4 Big Legal Changes That Will Hit Your Wallet in 2018

social security 401k tax changes 2018

With all eyes on the GOP’s sweeping plans for tax reform, it’s easy to lose sight of other policy changes that could have an impact on your wallet.

In 2018, there are at least three key policy changes to keep tabs on — adjustments to Social Security benefits, 401(k) contribution limit changes, and the preservation of one of the year’s most controversial financial rules.

Here’s what you need to know:

More Social Security benefits

For Social Security beneficiaries, there is a lot to be excited about in 2018.

The cost-of living-adjustment, which determines the amount of money people receive from the system, is rising by 2 percent, the largest increase in five years. This means a growth in benefits for the more than 61 million recipients currently who currently utilize Social Security in America.

Additionally, the maximum payout—which is the amount you can receive once you’re eligible for 100 percent of your benefits—is also increasing, with the figure growing from $2,687 per month to $2,788 per month.

Greater 401(k) contributions

Saving for retirement will also be a little easier in the coming years, as the Internal Revenue Service announced that the annual limit for 401(k) contributors will increase by $500 in 2018.

Previously, anyone participating in a 401(k) or 403(b) plan, the majority of 457 plans, or the  Thrift Savings Plan could set aside $18,000 per year, but the number will grow to $18,500. To see how much this change might affect your retirement funds, you can use this calculator to track how your 401(k) funds will grow over time.

Mandatory arbitration contracts

Earlier this year, the Consumer Financial Protection Bureau (CFPB) issued a regulation banning mandatory arbitration clauses, the often-controversial sections of consumer contracts that effectively prevent customers from filing class-action suits against a company they are doing business with, such as a bank.

However, this law, which was set to come into effect in 2018, has been overturned by Congress, meaning the rule will remain in effect.

Martin Lynch, the compliance manager and director of education for Cambridge Credit Counseling Corp. in Agawam, Mass., says the repeal of the CFPB’s rule is a major defeat for consumers because forced arbitration is often used to scare customers out of taking action against the corporate world.

“That’s not fair, almost by definition,” says Lynch, who is also a member of the board of directors for the Financial Counseling Association of America. “It’s why the concept of consumer protection exists in the first place.”

Still to be determined: The GOP tax bill

It seemed as though 2017 might be yet another slow year for tax legislation. Then earlier this month Republican lawmakers moved to pass what is could be the biggest American tax overhaul since the 1980s.

While the U.S. House of Representatives and Senate still have to agree on a singular version of the new bill, which likely include close to $1.5 trillion in total tax cuts — $900 billion of which will be for businesses alone — they’re rushing to meet President Donald Trump’s Christmas deadline.

“If any or all of the proposed changes get enacted, we will have a lot to be concerned with,” says Cindy Hockenberry, director of tax research and government relations for the National Association of Tax Professionals.

So how will the Republican tax bill—in its current form—most affect consumers? Next year, not very much. The plan’s changes, which technically go into effect on Jan. 1, 2018, will be mostly marginal until 2019 because Americans will mostly be able to file their taxes in April under the current rules.

Being aware of these changes can help you plan in advance because filing taxes in the coming years might be extremely different, depending on your income bracket and your usual deductions. While the bill—officially named the Tax Cuts and Jobs Act—is not yet finalized, here are the parts of the bill’s current form that consumers are likely to feel the most:

  • Your income tax bracket could change: The House version of new law would reduce the number of standard tax brackets from seven to four, meaning many Americans would pay a new percentage of their income in 2019. You can check out this chart of the proposed percentages to see how your taxes might change.
  • Your state and local tax deductions will probably go away: The Senate plan would eliminate the State and Local Tax (SALT) deduction. This means that if you typically itemize your taxes—instead of just taking the standard deduction— you will be unable to write off taxes paid to state and local governments on your federal filing.
  • You will no longer be able to deduct a personal exemption: Currently, you can take a $4,050 “personal exemption” from your return that doesn’t count toward your taxable income. Under both the House and Senate bills, this option would disappear, however the standard deduction you can take each year would almost double—increasing from $6,350 to $12,200 under the House bill.

