I recently got a job that pays more than a living wage, and I’d like some of my income to be instead diverted into worthwhile causes. If I get paid and then donate it myself, some portion of it would be lost to Trump’s taxes. I don’t want that.
Is there a legal way for me to ask my employer to donate the funds directly, taking it out of my paycheck, without paying me first?
You can ask your employer to donate some or all of your wages to charity. But you will still be taxed on the donated wages just as if you had personally received them.
The idea is that you exercised control over the money by directing that it be disposed of in a certain way, so it’s no different than if you had received the money and sent it to charity.
Similarly, if you request that your employer pay your salary to your children (who are in a lower tax bracket than you), you still get to pay tax on the money your employer gave to your children just as if your employer had given it to you.
Is it a one to one equivalence? Like if I deduct $1000 for my itemized contribution, that’s considered $1000 less in income? I thought it didn’t work like that, but I’m not sure.
Also, there is the possibility that I may want to donate to a 501c4 (political advocacy group) and not a charitable nonprofit. I am not sure how that affects the employer’s tax bracket… didn’t think that far ahead
Your employer cannot do this legally on the federal level. There are a limited number of fringe benefits, health insurance is an example of a fringe benefit, that are not taxable and you can find them in IRS Publication 15-B.
Many celebrities perform or speak at events in exchange for payment. It’s also somewhat common for one of those people to waive their usual fee for charitable organizations they like.
If Bruce Springsteen was approached by a veterans’ group with an offer to perform at a fundraiser in exchange for money, but he waives his fee, how is that different in the eyes of the IRS from the scenario the OP describes?
I mean, maybe it’s very different, but it sounds pretty similar to me. Our hypothetical Springsteen had control of the offered money, but chose to funnel that money to the charitable organization by saying he’d do the work for less than the going rate. Isn’t this effectively a charitable donation to the nonprofit?
Does your employer offer a tax-deferred savings plan, like a 401k or a 403b? That way, you pay less taxes and you have money (hopefully) earning interest until you retire, and you won’t pay taxes on it unless you withdraw that money prior to age 59 1/2.
The waiver has to be unconditional to avoid taxes.
If Bruce Springsteen says “You take the money and give it to the Veterans Scholarship Fund,” that’s taxable. If he says “You just keep the money and do whatever you like,” that’s not taxable. Once you set conditions on what happens to the money, you had control over it.
For example, here is the waiver that a speaker at Notre Dame University must sign to avoid having their honorarium treated as taxable income.
And, before anyone asks, the value of personal services is not tax-deductible in the United States.
I suppose if the conditions of the fund allowed the manager to spend it all on hookers and blow for himself, he would be taxed. But in the case of most funds, the money remains the property of the fund and must be managed on behalf of the fund according to the fund’s by-laws.
In contrast, your salary becomes your property to do as you please with.
What you list on your itemized deductions is subtracted from your adjusted income. If you donate $1000 then your taxable income will be decreased by a $1000. If you are in the 20% tax bracket that will net you $200 in saved taxes.
The problem is that if your itemized deductions plus the charitable contribution add up to less than the new standard deduction, you get no tax benefit from the contribution. That’s where I am now. I just donated some stuff to a thrift store and didn’t even bother to get the receipt.
That’s also why I paid off my mortgage - no more tax benefit.
The higher standard deduction is what has changed.
If Bruce rents an auditorium and hires backup singers for a charity concert, the amount he spends doing that is deductible. The amount he might theoretically have been paid for performing is not. Even if he can prove that his usual fee for putting on a concert is $x, it is not deductible.
But the OP’s question about employer directing funds to charity does strongly imply a significant amount, not below the “standard amount”. discussions of handling small amounts is not answering the OP.
What answers the OP is a discussion of fringe benefits.
Look, if business ACME LTD says it donates 10% of its profits to some charity,
then you go to work for them, well thats the same as if you are working for them and then ask them to do the donation. I dont see donations to charity being somehow treated as a payment to individuals.
What the employer can be caught on is fringe benefits.
This is where you get free rent and a reduced salary.
If the work place is remote, and you clearly had to move out there for work, it might be exempted. but you can’t just get your employer to pay your rent to dodge tax.
( Well in this country, Australia, people who work for health facilities such as public hospitals, do get $10,000 of exemptions of fringe benefits, so that they do get their rent paid by their employer, and tax is dodged. )
Many years ago I had a new employee approach me right after she was hired, [del]asking[/del] telling me to make her pay checks payable to her friend/roommate so that her income wouldn’t negatively impact benefits she was receiving.
I told her no. She asked if it was illegal, and I told her I honestly did not know, but I would not spend any time researching the issue.