- Days left

Don't Get Burned by Your Charitable Deductions

×
NEW YORK, NY - NOVEMBER 01: People stand in a queue for basic supplies like diapers, food and water at a distribution center November 1, 2012 in New York City. Limited public transit has returned to New York. With the death toll continuing to rise and millions of homes and businesses without power, the U.S. east coast is attempting to recover from the effects of floods, fires and power outages brought on by Superstorm Sandy. (Photo by Allison Joyce/Getty Images)
Allison Joyce/Getty Images
Americans are well-known for their generosity in times of tragedy. But if you aren't careful about making sure the charity you're giving to is legitimate -- or that you set up the donation properly -- you could end up wasting your money and losing the tax deduction the IRS gives for charitable donations.

Fake Charities and Dud Deductions
Last November, shortly after Hurricane Sandy struck, the IRS issued a warning about scam artists impersonating charities and collecting donations from unsuspecting donors. By using official-sounding names that are similar to those of well-recognized national charities, these criminals not only benefit from the cash they pocket from donations but also collect vital personal information, such as Social Security numbers, credit card numbers and banking information, that they can then use for identity theft and other criminal activity.

Adding insult to injury, taxpayers who get caught by such schemes can't deduct their donations. Because they weren't actually given to a legitimate charity, those donations aren't eligible for the deduction for charitable contributions.

Losing Deductions on Legitimate Donations
Even charities that aren't scams can cause trouble for donors. In most states, it's easy to set up a charitable organization, but it can take a lot more work to file the paperwork and get approval from the IRS to become eligible to receive tax-deductible donations.


In such cases, donors may make gifts on assurances from the charity that its application with the IRS is in process, only later to find out that the organization never followed through or failed to get IRS approval.

Unfortunately, it can take months or even a year or more to get a new charity through the approval process. If a charity is approved, previous donations are retroactively given deductible status. But until then, donors are gambling that their charity will pass the IRS' tests.

Before You Give ...
In order to make sure the gifts you make to charity are legitimate and deductible, be sure to use the IRS website's Exempt Organizations Select Check. There, you can enter the name of any charity and get verification of whether it can accept tax-deductible contributions, as well as if it has had its previous deductible status revoked.

It's sad to have to go to such measures against scammers taking advantage of other people's tragedy. But with the right tools at your disposal, you can make sure your money goes to charities that will legitimately use it for good.


Increase your money and finance knowledge from home

Getting out of debt

Everyone hates debt. Get out of it.

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

TurboTax Articles

Top 6 Tax Tips for Sharing Economy Freelancers

It's never been easier to earn a few extra dollars: Whether you drive for a ride-share company like Uber, rent out a room through a rental service such as Airbnb, or work for a company like TaskRabbit that outsources small jobs, errands and tasks?being a freelancer in the sharing economy means you may have one or more micro-enterprises or small businesses going on. And, just as your full-time job does, these endeavors often result in tax obligations people often overlook.

Claiming Property Taxes on Your Tax Return

If you pay taxes on your personal property and owned real estate, they may be deductible from your federal income tax bill. Most state and local tax authorities calculate property taxes based on the value of the homes located within their areas, and some agencies also tax personal property. If you pay either type of property tax, claiming the tax deduction is a simple matter of itemizing your personal deductions on Schedule A of Form 1040.

Side-Giggers: Tax Tips for Side Jobs

Having a side gig can help you make ends meet or build your rainy day fund. Income from freelance work, running your own small business or working at a second job brings in extra income without requiring you to quit your day job. But, like your main source of income, a second job or side gig must be reported on Form 1040 at tax time.

Tax Aspects of Home Ownership: Selling a Home

Though most home-sale profit is now tax-free, there are still steps you can take to maximize the tax benefits of selling your home. Learn how to figure your gain, factoring in your basis, home improvements and more.

Add a Comment

*0 / 3000 Character Maximum