Hockenberry, who is based in Appleton, Wis., says the most important part of the plan is its proposed elimination of the personal exemption and a number of itemized deductions. Some Americans might have to pay more each year, she added, because the increase in the standard deduction might not be enough to make up for these changes, causing some consumers’ taxable income to grow.

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Are Braces Really Worth the Cost?


Whether it’s for themselves or their children, many people are at some point forced to decide if braces are a worthy investment. The American Association of Orthodontists (AAO) recommends that children have their first orthodontia checkup by age 7.  

Orthodontic treatment is becoming increasingly more commonplace, leading to industry growth, more patients and more money for practitioners. Worldwide, the industry has reached $11 billion in revenue, according to a 2016 market research report by IbisWorld. (Though this represents only a modest pace of revenue growth, demand is soaring, the report found.)  

An estimated 5.41 million patients in North America sought orthodontic treatment in 2014, according to the most recent data from the AAO. Annual salaries for orthodontists in the United States have increased to $228,780 annually in May 2016, up from $186,320 in May 2012, the U.S. Department of Labor. 

Still, the debate over braces remains largely a financial one, as parents have to consider if the long term effects justify the expense, or if their their children’s dental problems aren’t severe enough to warrant the cost. 

How expensive are braces?

Comprehensive treatment for children ranged from $4,685 to $6,500, and adults ranged from $4,800 to $7,135, according to data from the American Dental Association cited by the AAO. BracesInfo.com offers a free calculator tool that lets you estimate prices based on location 

Still, prices can vary widely based on location, with practices in larger cities tending to charge more. Rates are also dependent on the length of the treatment itself, which on average lasts about 24 months. With these variables in mind, ValuePenguin, a financial site, estimates the entire process could range from $3,000 to $10,000.  

Dr. Nahid Maleki, president of the AAO, says many orthodontists offer initial consultations for little to no cost. 

Learning the costs beforehand is the only way to make a truly informed decision, says Dr. Dawn Pruzansky, the administrative director of the Arizona School of Dental and Oral Health postgraduate orthodontic program in Mesa, Ariz. 

“When you look at the overall price, it does seem to be a bit daunting,” says Pruzansky, who owns a practice in Glendale, Ariz. “Just go get the consultation and don’t automatically think that it can’t be done.” 

When are braces worth the price?

While some parents may want to take a “wait and see” approach to braces, Maleki says there are certain dental problems that should be resolved before a child gets too old, as many irregular bone structures can’t be fixed after a person gains all their permanent teeth. Additionally, an improper bite can cause permanent damage to the teeth, making some damage irreversible after adolescence. 

“We can prevent problems from developing fully,” but a child cannot “un-grow” undesirable growth in their bones, says Maleki, who has a practice in Washington, D.C. 

However, there are problems that may not require immediate action. While Pruzansky notes that issues such as overcrowding won’t resolve themselves, she says dental problems that don’t inhibit a person’s ability to speak or eat properly — for example, minor spacing flaws — don’t normally justify braces.  

In these cases, it may be feasible to wait until adulthood to re-evaluate the situation. Pruzansky says holding off on treatment can be beneficial because adults can be more compliant, meaning they’re usually more likely than children to do what it takes to get the most out of having braces.  

“Sometimes it’s hard to get kids to understand the importance of braces,” she says, “or to get them to wear their retainers afterward.” 

This decision to wait seems to be growing in popularity. The number of adults receiving orthodontic care throughout North America increased by 67 percent from 1989 to 2014, the most recent data available, and 27 percent of all patients — 1.46 million people — were adults, according to AAO estimates from its membership of 19,000 orthodontists. The increase may  be due in part to the price difference between age groups, as ValuePenguin estimates that, on average, braces for adults cost only about $150 more than they do for children.  

What if I can’t afford braces?

There are a number of payment plans available, most of which involve making consistent monthly payments on a low-interest loan, typically giving you around five years to pay off the total.  

There also are no-interest plans, typically in the form of medical expense credit cards that have to be paid off in less timeCareCredit, which has financing options ranging between six and 24 months, is a popular example. Just watch out for deferred interest clauses, which can result in hefty fees if you don’t pay off the debt before the 0 percent intro period is over.  

