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What To Do If You’ve Donated to a Fraudulent Charity

This article was written by in Charity, Consumer. 5 comments.


It happened after September 11, Katrina, Sandy, the Boston Marathon, and other disasters, man-made and natural, around the world. After serious tragedies, when a compassionate public is at its most vulnerable, unscrupulous individuals find taking advantage the world’s generosity comes easy. Within hours — even minutes — of the news, new operations spring up, offering to collect donations in support of victims.

Thanks to today’s electronic environment where sharing news is effective and fast, with only one mouse-click, well-meaning people spread information at a faster rate than ever. Who has time to fact-check when lives are on the line? That’s how one message on Twitter, purporting that the owner would donate $1 to Boston’s victims every time the message was shared, spread so quickly.

Just pausing for a few seconds to look at the basic facts about the owner of that Twitter account should have been enough to signal the lack of validity to the statement, but the rewards of sharing such a message outweighed the risk. After all, the Twitter message wasn’t asking anyone to send any money.

In the scam spectrum, this was pretty tame. Once money is involved, the stakes are higher. Use common sense before giving any relief organization your money:

  • An official-sounding name doesn’t make an organization official. Make sure the organization shares important information online, like its founders and board members.
  • Organizations must file with their state before soliciting donations. It’s worth a call to the appropriate Department of State before sending money.
  • Sites like CharityNavigator can tell you more about a non-profit organization, but even legitimate pop-up charities might not be listed in the immediate aftermath.
  • The IRS website allows visitors to search for an organization’s 501(c)3 (non-profit) status. But the IRS can take months to grant the status, so again, if timely giving is important, you might not yet know whether your contributions are tax-deductible.
  • Don’t give anyone cash, and don’t give money to an organization that calls you out of the blue. The Office of the New Jersey Attorney General puts it best: Don’t give simply because of a pathetic “sob story.”

Not all charities are tax-deductible. If you are giving to a fund that helps a specific person or family, your money may be put to good use, but the organization will not be listed with the IRS as a 501(c)3 non-profit organization. Organizations can get into trouble if they claim donations will be tax deductible and are later unable to receive the blessing from the IRS, and when you pay your taxes, you could be hit with penalties and interest if you claim a donation is tax-deductible when it’s not.

Once you’ve parted with your money, your options are limited if you later find out the organization was fraudulent. Getting back your money could be a long process. There are some helpful suggestions from the New York Department of State, and I have amended with my own thoughts.

1. Contact the authorities.

You should report the suspected fraudulent charity with the details of the incident in which your money was solicited to the proper authorities. These include:

  • Your state’s Department of State, and the Department of State from wherever the fraudulent charity operates.
  • The Attorney General’s offices for both states. If there is enough evidence of fraud, the states will want to sue the organization to recover the money for the donors and possible pursue criminal charges as well.
  • Contact the Federal Trade Commission and report the incident.

2. Share a warning through social media.

When the “Blogger” software was released, its tagline was “push-button publishing for the people.” The World Wide Web had been around for years, but new software made it very easy and fast for anyone with an internet connection to have a voice, spreading news and opinions. The world hasn’t slowed down since. The next video seen by millions of people is not going to be a program broadcast by a major television network or a blockbuster movie in a theater. It’s going to be a clip uploaded to YouTube, spreading from one person to around the world like a fast-moving virus, made by some kid with nothing more than a webcam.

This gives a power of influence to anyone, and you can use that power to let others know about the fraud you experienced. There are laws against defamation, so before you publicly slam a company for committing fraud you better be prepared for that company to come after you; but if you can get the message out, warning the public and sharing the facts, you can help bring attention to the issue and possible prevent others from falling into the same trap.

3. Recover your money.

If you paid with a credit card, you’re in pretty good shape. If you become aware of the fraud rather quickly, you can contact the credit card issuer. You will have to show that you made an effort to recover the money directly from the perpetrator, but a fraudulent organization will be difficult to contact after they take your money.

Disputing the charge will most likely end up in a cancellation of your payment to the organization, and you won’t be liable for what you paid.

If you paid with a check that has already cleared, getting your money back might be more difficult. You might need to wait for your state to take legal action, and that could be a long process.

