Church and NPOs’ Employee Contributions by Payroll Deduction (Part 1)

Question:

A church treasurer asks, “Is tithing from payroll legally acceptable? And, if yes, how can I set it up through QuickBooks?”

Answer:

Many church and not-for-profit organizations find that their own staff members are among their most faithful donors! And, yes, it’s actually a good option for some employees. Of course, the same confidentiality and fidelity that oversees the charitable gifts of others to the employer must be exercised on behalf of staff members.

In QuickBooks (Desktop version), set up a new payroll item and follow the sequence presented below.

Give the deduction a name. The church or NPO could even set up multiple payroll items if some employees wanted to make designated gifts other than unrestricted contributions.

Keep working through the sequence of intuitive QuickBooks windows until you reach the following setup window. None of the options here should be checked.

Next… AND VERY CRITICAL to calculate on net pay.

The final window enables the employer to set up default amounts. But since each employee will likely be different, we recommend leaving these amounts blank.

Employees should be receipted just as other donors. Their donations do not reduce employee compensation, but they can, of course, consider itemizing their deductions as other taxpayers do.

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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