Pruzansky says she also has seen patients use their Health Savings Account (HSA) — a special pretax account — to pay for braces. HSAs can typically be used to pay for orthodontic treatment, but check with your bank.  

Additionally, getting braces through a dental school could help save on certain fees, as some schools will charge only for materials and equipment 

While the most cost-effective solution may differ from situation to situation, Pruzansky says people are often surprised by the number of affordable options they actually have at their disposal.  

“I never want someone not to start simply because they can’t afford it,” Pruzansky says. “I don’t know any private practice that doesn’t offer some kind of interest-free financing.” 

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5 Lies Your Financial Adviser Might Tell You

More Americans are seeking professional help when it comes to managing their money.  

The percentage of people who used a financial adviser grew to 40 percent in 2015 from 28 percent five years earlier, according to a survey by the Certified Financial Planner Board of Standards. Those people said their decision had less to do with recent economic crises than with their desire for better financial guidance. 

However, reliable financial advisers are becoming increasingly hard to find, and more investors have grown distrustful of the profession as a whole. In the same 2015 survey, the board found that 60 percent of Americans thought their adviser valued his/her company’s interests over those of the consumer, compared with 25 percent in 2010.  

Jessica Parker, 23, is particularly wary. The first time she met with a financial adviser, she believed she was interviewing for an internship. Instead, she was given an hours-long investment pitch and left the meeting having unknowingly signed an insurance policy.  

“They made it sound so appealing,” says Parker, who works as a senior analyst for Johnson & Johnson in Raritan, N.J. “They had all of these metrics, graphs and data. They 100 percent lied about what it was going to be.” 

Whether lies are serious or more mundane, they can take a toll. Having an untrustworthy adviser can mean serious damage to your stock portfolio, your retirement plan or any number of other investments. Knowing the lies some financial planners will tell you  can help you avoid being tricked into a decision that could put your money in jeopardy. 

“Trust me, this is your best investment option.”

When speaking with your adviser, it’s important to know he or she has your wallet in mind, rather than his/her own.  

Julie Rains, 57, a writer in Winston-Salem, N.C., says she met with a financial planner who suggested an investment option that wasn’t in line with the type of portfolio she wanted. After refusing the offer and complaining to the brokerage, Rains said, she eventually discovered that the investment would have made her adviser a large amount of money.  

“His recommendation was complex and confusing, and would have resulted in a huge, unnecessary tax bill,” Rains says. “But the solution would have benefited him greatly with a large annual fee.” 

Ben Jacobs, a financial planning analyst based in Athens, Ga., says conflicts of interest are common among advisers who earn commissions for their services.  

Jacobs recommends seeking a financial planner who is registered with the National Association of Personal Financial Advisors (NAPFA), with some 3,000 members nationwide and high standards for membership. 

NAPFA members earn their money through a consistent client-paid fee instead of earning a commission from a percentage of the financial products they sell to customers, such as mutual funds, life insurance and annuities. As a result, fee-based planners have no financial incentive to sway you in any one direction, because they’ll get paid the same amount regardless.  

“Fee-only means you don’t pay me for the work.”

Still, fee-only advisers, who receive a set fee from clients and do not earn commission on the products they sell, can be just as misleading when it comes to how they’re paid. Jacobs says confusing pay structures are common in the industry, with consumers often misunderstanding how their financial planner calculates their total service charge. 

“You’d be surprised at the number of people who think they aren’t paying their financial adviser,” he says. 

The cost of working with a financial planner can vary depending on the planner’s experience and where you live. 

Vid Ponnapalli, founder of Unique Financial Advisors in Holmdel, N.J., says people should be weary of additional costs when making any agreement with a financial planner who says there’s just a flat monthly rate. These extra, sometimes hidden expenses can range from your adviser earning a percentage of your bond sales to 12b-1 fees — an annual marketing fee tacked onto some mutual fund agreements.  

You should read through any contract before signing, especially if you’re unsure how  your adviser is making money from your business, he says.  

“My credentials show that I’m an expert.”

Many advisers take on titles and certifications that have little to do with their actual skills.  The Consumer Financial Protection Bureau found more than 50 designations for senior-specific advisers in a 2013 study of financial problems facing senior citizens.