In times of crisis, don’t let your guard down. Compassion is a great virtue; I’m thankful knowing that the human spirit is alive and people, emotionally moved, are looking to help in the face of a crisis. I think everyone who’s been aware of the news lately has seen similar support after the recent events, the bombing at the Boston Marathon and the explosion in West, Texas.

The urge — the need — to help immediately is powerful, but it can’t be an excuse for making bad decisions about money. Don’t give money without due diligence, and if you find yourself a victim of a charity scam, report it to the authorities and warn others.

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Giving Tuesday: Turning Black Friday on Its Head

This article was written by in Charity. 3 comments.

It’s approaching that time of year again. The holiday shopping season, with the massive retail marketing campaigns surrounding Black Friday and Cyber Monday, will be the industry’s final major push in an attempt to turn consumer confidence around and inspire spending.

Over the past two years, companies have seen the potential social media — communication through Facebook and Twitter, for example — has for spreading messages. Combining social media with the retain establishment’s desire to separate the public with their money results in monstrosities like American Express’s Small Business Saturday: a thinly veiled attempt to encourage mom-and-pop merchants to accept the more expensive American Express card disguised as moral support for family-run, small businesses on “Main Street.”

The 92nd Street Y (sometimes known as just 92Y in today’s LOL BRB L8R world), a non-profit community and cultural center based in New York City, is taking the theme of the “shopping holiday” — Black Friday, Cyber Monday, and Small Business Saturday — and using the same approach to encourage the public to think about giving. You can view charity as an industry just like retail; even non-profit organizations need to make money and pay their employees. Here is an opportunity, however, to use a major social media campaign to encourage charitable contributions as a way to help society around you rather than just lining the pockets of retail CEOs, major shareholders and equity partners, and Wall Street’s bankers, the real goal of “shopping holidays.”

92Y has created Giving Tuesday (or #GivingTuesday, as marketers tend to be on a hash-tagization kick lately), and the campaign is scheduled to culminate on Tuesday, November 27. The day will be “one powerful national day of giving, raising funds and awareness for important causes everywhere.” Charitable causes have been an important part of my approach to personal finances from the beginning.

  • My first major job out of college was with a non-profit organization that relied on donors’ contributions.
  • I’ve always been involved in the arts, an genre of the human experience that doesn’t always translate to profitable businesses.
  • In the past, when I had more time than I had money, I donated my time to important causes. With less extra time, my focus shifted to contributing money, but this may shift again with my ability to focus on both.
  • With Consumerism Commentary, I’ve tried to encourage a charitable approach to life through projects like Financial Literacy Challenge and matching charity campaigns scheduled around the Thanksgiving holiday in the United States, much like Giving Tuesday.
  • I’m looking for opportunities to sit on the board of directors for a non-profit organization whose mission is meaningful to me.
  • I’m considering plans to start a foundation or non-profit organization within the next few years.

Giving Tuesday seems to be in the earliest planning stage. 92Y is looking for other non-profit organizations as well as corporations, communities, and individuals who are interested in the idea. I’ll be following Giving Tuesday to see whether well-known corporations and brands are willing to get behind such an endeavor. Large corporations often have the possibility and the capability of creating their own powerful giving campaigns.

Chase Community Giving is one such example. A division of J.P. Morgan Chase, Chase Community Giving allows customers to nominate charities deserving of grants from the company. During several periods throughout the year, the public can vote using Facebook for the charities most deserving. In the spring of 2011, several non-profit organizations I’d worked with previously were competing with each other for a slice of a $5 million grant from Chase. One of the organizations walked away with a $200,000 grant for its youth-oriented programs. The organization’s social media marketing skills played a significant role in their winning the grant.

Charitable contributions, like many other aspects of business and society, are going social and mobile. Giving Tuesday has the right idea, and it will be interesting to see if it catches on over the next three months.

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PayPal Makes Accepting Charity Difficult

This article was written by in Charity. 8 comments.

Around the holidays, for-profit companies see an opportunity to do something charitable, even though they’re not technically registered non-profit organizations. The concept reminds me of college. I was in my university’s marching band, and we frequently traveled as a group to performances. At the end of the trips, someone on the bus collected money from everyone else to give to the drivers to thank them for their time and for getting us to the destinations alive.

PayPal is one of the many companies that makes collecting cash from many people easier.

