Car Donation Scams
Many people donate cars to charity and take advantage of tax write-offs; unfortunately, they often don't know the warning signs of car donation scams. Read on for information on how you can make sure your car donation is put to the best use, all while protecting yourself and your tax interests.
Types of Car Donation Scams
Generally, car donation scams occur when you donate a car to a disreputable charity that engages in such practices as:
- Using a dishonest intermediary agency (or a “middleman") to collect the vehicle.
- Allowing the middleman to keep the vehicle or most of its worth.
- Isn't designated as a tax-exempt charitable organization.
Of course, car donation scams aren't limited to the above. Avoiding charity scams means being proactive about informing yourself and picking out the best car donation charity for your needs.
How to Avoid Car Donation Scams
Take these tips into consideration before you donate a car.
1. Research the Charity
Today, researching car donation charities is fairly easy; in fact, the Internet makes researching charities a nearly immediate process.
Some charity research resources include:
These organizations help you determine whether a car donation charity is reputable—often, they even include any issues and resolutions others have had with the charity.
Of course, you can always do some groundwork, too. For example, talk to others who have experience with car donation. Which charity did they use? How complicated was the process? Does the charity work with local area needs (which might be easier to evaluate), or is it a national organization?
2. Donate Directly to the Charity
Often, car donation scams use middlemen, and these middlemen take a cut of the donation.
Simply put, this means the middlemen (or “intermediary agencies") and the charity each take a chunk of your donation, and the actual recipients of the donation (those folks in need) get what's left. Whenever possible, donate directly to the car donation charity; your donation goes farther and has more impact when you do.
Additionally, when you donate a car for a tax write-off, you benefit more if a higher percentage of your donation goes directly to the charity. Remember to keep records and always talk with your tax professional about your charitable car donation.
3. Check for Approved Charity Status
More reputable car donation charities hold a 501(c)(3) status with the Internal Revenue Service (IRS), and the charity must have this designation if you want to donate a car for tax write-off purposes.
- You can check for 501(c)(3) status by:
- Asking to see the charity's IRS tax exemption letter.
- Using the IRS' online Exempt Organization Select Check.
- Calling the IRS at (877) 829-5500.
While these are the most direct ways to check for 501(c)(3) status, you might also find the information when you research the car donation charity using the websites listed above.
4. Always Sign the Vehicle's Title
Sometimes, car donation scammers will tell you that you're not authorized to sign the title; they'll say authorized personnel at the charity's office must sign the title.
This is not the case; in fact, the IRS recommends you sign the title (or transfer the title) before donating the car. While it's not illegal for a car donation charity to have an “open" vehicle title, you remain responsible for all fees related to taxes, licensing, and registration until the title is properly signed over to the charity.
5. Look for Local Car Donation Charities
It's much easier to see your car donation at work when you donate to local charities; ideally within your community, but at least within your state.
Of course, you shouldn't donate a car to a local charity just because it's local (keep all the above tips in mind, too!), but local charities develop reputations among community members, and these reputations can help you determine whether the charities are known for scams.
What to Do if You've Been Scammed
If you've been the victim of a car donation scam, report it to your state government.
Contact your Attorney General, or your state government's consumer fraud investigation division. A representative will advise you on how to move forward.
Alternatively, you can contact the Federal Trade Commission (FTC) Bureau of Consumer Protection and file a complaint online.