However, the CFPB also found that the educational and professional requirements for using those titles varied greatly, and that some could be obtained with little to no training or effort.  

The Financial Industry Regulatory Authority (FINRA) maintains a database of professional designations and the prerequisites for earning them. Some of these titles — such as Behavioral Financial AdviserDisability Income Advocate, and Retirement Plans Associate — require almost zero qualifications.  

The Securities and Exchange Commission (SEC) released a formal warning against deceitful titles in 2014, encouraging consumers to “look beyond a financial professional’s title when determining whether he or she can provide the type of financial services or products you need.”  

The titles that matter most, such as Certified Financial Planner (CFP) and Accredited Financial Counselor (AFC), involve accreditation by national standards agencies that often hold professionals to certain ethical standards. FINRA maintains a list of these designations, and you can also use the organization’s BrokerCheck tool to search for advisers who hold these titles.  

“I can help with all of your financial needs.”

Even when their credentials are legitimate, planners may try to emphasize skills they don’t have. For example, advisers may claim they’re qualified to sell you insurance despite having little knowledge of the subject.   

Rains, who runs a website called Investing to Thrive, says she thinks advisers are  attempting to seem more versatile and appeal to a large client base. 

“Certainly, some are qualified to handle a broad range of functions, but many have a specialty,” she says. “It’s good to be aware of the strengths, and limitations, of whoever you might hire to help you.” 

Even financial planners with highly respected designations can have their blind spots. For example, Jacobs says the CFP exam doesn’t include certain specialized topics—such as divorce settlement and disability planning—that advisers may need to seek separate training in order to properly cover.   

In order to ensure that he could meet the needs of prospective clients, Ponnapalli began offering free, hourlong consultations before doing business with them.  

“I can guarantee you big returns on your investments.”

Parker says it’s a bad idea to trust advisers who say they’re only concerned about making you money. Nothing is ever certain in finance, and consumers should be suspicious of planners who promise them a specific return on their investment. 

Advisers have the responsibility to set realistic expectations, and promising clients a specific payoff “can lead to huge problems,” Ponnapalli says. 

“The big myth is that we are moneymakers,” he says. “We have to explain to (clients) that money management is one small part of our job.” 

Tips for finding a reliable financial planner:

  • Look for a fiduciary. As a fiduciary, a financial adviser is required to take a formal oath stating that he or she will work in the best interests of clients. When looking for a fiduciary, start with the NAPFA, which requires each of its registered financial planners to renew the Fiduciary Oath every year. Also, MagnifyMoney has reviewed some financial planners, including online options Stash Wealth and the XY Planning Network. 
  • Compare advisers. Finding a financial planner who fits your specific needs can take time, and it may involve meeting with many in person. Rains recommends looking for substance over flash and charm. “Personally, I’d choose the smart person who’s good with money but slightly clumsy with conversation over the one who’s a smooth talker,” she says. 
  • Do your research. As important as in-person meetings are, you also need to do your homework.  According to a 2016 study at the University of Minnesota, 7 percent of financial advisers at the average firm have a record of misconduct (the figure reaches 15 percent at some of the largest firms), with almost half of these individuals keeping their jobs after they were caught or disciplined. To help with this, the SEC has an online database where you can do a background check on most registered financial planners.  
  • Don’t be afraid to ask questions. Once you pick an adviser, you need to make sure you’re both on the same page. When meeting with your planner for the first time, it’s good to come in with a long list of questions, as well as a full brief of your own financial situation. “Do your research on what type of plans they offer,” Parker says. “When you’re in there, be very clear on your intentions of what you want to do with your money, otherwise they might try to steer you another way.” 

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How the New Federal Overtime Rule Died — And What it Means for Workers


A new federal overtime rule had many American companies scrambling at this time last year. The federal regulation, which was set to pass on Dec. 1, 2016, would have required businesses to begin paying overtime wages (1.5 times an employee’s hourly rate) to any full-time salaried employee earning less than $47,476.

This threshold previously had been more than twice as low, with companies owing overtime pay to employees with yearly salaries under $23,660. Then, after many employers had already responded to the regulation by offering raises and adjusting exemption statuses, a federal judge in late 2016 temporarily blocked the rule, halting its effects nationwide.

