More online information about indentifying and avioding Charity Scams

Articles from America on Charity Scams:

A more in-depth look at the different kinds of Charity Scams.

Please note: the IRS or CRA (America) is equivalent to IRD in NZ.

How to Spot a Charity Scam Artist- link for article:   USA

By Lahle Wolfe

 

Many kind-hearted individuals and businesses make financial donations towards the end of the year. Unfortunately, online scam artists count on this and step up their efforts to steal valuable identifying information, load your computer with viruses, and swindle donors through Email solicitation campaigns. 

 How Email Charity Scam Artists Con Donors

Scam artists send out their mass email campaigns asking for charitable donations for a variety of causes. Online scam artists have gotten more sophisticated and are no longer simply asking you to mail them information or offering a hyperlink (usually to a virus or form to input identifying information.) Many scam artists are now taking the time to develop actual "charity" websites in an attempt to convince you that they are real.

 

Before you make an online donation to any charity you are unfamiliar with check them out.

Unfortunately, not all charities are listed in the online IRS database (which is about two years behind in listing charities it has approved for tax exemption status.) If you cannot find the charity online, call the IRS or your state's tax board.

 

Typically, only multi-million dollar charities are listing in registries like GuideStar. Even the Better Business Bureau (BBB), which is now starting to list charities, is misleading, because to get your charity listed with the BBB, you only have to pay a (steep) registration fee.

But you can still spot a scam artist by being alert to the following dead giveaways that a charity is a scam.

Charities That Ask for Too Much Information Are Scams
 

Any charity that asks for too much information, including your date of birth, social security number or driver's license information is a scam.

Charities are not required by the IRS or state charity laws to collect this information and they do not need this information to process a donation or issue a tax receipt.

Unsolicited Mass Email Campaigns Are Dead Give Aways!
 

Charities are bound by CAN SPAM Laws - they are not allowed to contact you through purchased mass email lists, and they cannot use web robots to collect Email addresses from public Internet sources.

 

In fact, unless you have previously donated to a particular charity, I would be highly suspicious of any charity that contacted you via Email out of the blue.

 

Discard any Email that is sent to "Undisclosed Recipients." It is almost certainly a scam.

Charities Do Not Send Attachments in Solicitations Legitimate

Legitimate charities are smart about their solicitations. They know people are unlikely to open emails with attachments and they do not send them.

Do not open any charity Email with an attachment. And, before you click on any hyperlink in a solicitation Email be sure you are not clicking on a virus link.

 

If you are not sure how to do this, read How to Spot Fake Hyperlinks in Emails.

 

Fake Charity Website Dead Giveaways

 

Check out the charity's website before you visit it or click on Email hyperlinks. The fastest and easiest way is to check out the website's domain registration information.

 

To see when a website went live, visit www.Whois.sc and enter in the domain name. Whois.sc will tell you when the website went live, where its servers are located, etc. You do not have to create an account, and basic information about websites is free.

 

Scammers almost always purchase domain names for one year. They expect to get caught and shut down and discard the domain. Whois.sc allows you to look at when the domain registration expires.

  

If it will expire in less than one year, they might be a scam artist.

 How To Determine If your Charity is Legitimate

By Miriam Caldwell
 

It is nice to give to others, and to help out those in need. When you choose a charity or cause to donate your money to, you need to make sure that you are giving a legitimate organization that will use your money for the purpose that you intended. It is your money that you are giving, so you should be sure that the charity or cause support your beliefs and your purposes when you give.

 

Here's How:

1. First, you need to determine which charity or cause that you want to give to. For example if you want to donate a gift or money for children over the holidays you should have several different options available in your area to choose from. If you are choosing to help fight cancer or another cause you may different organizations to choose from as well.
2. Second, you need to make sure that the organization you are giving to is legitimate. An easy way to do this is make sure it is a national organization with a large track record. You can check with your state to see if they are registered as a nonprofit. Many nonprofits also post where the contributions go on their websites. If you donate to a large organization such as the Red Cross you may be able to choose to support a specific need or cause.
3. Third, you need to make sure that you are donating through a legitimate channel. For example, people have gone door to door collecting donations, and claiming that they belong to an organization when they do not. Usually you are best to contact your local chapter of the organization or the national organization and donate directly to them.
4. Fourth, if you donate on the Internet be sure that you use a secure connection. You also need to make sure that the site is legitimate and not a site that was put up by someone other than the organization that you are trying to donate to. Be especially careful if you are linking to the site through an email that you received.