If I were to decide to collect money from people all around the country to give to a non-profit organization all of us supported in one transaction, I might choose to simplify the collection process by setting up a website where people could transfer money online from their bank accounts or pay with credit cards. PayPal is the most popular tool for these transactions. Unfortunately, PayPal’s policies are confusing, poorly written, and inconsistently enforced.

Regretsy, a website that brings attention to odd items available on the shop Etsy, created a gift exchange program to help 200 kids receive Christmas presents this year. Families applied to be recipients, and Regretsy verified that those who made the list of gift recipients were truly needy. After publicizing the plan, Regretsy raised enough money not only for toys for the kids, but for cash gifts for the families. This was made possible by PayPal, and the company collected its usual fees on every transaction.

Regretsy used the PayPal account to buy some of the gifts, transactions on which PayPal collected its usual fees. The PayPal account also contained money for other purposes, but PayPal froze every cent in Regretsy’s account a few days ago. Hellen Killer, the operator of Regretsy wasn’t able to get anywhere with a customer service representative. You can read her side of story here. The representative claimed only non-profit organization can use the “Donate” button, but that is incorrect, and it is one of the few clear items in PayPal’s terms. PayPal insisted that Regretsy return the gifts it bought for the 200 families (while keeping at least a portion of the transaction fees) and return the contributions it received (while keeping at least a portion of the transaction fees). Apparently this became a charitable endeavor for PayPal rather than for the 200 families.

After outcry from the internet and significant proof that PayPal did not follow their own policies, Anuj Nayar, PayPal’s Director of Communications, announced that they were following federal regulations that govern all payment processors, released the funds, and is making its own contribution to the cause. This was done without an apology for PayPal’s misapplication of policy, stubbornness of the customer service representative who refused to allow Hellen to speak with anyone with better knowledge of the situation, or the inconvenience it caused.

Operating a payment processing business like PayPal is a risky endeavor, but this is not the only story about the company freezing an account without good reason. The website SomethingAwful raised money following hurricane Katrina and faced similar issues dealing with PayPal, documented here.

Here is how these issues could be avoided, other than simply choosing a payment processor other than PayPal.

In a perfect world, anyone who wanted to create a charitable project of any scale could create a registered non-profit entity and legitimize the endeavors. Unfortunately — or perhaps fortunately, to prevent fraud — creating and registering up a non-profit organization is not that easy. It’s a long process, and if your initiative is in response to an event like hurricane Katrina, getting the proper paperwork together, consulting with lawyers, assembling a board of directors, and raising the significant financial requirements would take away from resources you need to just collect money from others and give it to deserving recipients.

The next best option for an outfit like Regretsy or an individual with a big idea is to partner with an existing non-profit whose mission statement matches the mission of the project. A partnership would be much more practical for short-term projects like Regretsy’s initiative. All money could flow directly from the donor to a non-profit organization, through the group’s own collection methods, to the recipients. This way, the paper trail uses an already-established process, and the contributions are tax-deductible for the donors.

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Year End Reminder: Donate to Charity

This article was written by in Charity, Taxes. 6 comments.

The year is quickly coming to a close, and the first priority for many people right now is getting through the holidays with as little stress as possible. Focusing solely on the holidays at the expense of your household’s financial needs can only add to stress later, so it might help to get a few items in order now rather than attempting to manage your year-end tasks in the one week between Christmas and the new year. A few days ago, I suggested changing your 401(k) contribution level now because of the time it takes for changes to take effect, and today, I’m looking at charity.

A tax benefit shouldn’t be the sole reason you contribute to charitable organizations, but there is a federal tax deduction for charitable contributions, and it’s better for a family’s own financial situation to take advantage of this benefit if plans call for charity regardless. Unlike other benefits that allow qualification extensions into the new year, to receive a deduction on this year’s tax return, the organization to which you donate must receive the contribution this calendar year.

Charity BoxUnfortunately, the time you spend volunteering for a non-profit organization is not tax-deductible. While volunteering could benefit an organization more than a moderate financial contribution, the tax code favors gifts of value, not time.

Choose your recipient

Charity isn’t an end-of-year activity. If you value a certain cause, doing what you can throughout the year can be a more effective way of maximizing the benefit you can provide to a non-profit or religious organization. Nevertheless, in busy lives, people often don’t think about finalizing their charitable gifts until the spirit of the holiday giving season is in full-force. If you think about giving throughout the year, you may already have one or more intended benefactors.

