The Internal Revenue Service issued a warning on Tuesday reminding consumers to be cautious about making donations to organizations purporting to support people affected by Hurricane Harvey.
“While there has been an enormous wave of support across the country for the victims of Hurricane Harvey, people should be aware of criminals who look to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, email or in-person solicitations,” according to the IRS.
Many of the same precautions consumers take to avoid fraud online can prevent them from giving money to scam artists, like double-checking website links to make sure they’re legitimate. Some fraudsters may create an organization with a name similar to a nationally recognized one, hoping their victims won’t notice.
Consumers can also run the name of an organization through the IRS’ Exempt Organizations Select Check tool, which will show organizations that are eligible to receive tax-deductible charitable contributions. The IRS noted that some legitimate organizations, such as churches, won’t show up on this list.
Donating by check or credit card can help clients keep from throwing money to the wrong people, and gives them a way to track donations if they claim them in their tax returns.
The North American Securities Administrators Association released its own scam warning on Wednesday.
“As we are seeing in Texas, natural disasters bring out the best in people, with neighbors helping neighbors. Unfortunately, we know from experience that disasters also can bring out the worst in people, particularly those seeking to profit from the misfortune of others,” Mike Rothman, NASAA president and Minnesota commissioner of commerce, said in a statement.
Rothman warned that “unsolicited investment offers seeking to capitalize on the aftermath of Hurricane Harvey should be approached with extreme caution.”
For example, water removal or purification schemes, investment pools or bonds that promise to bring support to victims of the storm and distressed real estate remediation programs are common.
NASAA recommended not engaging with potential fraudsters by deleting unsolicited emails and simply hanging up on aggressive cold callers.
While some scammers target well-wishers who aren’t affected by the storm, others will wait and try to hit victims when they receive large insurance settlements.
The Federal Trade Commission said on Wednesday that the Federal Emergency Management Agency is already getting calls from homeowners who say they’re getting robocalls demanding payment on past-due flood premiums. These calls demand immediate payment to get coverage for damage related to Harvey.
The FTC warned that homeowners who get calls like that should reach out to their insurance agent directly to ask about their coverage.
What Others Are Doing to Help
Some industry organizations are speaking out to help people affected by the storm, including advisors.
- For candidates in counties and regions declared disaster areas by state or federal governments as a result of Harvey, and whose Series 63, 65 and 66 exam windows were set to expire between Aug. 25 and Sept. 22, NASAA is extending the window to Nov. 6, and may provide additional extensions as more information becomes available.
- The American Retirement Association asked for relief for taxpayers who use savings from qualified retirement accounts to alleviate hardships from the hurricane, using IRS Announcement 2012-44 following Hurricane Sandy as a template. ARA also requested a waiver of the early distribution excise tax under IRC Section 72(t), ratable inclusion of the distribution in income over a three-year period, expanded rollover periods for qualified hurricane distributions and increased loan limits under IRC Section 72(p).
- The IRS announced on Wednesday that it is in fact providing relief for Harvey victims through “streamlined loan procedures and liberalized hardship distribution rules” if they draw from 401(k), 403(b) and 457(b) accounts. IRA owners can’t take loans from their accounts, but may be eligible to receive distributions. The withdrawals must be made by Jan. 31, 2018, and are available to people who live or work in areas designated as disasters by FEMA. Click here to see a list of the counties in Texas that are currently designated as such.
— Read 3 Ways Harvey Is Touching the Life and Health Community Now on ThinkAdvisor.