Less than a month ago, that same judge permanently struck down the Obama-era regulation, leaving the state of overtime pay in limbo. The increased threshold would have affected 4.2 million workers, according to the Department of Labor, so it’s clear this decision will have wide-reaching effects.

Here’s a breakdown of what we know.

Does the rule still stand a chance?

The short answer is no. While the federal government might have tried to fight the court’s ruling, that doesn’t seem to be the Trump administration’s intention.

A week after Judge Amos Mazzant — an Obama appointee on the U.S. District Court for the Eastern District of Texas —struck down the overtime rule, the Department of Justice announced that it was withdrawing its appeal, essentially agreeing to move on from the issue.

The Department of Labor has done the same. The agency reopened public comment on overtime rules and exemption requirements back in July, with the response period ending on Sept. 25. Suzanne Boy, an employment lawyer with the firm Henderson, Franklin, Starnes & Holt, based in Fort Myers, Florida, says this is an indication that the Obama rule has been defeated.

“For all intents and purposes, it’s dead,” she says.

What’s next for businesses and their employees

There were several ways in which employers responded to the rule. Some gave raises, but others cut hours. Some companies that had switched salaried employees to hourly pay to make them exempt from overtime eligibility changed them back, Boy says.

“I have actually not heard of any client that has taken a raise away as a result of this change,” she says.

Christa Hoskins, a 26-year-old graphic designer in Fort Myers, was given a $10,000 pay bump last year, partially due to the new overtime rule. She tells MagnifyMoney her employers are letting her keep the bump, even though the regulation was struck down.

“I received last year’s pay raise due to this rule possibly coming into play since my work anniversary so happened to be around the same time,” Hoskins says.

Boy says keeping the original $23,660 threshold could help some employees in the long run, because the proposed rule change would have forced many companies to cut costs at the expense of their lowest-earning workers. For example, many employees earning thousands of dollars under what would have been the new $47,476 threshold — such as $30,000 per year — might not have received raises. Instead, they could have seen their hours scaled back or their pay structures altered to help employers circumvent the new overtime policy.

“I think that it would not have been the saving grace that it was intended to be,” Boy says. “I think a lot of people wouldn’t have obtained the big raise that the rule was touted to be.”

The fact that the Department of Labor is asking for public comments means another new rule could be on the way, with the agency likely taking at least a few weeks to analyze and consider the responses.

It’s tough to judge what a new regulation would look like. According to a statement made by Labor Secretary Alexander Acosta earlier this year, it seems possible the Trump administration could place the overtime threshold somewhere around $30,000. This figure would essentially  take the previous amount of $23,660 and adjust for inflation.

Some people are concerned it isn’t enough. Steve Zieff, a San Francisco-based employment attorney with Rudy, Exelrod, Zieff & Lowe, says he thought the Obama administration’s threshold, while not necessarily high enough, was likely better than a potential new rule.

“I think even the current Department of Labor recognizes that the salary level is way too low,” says Zieff, who specializes in overtime pay for white-collar employees. “But I’m fearful they’re not going to raise it to a meaningful level.”

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43 Million Americans Could Get a Big Credit Score Boost Soon — Here’s Why


Some 43 million Americans might see their credit report improve soon, thanks to new policies put into effect by the “Big Three” credit reporting agencies — Equifax, Experian, and TransUnion.

As of Sept. 15, credit reports will no longer include medical debts that are less than six months past due.

This is a big deal. At least one unpaid medical collection appears on one in every five credit reports, and these medical debts negatively affect the credit scores of as many as 43 million Americans, according to a 2014 study of collection data by the Consumer Financial Protection Bureau (CFPB).

This is the second major change to credit reporting this year that could help boost millions of Americans’ credit scores. As of July 1, the major credit reporting agencies agreed to remove from consumer credit reports any tax lien and civil judgment data that doesn’t include all of a consumer’s information.

This new medical debt reporting change, however, will have a far greater impact. Research has shown that many consumers’ medical debts aren’t all that representative of their creditworthiness, which helped drive the bureaus to make the change. In fact, around 50 percent of Americans with medical collections on their credit report had no other significant blemishes on their credit report, according to the CFPB.

