Fraud Scenario – Donation tax shelter scheme
Mary and William are married and have three kids. They are both working professionals but with the rising costs of kids, bills, and mortgage, they find themselves having trouble making ends meet.
One day, Mary and William receive an invitation in the mail to a seminar that promises hefty tax breaks. During the seminar, a representative from a charity explains to the group that if they donate immediately they will receive tax receipts for four times the amount they donate. Mary and William figure this is a win-win; they will be donating to a deserving charity and will get a hefty tax break. They decide to each donate $500 because the tax break will help them with their financial troubles.
After filing their tax claim for the donation, Mary and William receive a notice that the Canada Revenue Agency will be holding their assessment while they review the case. It turns out that Mary and William were tricked into a gifting tax shelter, and ended up losing the money that they paid without a tax break. They are embarrassed and upset.
Does this scenario sound familiar? This couple is not alone. In recent years, approximately 2,500 individuals a year participated in gifting tax shelter arrangements. To date, over 190,000 Canadian taxpayers who donated to one of these tax shelter schemes have been reassessed. Nearly $6.3 billion in donation claims have been denied.
When donating, remember:
- Be wary if you are offered a tax receipt worth more than the amount you donated.
- Obtain independent professional advice from a tax advisor before signing any documents.
- Ask for written information about the charity, including name, address and telephone number.
- Call the charity. Find out if the organization is aware of the solicitation and has authorized the use of its name. If not, you may be dealing with a scam artist.
- Confirm if the charity is registered and eligible to issue official donation receipts through CRA’s charities listings.
- Ask the representative for the charity’s registered charitable tax number.
- Refuse high pressure sales pitches. Legitimate fundraisers will not push you to give on the spot.
Remember if it sounds too good to be true, it probably is.
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