Category Archives: Disasters

Fraud Alert: Latest Reprehensible Tax and Financial Scam: Phony Charitable Contributions To Aid Typhoon Victims

IRS Alert: Charitable Contribution Scam

Typhoon Haiyan Disaster

The Internal Revenue Service has just issued a consumer alert about possible scams taking place in the wake of Typhoon Haiyan.  As most of us know, on Nov. 8, 2013, this typhoon known as Yolanda in the Philippines – made landfall in the central Philippines, bringing strong winds and heavy rains that have resulted in flooding, landslides, and widespread damage and personal devastation.

Following major disasters, it is now increasing common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers.

Fraudulent Contact:

Such fraudulent schemes may involve contact in many ways including the following:

  • Telephone
  • Social media
  • Email or
  • In-person solicitations.

Tips To Avoid Being Scammed:

To avoid your own personal financial disaster, please follow these recommendations:

  • To help disaster victims, donate only to recognized charities.
  • Be wary of charities with names that are similar to familiar or sound like nationally known organizations.
  1. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations.
  2. The IRS website at IRS.gov has a search feature, Exempt Organizations Select Check, through which people may find legitimate, qualified charities; this will help make sure that the donations to these charities are tax-deductible.
  3. Legitimate charities may also be found on the Federal Emergency Management Agency (FEMA) website at fema.gov.
  • BASIC RULE OF LIFE:  Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone soliciting contributions.  Scam artists may use this information to steal your identity and money.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.  Please read IRS Slams Taxpayers: Attention to Tax Details Matter to learn why this is so important from a tax perspective.

    • Ultra-Careful Tip #1:  In fact, it is probably better to use your credit card as your card company may protect you against such fraudulent charges.
  • If you plan to claim a deduction for your contribution, see IRS Publication 526, Charitable Contributions, to read about the kinds of organizations that can receive deductible contributions.
    • Ultra-Careful Tip #2: Even in situations where there is no fraud, it is prudent to make sure the organization is a qualified tax-exempt organization under federal law.  You may be unpleasantly surprised to know that many organizations erroneously hold themselves out as tax-qualified.  This can result in some nasty tax consequences if an audit by the IRS determines that the organization was not tax-exempt and disallows your charitable deduction.

Bogus Websites and E-Mails:

Bogus websites may solicit funds for disaster victims. Such fraudulent sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim affiliation with legitimate charities to persuade members of the public to send money or provide personal financial information that can be used to steal identities or financial resources.

Additionally, fraudsters often send e-mail that steers the recipient to bogus websites that seem affiliated with legitimate charitable causes.

Final Thoughts:

This is such a sad commentary about our world.  The old refrain “No good deed goes unpunished” is clearly applicable here.  It seems our best and noblest intentions can and will be used against us.  Vigilance, skepticism and prudence are imperative even when we are trying to do the right thing.

Does this kind of fraud strike a nerve or really make you angry?  Or are we just numb to it all and just pass it off as the way of the world? What are your thoughts?  Be sure to let me know what you think in the Leave a Reply below.

As required by United States Treasury Regulations, you should be aware that this communication is not intended by the sender to be used, and it cannot be used, for the purpose of avoiding penalties under United States federal tax laws.

As required by United States Treasury Regulations, you should be aware that this communication is not intended by the sender to be used, and it cannot be used, for the purpose of avoiding penalties under United States federal tax laws.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.

Hurricane Sandy: Tax Deductions For Casualty Losses

Hurricane_Sandy_Marine_hoists_in_Staten_Island,_N.Y.My last post talked about when we can trash tax and other important records. Well, Hurricane Sandy brought a whole new meaning to the concept of trashing records and a whole lot more.

Experts estimate that Hurricane Sandy has caused $50 billion of damage.  Eqecat Inc., a financial advisory firm out of Oakland, California predicts that insurance will cover $10 to $20 billion of such losses.  Storm victims will be on the hook for the other $30 billion of losses.

A couple of points to keep in mind before talking about the casualty loss tax implications:

  • If your house is damaged from this disaster, contact local building authorities to see if the home is inhabitable,
  • Establish an insurance claim, but don’t settle immediately,
  • Make temporary repairs and take other remedial action to prevent further damage to homes and belongings, and
  • Take photos of the damages.

With so many lives in complete turmoil, many of us on the East coast  crushed by Sandy’s wrath are not thinking of  claiming a casualty loss for tax purposes. However, knowing about how taxpayers can claim tax deductions under casualty loss provisions of the Internal Revenue Code is essential in dealing with insurance companies.  While memories are fresh and evidence is still available, now is the time to develop, document and support such casualty losses.

To aid those affected by this devastation readers should look at my article entitled Casualty Losses For Hurricane Sandy.  This article details  the tax qualification rules for being eligible for casualty losses.  It is a must read for anyone devastated by Sandy.