And even though the cost to your credit can be dire, most Americans don’t actually even owe that much for their medical expenses — the average unpaid medical collection tradeline is only $579, according to the CFPB’s 2014 study. This means many consumers are taking major credit hits for a relatively low bill.

Additionally, the agencies have promised that if your insurance company ultimately pays off a medical collection, this debt will be removed from your credit report altogether. Both of these changes will provide more time for insurance claims to process, says John Ulzheimer, a consumer credit expert based in Atlanta.

Expect to see an impact soon

The changes officially take effect on Sept. 15, and their influence will be felt fairly immediately. These new policies are both immediate and retroactive, meaning no medical debt from within the last six months should show up on your credit report after that time.

Jenifer Bosco, a Boston-based staff attorney with the National Consumer Law Center (NCLC) who specializes in medical debt, recommends using these changes as an opportunity to check your report now. That way, you can see if there are any collections that need to be altered because of the new debt practices.

Bosco suggests viewing your credit report for free by filling out an online request with Annualcreditreport.com. You can check out MagnifyMoney.com’s online guide for a bank-by-bank breakdown of how to easily receive your FICO Score.

The immediacy of this agreement is important, because medical collections can be a long and arduous process. Bosco says the new 180-day window is especially helpful because it provides a cushion for consumers who are trying to work through expenses with their insurance provider.

“It’s definitely helpful for people who might actually just have a debt and owe the money, but also people who are going through a lengthy process with their insurance company to get something covered under their policy,” Bosco says.

How much will credit scores improve?


While it’s difficult to measure exactly how much unpaid medical bills can affect your credit, Ulzheimer says these debts are typically just as detrimental as other collection types. “For example, the impact can range from severe, if you don’t have other unpaid bills on your credit report, to nominal, if medical bills are just one of many outstanding collections,” he told MagnifyMoney.

Having good credit often makes the cost even higher. According to the CFPB’s collection data research, an unpaid medical bill of $100 or more can drop a credit score of 680 by more than 40 points, but the same bill could drop a score of 780 by more than 100 points.

Consumers who notice incorrect medical debt after Sept. 15 should send a dispute to the credit agency that falsely reported it, the NCLC recommends in a press release. If this doesn’t work, you can reach out to the CFPB. If your state’s attorney general was one of the offices involved in the agreement, you can direct your issue to them.

The CFPB research also found that the lack of price transparency and complex insurance coverage systems make medical bills often a source of confusion for consumers. People can often incur debts simply because they aren’t sure exactly what they owe or who they need to pay. Having more time to figure out what you owe, pay your debts, and work through collections with your insurance company can be a major financial benefit, Bosco says.

Bosco also says the changes go beyond specific circumstances and that these protections will be helpful regardless of your situation.

“It benefits all consumers who have medical debt,” she says.

Better credit for all?

The changes are the result of two separate settlements — one with the Attorney General of the State of New York and one with the attorneys general in 31 other U.S. states — but Ulzheimer says the changes are universal.

This means that regardless of what state you live in, credit agencies can’t fault you for medical debts that are less than 180 days old, or for collections that are ultimately handled by your medical insurance.

Hopefully, these changes mean there will be less medical debt bogging down Americans’ credit overall.

The agreement was reached voluntarily, which means there is no sweeping federal or state law or regulation guiding these changes but shows the credit agencies are on board.

“We have never hesitated to go beyond the letter of the law to voluntarily improve the existing credit reporting environment,” Stuart Pratt, the president and CEO of the Consumer Data Industry Association (CDIA) said in a press release announcing the changes. The CDIA represents the country’s consumer data industry, which includes the three major national credit agencies.

Still, this decision is incredibly important considering how instrumental the “Big Three” are in determining credit scores.

The federal government considers Equifax, Experian and TransUnion to be the country’s major credit agencies, and you’re entitled to a free report from all three companies each year. The information that shows up on reports from the “Big Three” carry major weight, so having a chance to improve your score with these groups can go a long way.

To aid this process, the NCLC has created guidelines — called the Model Medical Debt Protection Act — to help protect consumers from unfair medical collection procedures. The guidelines can be used as a standard for improving their medical debt practices even further.