Tips:

1. Giving money is a great way to help others. It can help you to feel empowered and to take control of your finances as you take time to donate on a regular basis. Many financial advisors recommend giving money on a regular basis.
2. You should determine how much you can give and stick to your budget. You may choose to divide it between several different organizations or causes or you may choose to give to just one. The help that you give will be appreciated. You can also claim the donation as a tax deduction.
3. Take advantage of the opportunities to donate through your work. Many companies will offer an incentive if you will contribute to United Way or another organization through your work. If you are comfortable giving to United Way it is easy to have the money automatically deducted from your paycheck each month.
4. If you do not have the money to give, consider donating your time to a cause that you feel is important. Many people in their twenties spend time mentoring children and teenagers through Big Brothers and Big Sisters or other similar organizations. You can also give smaller donations of goods to your local food pantry to help when you have a little extra money. 

 What You Need 

• Money  
• Time 

Avoid Donating to Irresponsible or Bogus Charities

By Trisha Torrey

 

There are many times in our lives when we decide to donate to charities that need our money to do their good work. We may feel moved to donate to a charity that does research in a certain health area we are interested in. When someone we loved or respected dies, their family may ask for donations in lieu of flowers. Tragedies often trigger creation of new charities, as when a young person dies a tragic death.

 

Sometimes we want to donate simply because we are asked to. And, of course, the end of the year, during the holiday season, we consider our gifting at the same time we plan for completing the tax year.

 

There are three important planning steps to determining the right charities to donate to:

1. Develop your giving goals.
    
2. Make sure a charity is bona fide; that is, that it exists to truly help the organization or individual it is meant to help.
    
3. Research the strength of a charity's fiscal responsibility and its track record for using donated money to address the goals that are of interest to you.

Here is information to help you with these steps:

 

1. How can you choose which charities to donate to?

The best way is to set some giving goals - from the type of charity to the scope of its reach. For example, do you want to donate to help research treatment options for a certain disease? or perhaps you want to help pay for medical care for a child who has a rare disease? Here is how to determine what kinds of charities you want to support.

 

2. Confirm the authenticity of the charity.

There are tens of thousands of charities that ask you for money, but not all of them are real charities, meaning, some are only set up to take your money, and not to truly help your cause. This is particularly true when a tragedy has taken place, such as those scammers who claimed they represented families who lost a child at Sandy Hook, or which claimed they were assisting people who lost their homes after Hurricanes Katrina and Sandy.

 

If a charity is new to you, or if you have received some sort of solicitation by phone or email, do not simply assume that it is safe to donate - or even to link to the charity from an email link or a FaceBook page or other social media. You might be giving money to someone who doesn't deserve it, and even worse, if it's online, you may pick up a computer virus, too.

 

Therefore, it's important to confirm that you are donating to a bona fide charity, one that is authentic and will use your money well.

 

In some cases you can know whether a charity is "real" by confirming its IRS or CRA status. But don't ask the charity, and don't simply accept a statement on its website since we know that not all websites have credible information.

 

Instead check with either of these resources to confirm a charity's authenticity:

• The Better Business Bureau will help you search for a rating on a specific charity. You won't be able to search for a group of charities with one focus, but you can find out how individual, even local, charities are rated or whether the BBB accredits them.

• The National Association of State Charity Officials provides links to the person or office in each state that can help you determine authenticity.

3. How well does the charity address your goals?

 

There are two important aspects of how well a charity is run that will be of interest to us as donors.

First, take a look at its fiscal responsibility. You want to know how well run a charity is; whether they waste their money, or have fulfilled their promises.

