they say, no one will die if you don’t donate $20 right this minute!
  • Thank you. Don’t be tricked by a scammer calling to thank you for a donation you know you’ve never made. Scammers will start by thanking you and then subtly ‘ask’ for additional donations to support the cause you already ‘love’.
  • Listen carefully. Scammers will use charity names that sound oddly similar to real organizations but are not. Ask for specifics, federal tax identification numbers (and verify them) and specifics on how your donation will be used.
  • Never donate gift cards or money transfers. No reputable charity will ask you to go out and purchase gift cards on their behalf or wire money via Western Union or other agency. Always pay by check or credit card so the amounts can be traced and rescinded, if necessary.
  • Sweepstakes. Callers who promise to guarantee sweepstakes winnings in exchange for a donation are SCAMMERS. It is illegal to offer such incentives in order to solicit a donation.

You’ve been scammed, now what?

If you have made a donation to what you now believe is a scam, take action. You can report scams to your local police, the FTC.gov/complaint, and your state charity regulator. Write down any information you can remember about what the organization asked for, their phone number or website address, and details about your conversation.

 

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations.

 

To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

 Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.

Donating to Charity: Quick Tips for Safe Giving

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After setting up and successfully running your own small business, it’s an empowering and fulfilling thing to know you can give back to your community or really support a cause in which you believe. In addition to giving back to the community, you can also take advantage of tax deductions for your charitable contributions during tax season. However you choose to give as a small business, you should make wise choices in giving that will give you a real sense of satisfaction, reflect positively on your business, and also not cheat you on your generous dollars.

Before you write that check, set a plan in place for how much you would like to budget for charitable giving each year. That way you can spread out your charitable contributions and provide a framework for what types of charities and the total annual amount your business can afford to give. 

Here are some safety tips to guide you:

Choose a charity or cause wisely. If you are not very familiar with a charity’s work, investigate the group before you make your donation. Overall, it is best to contribute to an organization that you already know. You may also inquire about the exact service or activity your funds will end up supporting. Honest charities should be willing to communicate with their donors about their spending activities. Additionally, it does pay to do a little research on your chosen charities to be sure that they are legitimate nonprofit organizations. Try using online verification sites such as Charity Navigator to review ratings and check the status of your prospective nonprofit with objective feedback from other users.

For tax purposes, ensure that the charity is tax-deductible. Some nonprofit organizations participate in political activities that prevent them from accepting tax-deductible donations. If you donate to these organizations, you will not be able to deduct your donation on your federal tax return. If the organization is “tax exempt,” this simply means that they do not have to pay taxes, but it does not necessarily mean that your donations are tax-deductible. Ask the organization for its tax status to be clear and look for a nonprofit 501c3 federal status.

Be sure to obtain and keep a record of your donation. In addition to helping you properly manage your bookkeeping and cash flow, having a record for your donation will also be needed to deduct taxes at year end. If you contribute less than $250, you may present a bank record, a cancelled check or a receipt or letter from the charity. The receipt or letter must have the organization’s name, the date, and the amount that you donated. If you contribute more than $250, the IRS will not accept a cancelled check alone – you will have to furnish a receipt from the charity.

Be careful when donating online. Donating to a charity online offers many conveniences, but can also be disadvantageous. When donating to a charity online, make sure you are already familiar with the charity, then make sure there is a working contact for the charity. A physical address and phone number are fair indications that the charity is not a scam. Be sure that the organization is still current with the information you view on their website. Many nonprofits do not update their websites regularly. Be sure the site uses encryption technology to protect your personal payment information, and also make sure there is a privacy policy. Print out the confirmation of your donation and keep it for your records and for tax filing. Donations to foreign charities are not – of course – tax deductible.

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations. To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.

Copyright Information 2018 Professional Association of Small Business Accountants

The Inside Scoop on Donor Advised Funds

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Looking for a different way to donate to your favorite charity? Many investors are finding that donor advised funds are a creative way to contribute dollars while still receiving a tax deduction for their efforts.  The Donor Advised Fund (DAF) is a charitable vehicle created at a public 501(c)3 organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors who receive an immediate tax benefit while recommending grants from the fund to charities of their choice over time.  Instead of making a one-time contribution to your favorite charity, contributors of donor advised funds can either set up their own private fund or use an established DAF and then direct how the contributions are distributed.

 

A Little DAF History

Donor advised funds aren’t new; rather they originated in the 1930’s.  It wasn’t until 1969 that congress established a legal structure for them.  Thirty years later, DAFs took off increasing in popularity and today the funds account for “more than 3 percent of all charitable giving in the United States.” In fact, Fidelity Investment’s Charitable Gift Fund surpassed the United Way as the largest recipient of charitable funds in the country. According to author Helene Olin in Atlantic Monthly, “Donors put $23.27 billion in Donor Advised Funds in 2016, a 7 percent increase since 2015 and 18 percent since 2014.”

How it works:

  1. Contributions are placed into the fund.
  2. Immediate tax deductions are received by the taxpayer for the amount they have ‘donated’ into the fund.
  3. Administration of the DAF including investments (in the stock market) is ongoing.
  4. Either immediately or at some point in the future, the taxpayer makes grants to qualified charities of his/her choice from the fund.