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How to Donate to Hurricane Relief Without Getting Scammed



When natural disasters strike, Americans pour in money and support to help the victims.

But while relief efforts are uplifting, they come with a caveat for anyone looking to contribute: How can you give money safely and securely to people who need it most?

Fundraising scams and fake charities often show up after hurricanes and other disasters. These practices aren’t new either — less than six months after Hurricane Katrina hit the Gulf Coast in 2005, the FBI had opened 100 investigations into fraudulent fundraising sites.

“After disasters like this, we do often see more organizations popping up, and it does take some time if there are scams out there to identify what they are,” says Katelynn Rusnock, the advisory system manager for Charity Navigator, an independent charity watchdog organization. Based in Glen Rock, N.J., Rusnock specializes in communicating potential wrongdoing found within charities.

So how can you make sure you’re not donating to a fake organization? Here are five ways to avoid fundraising scams.

Make sure the charity is legitimate with charity tracking sites

Learn about the organization before you give away any of your money, Rusnock recommends. Charity Navigator, and similar sites such as CharityWatch and GuideStar, maintain up-to-date listings of registered nonprofits, which you can use to check whether or not an organization is legitimate.

When in doubt, Rusnock suggests giving to larger nonprofits that have contributed to previous major disasters.

“Larger organizations that often respond to disasters are usually fairly equipped to deal with these types of things,” she says. “They have the teams with the expertise, and they’ve got the experience to do this well.”

Look up their employer identification number on the IRS website

You also can look up charities by checking their employer identification number (EIN), which will show if they’re registered with the Internal Revenue Service. Rusnock says you should be able to find this number on an organization’s website, and recommends asking them directly if it isn’t readily available. To help verify these groups, the IRS has created a tool on its website for searching charities by their EIN.

Check scam alerts from the Federal Trade Commission

Additionally, the Federal Trade Commission frequently updates a list of scam alerts so you can stay aware of recently reported groups.

The FTC reports that a flood insurance scam is already proliferating in the wake of Hurricane Harvey. Homeowners and renters get robocalls telling them their flood premiums are past due and that they need to submit a payment in order to get relief from their insurer.

You can sign up to get scam alerts sent directly to your email.

Beware of fake social media fundraising

While social media can be a helpful source of information about ways to give, and seeing friends talking about donating online can make it seem like an enticing option, it’s also unregulated and can be exploited by scam artists and phony nonprofits.

In times of heightened need, scammers using fake Facebook accounts and Twitter bots to post spam or malware links can be some of the biggest offenders.

Phishing is also a common concern, according to the United States Computer Emergency Readiness Team, a division of the Department of Homeland Security. Fraudulent organizations may send out emails or texts asking for direct donations or personal information, which are often attempts to steal a person’s identity. You should avoid giving out personal information or clicking on links from unknown sources.

Look out for red flags, like requests for payment via wire transfers

It’s also smart to be conscious of how a charity wants you to donate. In the FTC’s guide for avoiding fundraising scams, the organization warns that groups asking for payment in cash or through a wire transfer are more likely to be fake. Additionally, charities that offer to send an overnight courier to collect money, or use other tactics to pressure you to act quickly, are usually worth avoiding.

To combat this, Rusnock says it’s best to give directly to the charity through their own website, as opposed to using outside channels, such as social media or emails, that may or may not be associated with the organization.

Crowdfunding could be deceitful, too. According to the Better Business Bureau, campaigns on sites such as Kickstarter and Indiegogo can be unreliable, as it’s hard to determine whether or not a source is trustworthy or not. Still, there are some reliable ways to use these services, and GoFundMe has even set up an official page specifically for Hurricane Harvey relief and for Hurricane Irma relief. GoFundMe also offers to refund customers if they find out their donations weren’t used as promised.

Once you choose a legitimate charity, Rusnock suggests sticking with the organization. While many people tend to only donate immediately after a disaster strikes, she recommends signing up for recurring payments, or checking back in with the organization months after your first donation to learn about their current needs.

“A lot of people want to go out and donate after this happens, but we encourage donors — if they’re able to — to continue to support that organization even once the crisis is no longer in the news,” Rusnock says. “Oftentimes the charity is still responding long after attention has shifted away.”


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