 

The second is to be sure they focus on the aspects you think are important. We all have different reasons for donating, whether we're donating to health-related charities or the local high school band. When it comes to health-related charities, it's important to learn enough about them to be sure they work toward the same goals as you have.

 

For example, both my grandmother and my mother died of Alzheimer's disease, so I know I probably have some genetic tendency toward developing Alzheimer's myself. My goal, then, is for my donations to go toward research to find a cure, or at least a highly effective treatment.

 

But in doing my research for the best Alzheimer's focused charitable organization to donate to, I learned that they don't all do what they say they plan to do. In one case, I realized how much money and effort was going toward paying other organizations to fund raise for them. Others say they are focused on research, but in some cases I learned that less than 20% of their donations actually go toward research! Would you think twice about donating to a charity that said one thing but showed a track record of something else? I certainly did.

Here are two websites that can help you check both fiscal responsibility and a charity's real spending vs the focus it claims:

• Charity Navigator allows you to search by the name of an organization or by the disease or condition you hope to support. It allows for some very deep research into the financials, efficiency, cost of administration and more. It also provides a list of all 4-star rated health-related charities (4-stars are its highest ranking.)
   
• GuideStar collects information about non-profit organizations and makes it available to the public through its website.  Included is a charity evaluator, among many other offerings.

Bottom line:

You have worked hard to earn the money you are ready to donate. Be sure that when you give your money away, you do so in a considered fashion, to groups or individuals that will be good shepherds of your donation.

Educating yourself is the best defence! Info from the IRD NZ

The following information is from IRD NZ the Link here: www.ird.govt.nz/.../our-compliance-focus-2010-11.pdf 

 

Non-profit groups

Non-profit groups, eg, society clubs, amateur sports clubs, charities and district societies, are exempt from income tax. There are 26,000 registered charities in New Zealand. Non-profit groups employ over 200,000 staff and volunteers—just over 9% of the working population.

Updated webpages for non-profit groups

In 2009–10 we developed a better understanding of the non-profit sector and how best to interact with them. Research showed us that the key to improving compliance for non-profit groups is in understanding their communication needs.

In March 2010 we launched an updated non-profit section on our website. We’ve tailored the refreshed site to meet non-profit groups’ needs.

 

The new non-profit section at www.ird.govt.nz/non-profit includes information about employing staff and volunteers, paying and claiming GST, recovering donations and grants, and keeping records and filing returns.

The feedback, so far, has been positive with non-profit groups telling us it gives them a better understanding of what they need to do to comply.

We based our refresh on changes non-profit groups asked for through research we did in August 2009. Overall, we found they prefer targeted information.

 

Misusing charities tax-exempt status

The non-profit sector provides important community services and products that make a difference for thousands of New Zealanders. To recognise this, registered charities don’t have to pay tax.

The majority of charities are legitimate, but they can be targeted by a small group of individuals who try to exploit their tax-exempt status. Charities have been used to abuse the tax system through aggressive tax planning and fraud.

We will address misuse of charities tax-exempt status by:

·         working with the Charities Commission to reduce opportunities for misusing tax-exempt status

·         identifying charities that create false receipts and invoices, organisations that claim to be charities but aren’t, and claims from claimants who are trustees, officers or who derive a monetary benefit from the charity

(in this case NARK.Org.NZ founder)

·         investigating and applying sanctions and penalties to anyone who chooses not to comply with their obligations and prosecuting them, where necessary.

Non-profit groups’ awareness of their obligations

Non-profit groups play an important role in maintaining the integrity and quality of the giving schemes. They need to provide authentic receipts for donations and ensure arrangements they put in place to encourage these donations don’t compromise customer privacy and Inland Revenue systems.

We work with non-profit groups that aren’t registered with the Charities Commission. We give advice about the registration process and make sure they understand their tax obligations and the potential consequences of not registering. The non-profit groups we’ve contacted have responded positively to our information about their obligations.

