Finance
7 ways to avoid getting scammed by a ‘charity’ this holiday season
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A few years ago, a heart-wrenching story from New Jersey captured the nation’s attention. A couple, Katelyn McClure and her boyfriend launched a fundraiser to help a homeless man claiming he had used his last $20 to assist McClure when she ran out of gas. The tale struck a chord with thousands, leading to an overwhelming response on GoFundMe where donors contributed a staggering $400,000. However, this touching story soon unraveled, exposing a shocking scam. The money disappeared, and it was revealed that the couple had fabricated the entire narrative. Their deception ultimately landed them both in prison, serving time for their fraudulent actions.
This cautionary tale highlights the need for doing copious research when donating to charitable causes, particularly during the holiday season when people are most inclined to give. While countless organizations and individuals genuinely need help, there are also those who exploit goodwill for personal gain. To ensure your donations make a real difference, here are some essential tips to avoid scams and protect your generosity.
1. Verify charitable status with the IRS
Before donating to any organization, start by confirming its legitimacy through the IRS’s Tax-Exempt Organization Search tool. This resource allows you to check whether the charity is recognized as a tax-exempt entity under Section 501(c) of the Internal Revenue Code.
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Additionally, confirm that the organization is eligible to receive tax-deductible contributions. These two questions — whether the organization is tax-exempt and whether your donation is deductible — are critical in ensuring your funds go to a legitimate cause. If the answers to these questions are unclear, it’s better to hold off on donating.
Check with the IRS if you want to determine if the donation you are making is tax-deductible. | The U.S. Flag flies above the International Revenue Service headquarters building on January 3, 2024, in Washington, D.C. (Photo by J. David Ake/Getty Images)
2. Research the charity’s financial practices
Charities often advertise claims such as “a portion of every dollar goes to…” which might suggest that your contribution directly supports their mission. However, a deeper look at the charity’s finances can tell a different story. To investigate further, review the organization’s Form 990, a document that provides detailed financial information. This form outlines how the charity allocates funds, including the proportion spent on programs versus administrative costs, and reveals executive compensation. Understanding these details ensures that your donation aligns with your values and expectations.
3. Differentiate between gifts and donations
Crowdfunding platforms like GoFundMe have revolutionized charitable giving, allowing individuals to support personal causes or emergency relief efforts. However, it’s essential to recognize that contributions made to these campaigns often do not qualify as charitable donations.
If the campaign organizer is not affiliated with a registered tax-exempt organization, your contribution is considered a gift and is not tax-deductible. To avoid confusion, always ask how the fundraiser is connected to the cause and how the funds will be used. This distinction between gifts and charitable donations can help manage expectations and prevent disappointment.
4. Use charity ranking resources
Several online platforms provide valuable insights into the legitimacy and effectiveness of charitable organizations. Charity Navigator is a popular website that evaluates charities based on financial health, accountability and transparency. It also offers resources such as trending charity lists, top ten rankings and donor tips.
Jeffrey Arthur Moynihan Jr., 56, was arrested Tuesday night and charged with grand theft. (Credit: Bradenton Police Department)
Similarly, GuideStar provides comprehensive information on nonprofits, including access to Form 990s and data on community foundations. By leveraging these tools, you can make informed decisions and ensure your contributions support reputable organizations.
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5. Explore donor-advised funds
For a more strategic approach to charitable giving, consider using a donor-advised fund (DAF). This method allows you to contribute to a mutual fund company, securing a tax deduction for the calendar year. Your donation is invested and grows tax-free, giving you the flexibility to distribute grants to charities over time. DAFs are an excellent option for donors who want to maximize their tax benefits while maintaining control over how and when their funds are distributed.
6. Always request a receipt
Whether donating cash or non-cash items, always obtain a detailed receipt for your records. This step is especially crucial if you plan to itemize deductions on your tax return. For non-cash donations, you may need to complete Form 8283 to claim your deduction. Websites like satruck.org provide valuation guides for common items, helping you document their fair market value accurately. Keeping thorough records ensures compliance with tax laws and protects you in case of an audit.
Several online platforms provide valuable insights into the legitimacy and effectiveness of charitable organizations. Charity Navigator is a popular website that evaluates charities based on financial health, accountability and transparency. It also offers resources such as trending charity lists, top ten rankings and donor tips.
7. Protect yourself during the holiday season
Scammers often exploit the holiday season to take advantage of unsuspecting donors. For instance, the U.S. Postal Service never sends unsolicited text messages or emails containing tracking links unless you’ve specifically signed up for them.
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Likewise, FedEx and UPS have resources on their websites to help distinguish legitimate communications from fraudulent ones. If you receive a suspicious message or fall victim to a scam, report it immediately to the FBI’s Internet Crime Complaint Center at www.ic3.gov.
Charitable giving has the potential to transform lives and create lasting positive change. By taking the time to verify the legitimacy of the organizations you support, you can ensure that your generosity reaches those who genuinely need it. As you spread kindness this holiday season, remain vigilant against scams to protect yourself and your contributions.
Ted Jenkin is CEO and co-founder of Oxygen Financial and president of Exit Stage Left Advisors.
It appears T. Rowe Price is benefitting from the record growth in actively managed exchange traded funds.
Tim Coyne, the firm’s head of ETFs, reports the firm is seeing significant growth in the area — listing the T. Rowe Price Capital Appreciation Equity ETF (TCAF) and T. Rowe Price U.S. Equity Research ETF (TSPA) as two established strategies that can satisfy investor demand.
“I think having that professionally managed portfolio is really beneficial to clients,” Coyne told CNBC’s “ETF Edge” this week. “We’re seeing just… greater volatility [and] uncertainty across both the equity and fixed income markets.“
According to Coyne, the T. Rowe Price Capital Appreciation Equity ETF suits investors who are looking for long-term growth.
“The objective of the fund is to outperform the S&P 500 with lower volatility and greater tax efficiency,” he said. “It’s also a more concentrated portfolio, typically holding around a hundred names.”
As of April 24, the fund’s top holdings include Microsoft, Amazon, and Apple according to the T. Rowe Price website. But it’s not all Big Tech. The ETF also features smaller positions in companies like Becton Dickinson and Roper Technologies.
The T. Rowe Price Capital Appreciation Equity ETF is down about 5% so far this year while the S&P 500 is off about 7% However, the ETF is up close to 8% over the past year — roughly identical to the S&P 500’s performance.
Coyne notes the T. Rowe Price U.S. Equity Research ETF follows a similar strategy, but with a heavier weighting in top tech stocks.
“This is more of a large-cap growth product [T Rowe Price U.S. Equity Research ETF],” he said. “There are components of characteristics of both passive and active here. This fund is actually managed by our North American directors of research. So again, strong fundamental research is going into the stock selection.”
Both the T. Rowe Price U.S. Equity Research ETF and S&P 500 are down around 7% since the beginning of the year. Meanwhile, the fund is up almost 9% over the past year. That’s less than one percent better than the S&P 500’s performance.
T. Rowe Price U.S. Equity Research ETF vs. S&P 500
‘Some form of bear market’
Strategas Securities’ Todd Sohn thinks investment demand for active managers will continue to be strong.
“This is the type of the environment where it [active management] can actually shine,” the firm’s senior ETF and technical strategist said. “We are in some form of bear market. This is where the active manager really can come into hand and offer their solution they are doing right.”
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