Phishing emails. Online scams. Callers misrepresenting their identities. It seems like hardly a week goes by without reports of a new scheme to confuse or intimidate individuals into turning over money or financial information.
Remaining vigilant against fraudulent activity is always important, but perhaps even more so as the calendar year draws to a close with a flurry of charitable giving and tax planning actions. Whether it is an IRS poser or a fake charity, let’s take a look at how individuals can protect themselves from scams and ensure they are directing their donations responsibly.
IRS Communication Scams
There is nothing new about scammers posing as representatives of the IRS. What is new, however, is the number of methods the scammers are using. As the IRS always stresses, the agency will never proactively contact taxpayers via email, text messages or social media to request personal or financial information. Should you receive messages of this nature through these channels, do not reply, open or click any attachments and report the incident to the IRS.
IRS contact with taxpayers always begins with official correspondence sent through the mail, but scammers have recently coopted this method by modifying legitimate IRS letters to lure unsuspecting victims into turning over personal or financial information. With tax season just around the corner, it is important that taxpayers remain watchful for these types of scam attempts.
If you receive an unsolicited letter, fax, notice or form from the IRS that you suspect is fraudulent, visit the IRS home page to search for the number on the document. If the communication is legitimate, it will contain instructions on how to proceed. Taxpayers may also call 1-800-829-1040 for assistance in determining legitimacy.
Phone calls from individuals claiming to be IRS representatives also continue to occur. If you receive a suspicious phone call of this nature, the IRS directs taxpayers to ask for the caller’s name and badge or ID number if possible, or at the very least jot down the call back number and caller ID if available. Taxpayers should then call 1-800-366-4484 to find out if the call was legitimate.
Please refer to the IRS guide on how to handle or report a suspicious communication for more guidance and details on a variety of specific scenarios. Your RKL tax professional can also help answer questions about the legitimacy of a certain communication or other IRS tools related to tax or identity fraud, including Identify Protection PIN numbers.
Charity Donation Fraud
The holiday season offers taxpayers a great opportunity to contribute to causes important to them with the added bonus of tax deductibility where applicable. Due to this intersection of philanthropy and tax benefit, many charities ramp up solicitation and outreach to encourage giving before the end of the calendar year. Unfortunately, this opens the door for fraudsters to take advantage of generosity and altruism.
Whether or not a contribution is eligible for tax deduction, it is important that individuals are aware of where they are donating their dollars and for what purpose the funds are being used. Just like the tax scams discussed earlier, donors should be wary of any communications coming from a charity that seem suspicious or out of the ordinary and avoid clicking links or opening electronic messages.
Before making a donation, a best practice is to research the group to find out whether it is a registered charity and if your contribution will be tax deductible. Sites like the ones below are a good place to start:
- IRS: Exempt Organizations Select Check
- Pennsylvania Bureau of Corporations and Charitable Organizations: Charities Online Database
If you still want to learn more about a particular charity, GuideStar is a good place to turn. One of the largest sources of information on nonprofits, GuideStar maintains a database of tax returns and other financial information, like expenditures and administrative costs, that can lend additional credence to an organization.
RKL’s tax team is available to help clients assess the veracity and legitimacy of any IRS communications or charitable solicitation. Contact your RKL professional or one of our local offices for guidance or assistance.
Contributed by Tamera L. Lobb, Senior Accountant with RKL’s Tax Services Group. Tamera provides tax planning and compliance services to individuals and companies in a variety of industries. She specializes in multi-state compliance and pass-through entity taxation. Tamera is also active in RKL training and employee engagement initiatives.