We will work with non-profit groups to ensure they:

·         understand charitable giving, eg, the donation tax credit and payroll giving schemes

·         comply with the rules.

Tax incentives for charitable giving

New Zealand offers tax incentives to people who give money to registered charities. They can claim part of it back as a tax credit, either as a donation tax credit or through the payroll giving scheme.

But, in the past year, we’ve identified a number of issues that could affect the integrity of the tax system. They include:

·         ineligible or fraudulent donation tax credit claims being filed

·         people claiming a donation tax credit without meeting the application requirements

·         uncertainties about an organisation’s status, or interpretation of the donee organisation rules.

(No interpretation as to Nark.Org.NZ, being a Trust, Charity, Cause, Organization....)

We want individuals and businesses to understand the charitable giving process and follow the correct processes for making claims.

We will address tax issues around charitable giving by:

·         publicising the donation tax credit and payroll giving schemes to donors and non-profit organisations, eg, contributing to an inter-agency education programme

·         educating tax agents and employers about the application requirements for charitable giving

·         educating individuals who file an Individual tax return (IR 3) income tax return about the steps we follow when processing their donation tax credit claims

·         raising awareness about how to access information on the donations tax credit requirements and the payroll giving scheme

·         improving our internal systems to quickly and accurately pick up incorrect and fraudulent claims, eg, income verification and tolerance checks to find input errors

·         continuing to investigate, apply sanctions and penalties, and prosecute, if necessary.

Also the form: Inland Revenue’s compliance focus 2012−13

 

Misuse of charities

 

In recognition of the non-profit sector’s contribution to our communities, registered charities are allowed various exemptions and concessions. They also receive public and private donations, for which tax credits are claimed.

 

Most charities are legitimate, but they can be targeted by people wanting to take advantage of their tax-exempt or concessionary status. Charities have been used to abuse the tax system through aggressive tax planning and fraud.

In the past year, we have seen a growing range of abusive practices involving charities. These do not appear to involve generic schemes for tax avoidance. Instead, some taxpayers and their advisors are trying to use charities as a tax-saving device.

Increasingly, we are working in partnership with the Charities Commission (whose business functions have recently been moved to the Department of Internal Affairs) to identify charities and individuals whose activities warrant investigation. We are also developing appropriate compliance strategies.

 

A key resource for this work is the “open government data” that the Charities Commission now publishes on its website. Our information exchange with the Commission also helps us to identify existing and emerging trends in the misuse of charities.

 

We also liaise regularly with the ATO.

We are refining the legal and technical issues for cases involving charities, and have resourced specialist investigators to identify abusive practices and progress  cases swiftly.

We will investigate people who enter into tax avoidance schemes involving charities or who create false receipts and invoices. We will also focus on organisations that claim to be charities but are not, and on claims from trustees, officers or other people who receive payment from the charity.

 

Where appropriate, we will prosecute those who choose not to comply with their obligations.

 

 What you can do

 

• Make sure you understand your obligations. Avoid entering into any scheme that uses charities inappropriately. If you are unsure about your obligations, contact us for confirmation.

 

• If you or your client have misused a charity’s status,  you can contact us and make a voluntary disclosure, www.ird.govt.nz (keyword: voluntary disclosure).

 

 • If you have information about the misuse of a charity, you can report it to us anonymously through our website, www.ird.govt.nz (keyword: anonymous).  

 

Charitable organisations
Nga whakahaere aroha

 

Charitable organisations are organisations (whether incorporated or not) that carry out charitable activities or exist exclusively for charitable purposes. Since 1 July 2008 a charitable organisation needs to be registered by the Charities Commission to receive tax exemptions.

Income tax and charitable organisations

Charitable organisations are liable for income tax if they operate with no written rules, constitution or trust deed or they operate under a set of rules, a constitution or a trust deed that does not meet the requirements for income tax exemption or they use business income for charitable purposes outside New Zealand. Learn about rates of income tax, when to file returns and possible exemptions.

Registration of charities

The Charities Commission maintains a register of charitable entities that opened on 1 February 2007. Registration is voluntary, but if a charity wishes to be exempt from income tax and donors of gifts exempt from gift duty it will need to register.

