Tag Archives: charitable donations

No disaster scammer is safe from the NCDF

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What do COVID-19, major hurricanes and West Coast wildfires have in common? All three have attracted scam artists, who have bilked disaster victims, charitable donors, insurance companies and government agencies out of billions of dollars. Also, all of these disasters — and the criminals who take advantage of them — are the focus of The National Center for Disaster Fraud (NCDF). Let’s take a look at what this partnership between the U.S. Justice Department and various law enforcement and regulatory agencies does to investigate and prevent fraud.

Investigate and prevent

The NCDF was established in 2005 after Hurricane Katrina to combat the massive fraud schemes that emerged as financial aid poured into the Gulf region. The agency now coordinates investigations into all kinds of natural and manmade disaster fraud. It also helps to prevent perpetrators from finding victims.

Recently, the NCDF posted on its website tips for charitable donors who want to help victims of Hurricane Ida (justice.gov/disaster-fraud). For example, the agency urges people to avoid making cash donations, writing checks to individuals or donating via wire transfer.

COVID and other opportunities

COVID-19-related fraud — including dishonest Paycheck Protection Program (PPP) loan requests and phishing schemes offering fake “miracle” drugs — makes up the bulk of current NCDF complaints. In recent weeks, the Justice Department has announced the indictment and sentencing of a roster of COVID criminals.

This includes a Georgia woman who pleaded guilty to bank fraud after seeking $7.9 million in PPP loans for four medical practices she controlled. In another ambitious scheme, a Texas man submitted 15 fraudulent PPP applications to eight different lenders, seeking a total of $24.8 million.

Of course, criminals will capitalize on any opportunity. A California man received $26,000 in relief funds from the Federal Emergency Management Agency (FEMA) after falsely claiming a trailer burned in the Camp Fire was his primary residence. Earlier this year, a Florida woman was sentenced to more than six years in prison for using stolen identities to file five applications for FEMA disaster assistance that was intended for actual victims of Hurricane Irma.

Calls for help

Agencies investigating disaster fraud depend on tips from ordinary people who’ve witnessed or are victims of these crimes. The NCDF hosts a 24/7 telephone hotline (866-720-5721) and accepts Web form complaints at justice.gov/DisasterComplaintForm. Also, if you believe disaster fraud has delivered a double whammy to you or family members, contact us for more information on how to fight back.

© 2021 Covenant CPA

Take control of your charitable donations using restrictions

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Did you know that you can put restrictions on charitable donations you make through your estate? If you want the peace of mind that your donations are used to fulfill your intended charitable purposes, you’ll need to take the steps to add restrictions.

Reasons to add restrictions

Even if a charity is financially sound when you make a gift, there are no guarantees it won’t suffer financial distress, file for bankruptcy protection or even cease operations down the road. The last thing you probably want is for a charity to use your gifts to pay off its creditors or for some other purpose unrelated to the mission that inspired you to give in the first place.

One way to help preserve your charitable legacy is to place restrictions on the use of your gifts. For example, you might limit the use of your funds to assisting a specific constituency or funding medical research. These restrictions can be documented in your will or charitable trust or in a written gift or endowment fund agreement.

Restrictions in action

Depending on applicable federal and state law and other factors, carefully designed restrictions can prevent your funds from being used to satisfy creditors in the event of the charity’s bankruptcy. If these restrictions are successful, the funds will continue to be used according to your charitable intent, either by the original charity (in the case of a Chapter 11 reorganization) or by an alternate charity (in the case of a Chapter 7 liquidation).

Do your homework

In addition to restricting your gifts, it’s a good idea to research the charities you’re considering, to ensure they’re financially stable and use their funds efficiently and effectively. One powerful research tool is the IRS’s Tax Exempt Organization Search (TEOS). TEOS provides access to information about charitable organizations, including newly filed information returns (Form 990), IRS determination letters and eligibility to receive tax-deductible contributions. Contact us if you have questions regarding your charitable donations.

© 2021 Covenant CPA

IRA charitable donations are an alternative to taxable required distributions

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Are you charitably minded and have a significant amount of money in an IRA? If you’re age 70½ or older, and don’t need the money from required minimum distributions, you may benefit by giving these amounts to charity.

IRA distribution basics

A popular way to transfer IRA assets to charity is through a tax provision that allows IRA owners who are 70½ or older to give up to $100,000 per year of their IRA distributions to charity. These distributions are called qualified charitable distributions, or QCDs. The money given to charity counts toward the donor’s required minimum distributions (RMDs), but doesn’t increase the donor’s adjusted gross income or generate a tax bill.

So while QCDs are exempt from federal income taxes, other traditional IRA distributions are taxable (either wholly or partially depending on whether you’ve made any nondeductible contributions over the years).

Unlike regular charitable donations, QCDs can’t be claimed as itemized deductions.

Keeping the donation out of your AGI may be important because doing so can:

  1. Help the donor qualify for other tax breaks (for example, a lower AGI can reduce the threshold for deducting medical expenses, which are only deductible to the extent they exceed 10% of AGI);
  2. Reduce taxes on your Social Security benefits; and
  3. Help you avoid a high-income surcharge for Medicare Part B and Part D premiums, (which kicks in if AGI hits certain levels).

In addition, keep in mind that charitable contributions don’t yield a tax benefit for those individuals who no longer itemize their deductions (because of the larger standard deduction under the Tax Cuts and Jobs Act). So those who are age 70½ or older and are receiving RMDs from IRAs may gain a tax advantage by making annual charitable contributions via a QCD from an IRA. This charitable contribution will reduce RMDs by a commensurate amount, and the amount of the reduction will be tax-free.

Annual limit

There’s a $100,000 limit on total QCDs for any one year. But if you and your spouse both have IRAs set up in your respective names, each of you is entitled to a separate $100,000 annual QCD limit, for a combined total of $200,000.

Plan ahead

The QCD strategy can be a smart tax move for high-net-worth individuals over 70½ years old. If you’re interested in this opportunity, don’t wait until year end to act. Contact us for more information.

© 2019 Covenant CPA