Use These Tips to Avoid Hurricane Charity Scams

Posted on September 18, 2017

Americans are known for charitable giving.  In 2016 alone, Americans donated nearly $390 billion to charitable causes — an amazing 4.2 percent increase over 2015.  We are especially giving in times of national tragedy, like the devastating recent hurricanes that have hit Texas, Louisiana, Florida and the islands of the Caribbean.  Since Harvey and Irma struck, Americans have donated over $300 million for hurricane relief in just a few short weeks.

Most Americans are pretty conscientious when it comes to donating to reputable organizations that intend to provide nearly every dollar to relief efforts.  However, other well-meaning people may be tricked into donating to so-called charities that are only out to enrich themselves.  So, we thought we would take some time to explain how to make the best use of your charitable dollars in a time of crisis.

The biggest piece of advice we can give you is to ensure you donate to a charity with an IRS approved 501(c)(3) status.  Doing so ensures a level of oversight that may not exist in other organizations.  Charities with a 501(c)(3) status should be able to provide you with an acknowledgment letter and with their Employer Identification Number.  Donations to 501(c)(3)s are also tax deductible in the year in which they are made.  Please be aware that donations to some churches, civic or social organizations may not be tax deductible, as those groups are not required to file for 501(c)(3) status.

Do Your Homework

Most of the country’s largest charitable organizations, like the American Red Cross, The United Way and Samaritan’s Purse are well known and do not require much research.  However, if you want to donate to a charity you do not know much about (or if you are being solicited to donate), you should conduct your own due diligence to discover first if it is an IRS approved 501(c)(3) organization and learn the percentage of money that is actually going to those in need.

The Federal Trade Commission dedicates an entire webpage to helping donors determine if a charity is worth donating to.  Here are a few of their most important tips:

  • Be suspicious of charities that pop up in the wake of a natural disaster. They are often fraudulent ways of seizing your money following a tragedy.
  • Before donating, ask for detailed information about the charity, including the name, address, phone number, Employer Identification Number and proof that the IRS has granted 501(c)(3) status to that organization.
  • Get the exact name of the organization. Then input that name into an internet search adding the words “complaints” or “scams.”
  • Check if the charity is trustworthy by reaching out to the following organizations: Better Business Bureau, Wise Giving AllianceCharity Navigator or Charity Watch.
  • Keep a detailed record of all your donations.
  • Learn the difference between “tax exempt” and “tax deductible.” Organizations that are tax exempt do not have to pay taxes.  Tax deductible means that you can claim your donations on your annual 1040 income tax returns.  Visit the Internal Revenue Service webpage to discover which organizations are eligible to receive tax deductible contributions.  Make sure to have the organization’s EIN handy, as this is the easiest way to search.
  • Never send cash. Always pay by check when possible, and avoid paying by credit card or by handing out your bank account information.

As you consider how to help in times of national tragedy, we hope that you will use some of these tips to ensure that your donation goes to IRS approved 501(c)(3) charities and to those that are really in need.  If you should have any further questions, please feel free to contact IRS Trouble Solvers through our Contact Us form.  We are happy to help!

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