Transitional guidelines for charities

These administrative guidelines are intended to provide clarity about the tax position for entities that have not completed the process of registering with the Charities Commission by 1 July 2008.

 

$1,000 income deduction

Some non-profit organisations may qualify for a $1,000 income deduction. This deduction makes the first $1,000 of income that organisation earns free from income tax.

• If your organisation earns under $1,000
• If your organisation earns over $1,000
• Applying for the $1,000 income deduction
• Applying for an income tax exemption

If your organisation earns under $1,000

If your organisation's net income is below $1,000 per year, then the deduction effectively means you are exempt from income tax.
   
Therefore you won't be taxed on any income you earn, and don't need to file any income tax returns.
However, we recommend your organisation keeps records of any financial transactions, in case they are required for future reference. 

Note

An exemption or deduction of income tax doesn't automatically qualify your organisation for an exemption to all taxes. You may still be liable to pay other taxes, such as GST.

If your organisation earns over $1,000

If your organisation's net income is above $1,000 per year, you may be eligible for a deduction of up to $1,000. If you subtract this amount from your organisation's income, you reduce the amount of tax to pay.
   
To qualify for this deduction, your organisation will need to have written rules. An organisation without rules or a constitution won't qualify for the $1,000 income deduction.

Applying for the $1,000 income deduction

If your organisation doesn't qualify for an income tax exemption, you can apply for a deduction against your net income.
   
A non-profit organisation is allowed a deduction for the amount equal to the lesser of:

• $1,000, or
• the amount that would be the net income of the organisation.

To apply for a deduction, your organisation will need to follow the same processes as applying for the income exemption.

Applying for an income tax exemption

If you're a charitable organisation, go to the Charities Commission website to register as a charity.
   
If you're a non-profit body of any other kind, you may qualify for an income tax exemption.
Income tax exemptions aren't automatic. You'll need to apply to us in writing - go to "Contact us" for our address details.
   
Your organisation can send us a draft document of your exemption application for us to review. We can then suggest any changes before your organisation goes through the process and cost of having it submitted.
   
When you apply for the exemption, please include the following information about your organisation:

• IRD number - if you don't have one, you'll need to apply. Please complete an IRD number application - non-individual (IR596)
• a copy of its rules, constitution, trust deed or other founding documents - preferably in draft (before being finalised) form
• a copy of its certificate of incorporation (if applicable)
• a letter stating the type(s) of exemption being requested, eg sports club
• details of how it has been or will be operating.

We'll then give you written confirmation of your organisation's tax exempt status for income tax.

Charitable purpose

Charitable purposes include:

• the relief of poverty
• the advancement of education
• the advancement of religion
• activities for the benefit of the community.

An organisation's purposes must fall within one of these categories to be charitable. Its activities or aims must be for public purposes and the benefit must be available to a large section of the community. In addition, it must not be carried on for the benefit or profit of any individual. If the beneficiaries are limited by blood ties the charitable purpose can still be met in some circumstances.

Many organisations consider themselves charitable because of the work they do or because they are registered under the Charitable Trusts Act 1957. As a result, they may also think they are exempt from income tax. However, from 1 July 2008, an organisation will only be tax-exempt if it is a registered charity. Such an exemption does not apply to goods and services tax (GST) or PAYE. The organisation must still account for these.

Your organisation's income tax return

If your organisation has an annual turnover of less than $1,000, you don't need to file an income tax return. You'll simply need to keep sufficient records for your organisation.

If your income is above this threshold, or is expected to be, then you'll need to file an income tax return. The table below outlines what income return you'll need to file, depending on the type of your organisation.

If your organisation is a...	then you'll need to file an...
registered and incorporated company	IR4 company income tax return
trust or estate	IR6 income tax return for estates or trusts
club, society or association	IR9 income tax return for clubs or societies

 Go to Filing your income tax return at the end of the tax year


N.A.R.K Org.NZ threshold was well over $1,000