Once the money is in the fund, the dollars cannot be returned to the donor and become the property of the ‘fund’. The underlying issue for nonprofits is the inherent delay between taxpayer donations to the fund and their eventual distribution to the nonprofit.  Appreciative recipient nonprofit organizations argue that because the funds don’t have to be released on any set time horizon, it is very difficult to determine or plan for the contributions. Additionally, because the funds are anonymous, donors can elect to remain in secret making it harder for nonprofits to thank donors and cultivate new supporters. While these are legitimate frustrations for the nonprofits, reports say that donors under age 50 are gravitating more frequently to the Donor Advised Funds. To survive with the next generation of donors, nonprofits are going to have to find a way to work with these funds and find more creative ways to market to donors and receive the funds.

 

 

Who can set up a donor advised fund?

The good news is that donor advised funds are not just for the wealthy. For funds like Charles Schwab’s Charitable fund, anyone can start a fund with as little as $5,000 in irrevocable funds and add additional contributions, if any, of as little as $500. Donors can also control how and when the funds are distributed. Funds can remain in the fund in perpetuity. Unlike charitable foundations, that must by law allocate 5 percent of their dollars annually, DAFs are not bound by the same distribution rules.  For the more affluent investor, supervised, or ‘administered’ funds can be started with a minimum of $250,000 or more and select an individual investment advisor to manage the fund. Of course, administrative and investment fees vary based on the type of account under management.

 

If you have questions about how to start a donor advised fund or financial investment strategies, talk with a PASBA Small Business Advisor.

 

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations.

 

To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

 

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.

The Impact of the Tax Cuts and Jobs Act on Your Favorite Charity

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There are many winners and losers from the recent Tax Cuts and Jobs Act passed by Congress in December 2017, and nonprofits may be one of the biggest losers. While you may still plan on contributing to your local charity in 2018 and beyond, it will be harder for you to receive the tax benefit due to an increase in the standard deduction.  While not everyone gives to charity to take a tax deduction, there will be a substantial downshift in the quantity and frequency of contributions that nonprofits may start to see. The upside is that these impacts are ‘temporary’ as a part of the TCJA and will phase out by 2025 unless extended by Congress.

 

What’s changed?

A major part of the TCJA was a simplification in tax filing. This streamlining resulted in an increase in the standard deduction from $6,350 to $12,000 for single individuals and $12,700 to $24,000 for married couples.  It is estimated that the approximate 30 percent of tax payers who currently itemize their deductions will drop to about 6 percent in 2018. That translates to a drop of between $12 billion to $20 billion in charitable giving and charitable tax deductions according to the Tax Policy Center. Less itemized deductions means less opportunity for would-be donors to take a tax deduction for their charitable giving. Nonprofits are already bracing for the financial black hole that is to come.

 

Taxpayers are thinking strategically about their charitable giving, too. The New York Times wrote recently about the option of ‘bunching’ charitable contributions. Bunching is where instead of making annual contributions to charity, tax payers would accumulate donations over several years and make them in one year’s worth of gifts in order to take the larger itemized deduction and receive the tax break. But what happens to the nonprofit that counts on a steady stream of income and now faces substantial changes to donations?  Let’s take a quick look at donor advised funds. A somewhat daunting term for what translates to donating funds privately, donor advised funds allow the contributors to donate money and take the tax deduction in the same year, but pay the money to chosen charities over a predetermined time horizon.  The donor doesn’t control the money once it’s deposited to the fund, but can direct the fund’s administrator on how they would like the dollars allocated. Additionally, certain funds have an investment component that allows the fund to potentially yield even greater profits down the road.  While donor advised funds aren’t new to the financial industry, they are gaining traction as larger national funds have affiliated with big financial firms such as Fidelity and Charles Schwab.

In addition to the increase of the standard deduction, taxpayers are also facing substantially limited deductions for state and local taxes along with home mortgage interest. In states like California, New York, and Massachusetts, where both local and state taxes are high coupled with high real estate values may mean that the tax burden will be greater and charitable giving even less.

There is a small upside to these changes. The Act calls for an increase in the amount of deduction that an individual can make from 50 percent to 60 percent of his/her adjusted gross income. The nonprofit may see a slightly larger contribution than had been seen previously. Time will tell if this greater increase in donation maximums will bear fruit for nonprofits big and small across the country.

If you have questions or still aren’t clear on what type of contributions will be deductible or what your deduction threshold is, it may be time to talk with a Small Business Advisor. You can find one in your area by clicking on the Find an Accountant link above.

PASBA member accountants bring the collective resources of a nationwide network of Certified Public Accountants, Public Accountants, Enrolled Agents and other practitioners available to answer your tax and financial questions and streamline your business accounting, bookkeeping, and payroll operations.

 

To find a trusted accountant in your area, visit www.SmallBizAccountants.com.

 

Please be advised that, based on current IRS rules and standards, any advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS may assess related to this matter. Any information contained in this article, whether viewed or subsequently printed, cannot be relied upon as qualified tax and accounting advice. Any information contained in this article does not fall under the guidelines of IRS Circular 230.