If you have a charity in mind or if you need to find one, take the time to ensure the organization is not only legitimate but each dollar you provide will do the most good.

Charity Navigator is an indispensable tool. Using Charity Navigator, you can research any non-profit organization. You can see an evaluation of how efficiently the organization uses donors’ contributions and read the latest financial reports to determine how highly the executives are compensated. Charity Navigator will also help you ensure the organization you choose is a qualified 401(c)3, a non-profit organization recognized by the government.

I like to evaluate what percentage of contributed money is used for marketing, particularly. Marketing is of course very important to an organization, and effective marketing can pay for itself in increased donations, but if too much money is spent on marketing and not projects that directly apply to the organization’s mission, you have to consider that your donation may be more effective elsewhere.

In choosing an organization, consider your own values. You may be aware of an organization whose goals you admire and respect, and can start there. But if not, consider what issues are central to your core beliefs. Would you like to see poverty eradicated around the world? Do you believe people can improve their lives by living in a new home? Are you concerned that budget cuts in education are affecting children’s ability to receive a well-rounded education? Should more resources be committed to helping military veterans? You should be able to find an organization catering to the same issue that you consider most important.

When you complete the donation, be sure to keep a copy of the receipt for tax purposes. The receipt should show how much of your contribution is tax-deductible. If you receive a thank-you gift in return for your contribution, the amount you provide will most likely not be 100% deductible.

Open a donor-advised charitable fund

If you can’t or won’t decide which organization is most relevant to your values and charitable desires, open a donor-advised charitable gift fund. I opened this type of account a few years ago at Fidelity. The charitable gift fund allows an individual to contribute today and receive the tax benefit, while granting donations from the fund to worthy organizations over time. By using the gift fund, I could contribute funds throughout the year, invest in index funds, and assuming the funds appreciate in value, donate even more to the non-profit organization.

Even if the value goes down, most organizations can receive gifts in stocks or funds, so they can choose to sell and use the cash when it’s best for the organization.

You cannot withdraw the money you’ve contributed to your charitable gift fund, however. You can’t use a charitable gift fund as a saving or investment vehicle for yourself. Once you transfer money to your charitable gift fund, it becomes the property of the fund itself or its parent company. That’s the reason you can take the tax deduction immediately rather than waiting until you grant your donation to a non-profit organization.

Each year, I donate to DonorsChoose, an organization that helps teachers receive the resources they need for effective classroom instruction, an organization within my undergraduate university, and a few other organizations that match my values or are in response to important issues.

If you donate to charity, do you do so during the year or only at the end of the year? How important is the tax deduction?

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Tax Deduction for Time Spent Volunteering

by Luke Landes
Volunteer

I recently received reader feedback from a conscious saver who is planning to move his money from Wells Fargo to a credit union. She won’t make the Bank Transfer Day November 5 goal, because the credit union’s branch is planned to open November 7. This reader plans to be one of the new branch’s first ... Continue reading this article…

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Safe Donations to Victims of the Tsunami in Japan

by Luke Landes

Updated March 16, 2011. If you have been paying attention to the media, you most likely saw terrifying footage of tsunami waves destroying much of the eastern coastal areas of Japan, particularly Miyagi prefecture. Friday’s earthquake measuring 9.0 magnitude on the Richter scale triggered massive waves that leveled homes and farms, left thousands missing, forced ... Continue reading this article…

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Readers Gave $8,000 to Charity Since Thanksgiving

by Luke Landes

For the second year in a row, I offered to match Consumerism Commentary readers’ charitable contributions donated during the two weeks following Thanksgiving, up to $5,000. After extending the matching period a third week, and with MoneyCrush‘s offer to match the contributions made between $5,000 and $6,000, we surpassed all goals. After falling slightly short ... Continue reading this article…

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MoneyCrush Adding Support to the Charity Match

by Luke Landes

On Thanksgiving, I announced that Consumerism Commentary would match charitable donations through December 11, 2010 with a donation to Médecins Sans Frontières up to $5,000. Word is spreading, and other bloggers are interested in participating as well. Jackie from MoneyCrush has announced that she will match donations reported above the $5,000, raising the bar to ... Continue reading this article…

