The giving season is just around the corner, and donations will be on our minds. Before the hustle and bustle ensues, it would be a good idea start thinking ahead.
Now, donations can come in many forms besides giving cash. For example, some people enjoy giving their time. This includes volunteering at a food bank or serving holiday dinners to the homeless. Yet others are generous with their belongings. They turn over gently-used clothing and household items to thrift or consignment shops. These types of non-profits appreciate the non-monetary donations. First, they can sell the material items. Then, the proceeds allow them to hire people who have difficulty finding employment. In that way, the benefit of giving is cyclical.
While donating time or goods is helpful in many ways, some people prefer to hand over the cold, hard cash. In that case, there are a bazillion ways to give. One easy way to make a donation is to roll down the car window at an intersection and hand a few bucks out to a person in need. Or you could throw some change in that red bucket by the bell ringer! However, not everyone feels compelled to donate this way. So let’s explore other ways to give charitably, including through payroll.
To start, lets look at some data. Did you know that over 30% of donations occur in the month of December? Furthermore, 12% of giving happens with only three days left in the year! So, what does that tell you? For starters, it tells you that people are feeling charitable during the holidays. Then, you realize it likely also has something to do with taxes. We’ll address this important piece shortly.
Next, data shows that most non-profits strategize their year-end campaigns before Halloween. Scary? Nope! Based on marketing research, it’s the best time to start.
Finally, would you believe that nearly two-thirds of donors make donations blindly? In other words, they give without doing any research beforehand. On one hand, that might sound naïve. On the other hand, there is something else that can be as powerful as research. Namely, those people often make their decision based on word-of-mouth reputations of charities.
In conclusion, charities rely on the end of the year to make a haul. This is because they know that most people put off their big giving until the last minute.
Ditching Year-End Donations
Some people, however, don’t wait for the holidays to be charitable. Rather, they prefer to give all year. For those people, donating through payroll is one way to be consistent in giving. Some companies make it easy to give to charitable organizations through payroll. In fact, making donations through payroll deductions can be helpful for employees. Certainly, it takes some of the guesswork out of giving.
So, how exactly can an employer give employees a way to donate through payroll? Well, there are just a couple steps. To start, the employer chooses to collaborate with a charity, or a group of charities. Next, the employer verifies that the charity is truly an exempt organization. This makes certain that the employees will receive a deduction for their donation. For your convenience, the IRS provides a search tool called the Tax Exempt Organization Search. The tool assures that employers can confirm the charity’s exemption status.
After the employer begins taking deductions for the donations, there are a few items to provide to donors. IRS Notice 2006-110 mandates that employers first provide a pledge card. The pledge card should include the name of the charity, the date of the donation, and the amount. Along with the pledge card, employers are to provide one of the following to donors:
- A pay stub showing the donation as a line item
- The employee’s W-2
- A record from the employer. The document should show the total amount withheld from the employee’s check and paid to the charity.
So, checking these boxes is imperative. Most importantly, it keeps the employer in compliance with the IRS requirements for payroll donations.
Talking Taxes and Donations
Ok, now what about the tax aspect? Well, unfortunately there is one downside about donations through payroll. Namely, federal law won’t permit employers to offer pre-tax charitable donations. This means that employees must itemize the contributions on their income tax returns. That is, if they wish to receive the tax break.
While it may be tempting to “make it rain” with your charitable donations, not so fast. Be aware that there is a limit to the amount you can give, and still receive a tax break. The standard deduction for 2019 is $12,200 for individuals, and $24,400 for couples. Anything more than that will not reduce taxable income.
However, try not to get cold feet! Don’t let these two things keep you from making donations available through payroll. We can assure you that the upside far outweighs the downside.
Why Give through Payroll?
Now, as an employer, you are probably aware of the benefits of charitable donations. For instance, your community benefits from your donations to local charities. Additionally, your company receives a tax break for your charitable giving. Clearly, it is a mutually beneficial transaction. It is also one that reflects positively on a company.
Likewise, employee giving helps others, and gives back to them. So, this is one reason why giving through payroll is a plus. Some companies match employee giving. Matching makes the dollars employees give go farther. Therefore, this allows employees to feel like their donations are more impactful. However, the employer match does not increase the employee’s deduction. Employer matching goes on the employer’s tax return. Nevertheless, employees get a good feeling from giving. Plus, it is fun to reduce taxable wages. Reducing any amount of taxable income is something that makes most people happy!
Another good reason to give through payroll is that it keeps a great record of donations. So, at the end of the year employees can easily see if they’ve met their giving goal. Best of all, it requires no extra record-keeping on their part! All of the information will accrue with each pay period. Furthermore, the deductions will appear on the W-2, so it will make the tax-filing process a breeze.
These are just a few of the selling points you may want to address if you are considering payroll donations. Therefore, if you remind employees of these things, they may feel more compelled to donate this way.
Don’t Wait, Ask Now
Most importantly, charitable donations can allow you to help make someone else’s life a little better. Still, none of us will ever know the full impact of what we give to others. So, get front and center with your employees. Then, show them ways that they can give through payroll so that they can know they are making a difference.
So remember, you do not need to wait until the last three days of the year to do your big ask. Heck, you don’t even need to confine your strategizing to October! You can create opportunities for employees to make charitable donations at any point throughout the year. Moreover, you can make it easy for them to do something good by allowing donations through payroll.
About Journey Employer Solutions
Service: Journey puts service above all. We believe if you offer a great price and great technology, but don’t have A+ level service, it’s worthless.
Technology: Journey has the advantage of being forward thinking and fast moving. Our decisions are not based on stockholders, but on clients looking for advanced offerings.
Value: Journey takes a client trusting their team as a crucial part of their business very seriously. We realize cost is an important consideration and set extremely fair pricing.
This is not meant to provide legal counsel or advice. Every situation is different. Please contact an HR professional or employment attorney before taking any action.
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