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Consumerism Commentary Matching Charitable Donations for Thanksgiving

by Luke Landes
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Last year, Consumerism Commentary matched $3,584 in readers’ charitable contributions. For every dollar that readers donated and informed us, we made a matching donation to the World Food Programme (through the American arm of the organization, the Friends of the World Food Program). I felt this was a great way to give thanks to our ... Continue reading this article…

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Newark Public Schools to Receive $100 Million

by Luke Landes

Earlier this year, the State of New Jersey missed out in $400 million in federal aid for public schools due to an administrative error and the political inability to take the educational needs of the state’s students seriously. This money would have been part of the federal Race to the Top program, a set of ... Continue reading this article…

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Secret Billionaire Meeting Revealed

by Luke Landes

In May 2009, a group of the most powerful individuals in the world held a secret meeting to discuss the plans for their significant wealth. Bill Gates and Warren Buffett convinced David Rockefeller to to preside over the first of several billionaire meet-ups. Their idea was first to discuss philanthropy with like-minded individuals and determine ... Continue reading this article…

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Donations For Haiti Relief Will Be Deductible For 2009 Taxes

by Luke Landes

Earlier today the House of Representatives passed a bill to encourage more charitable contributions for recovery in Haiti. Once this bill passes the Senate and is signed into law by the President, and I expect it won’t be long until this law is official, those of us who have donated or will donate cash before ... Continue reading this article…

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Safe Donations to Victims of the Earthquake in Haiti

by Luke Landes

Yesterday, a magnitude 7.0 earthquake struck Haiti, with the center only less than ten miles from Port-au-Prince, the capital of the country. Of course, the news of the devastation has been everywhere in the media. Major landmarks have been destroyed by the disaster, including the Presidential Palace and the Port-au-Prince Cathedral. Haiti is a poor ... Continue reading this article…

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Consumerism Commentary Matching Charitable Donations for Thanksgiving

by Luke Landes

On behalf of myself, Smithee, and Tom Dziubek, to all those who celebrate today, have a happy Thanksgiving. I will be spending the day with my girlfriend’s family in New York. Although there’s nothing that makes one day of the calendar inherently more special than any other day, Thanksgiving is a good opportunity to think ... Continue reading this article…

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Donations to Rural Classrooms Worth Twice as Much

by Luke Landes

A few years ago, the personal finance blogging community came together to create the pfblogs.org Financial Literacy Challenge through DonorsChoose.org, a charity that facilitates funding for classroom projects needing money. The challenge was designed for bloggers to encourage their readers to provide tax-deductible donations through DonorsChoose.org to fund classroom projects focusing on increasing financial knowledge. ... Continue reading this article…

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2008 Charitable Giving: Did You Contribute Less?

by Luke Landes

As I’ve mentioned before, one of my long-term goals is to run a foundation to support arts education, specifically music education. To do this effectively, I would require a significant amount of start-up capital, and I’m not quite there yet. I’m not quite sure that I will ever have the opportunity to succeed, but if ... Continue reading this article…

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Charitable Giving: A Case of Bad Market Timing

by Luke Landes

I made a mistake, and I should have known better. Last year, I struggled with coming up with a needy non-profit organization that I felt I should support through charitable giving. The indecision stems from the desire to contribute to an organization with a mission that reflected one of my passions and the lack of ... Continue reading this article…

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Donating Old Clothing and Blog Roundup

by Luke Landes

It’s been a long time since I’ve gone through my clothing and eliminated items which are no longer appropriate for wear. For most of my life so far, my habit of keeping clothes for a long time — until recently, I still had a few items left from high school (1994) — was out of ... Continue reading this article…

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Foundations of the Rich and Athletic: What 10 Athletes Do With Their $30,000,000+ Annual Income

by Luke Landes

When you’re a world class professional athlete, you’re in high demand. When you’re the best, or nearly the best, at your particular skill in the developed world, the payoff can be huge. For example, right now, there is no one on this planet who can compare skills with Tiger Woods. Yes, every person in this ... Continue reading this article…

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Maimonides’ 8 Levels of Charity

by Luke Landes

In researching historical and religious views on charitable giving, I came across Maimonides’ hierarchy. He believed that there are 8 degrees of charity. These deal primarily with providing for the poor. Here are his 8 levels, from the highest to lowest. Do you agree with this assessment? How high are you on the list? Investing ... Continue reading this article…

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