How to deduct charitable donations from payroll, show on T4, get tax receipted?

Question

We use Sage50 as our church's accounting program. Two of the employees of the church want to make charitable donations to the church as a deduction directly from their pay cheque. 1. How do I set up this deduction in payroll? 2. Does Sage50 automatically show this in box 46 when we print T4s or do I have to set that up? 3. How do I make sure the donation is showing up as a donation to the church? I.E. For people who give charitable donations to the church through Sunday offering I have them set up as customers and I assign their donation as a project allocation. But I don't know how to make that part work when it's coming as a deduction from payroll. Thank you.

Alwyn · Accepted Answer

I handle a lot of churches but none of them use Sage 50 to produce the receipts for income tax purposes. But this is how I would suggest you consider your handling. First set up a deduction in payroll that is deducted after all taxes and other payments are calculated. This deduction would be a credit to an account such as Payroll Donation Payable. When you produce the T4 early next year this account should show in the list of deductions where you can choose box 46. This looks after the deduction and proper reporting, however, you will still have to move the funds from the Payable account to an income account and this would require a manual entry. No donation receipt would be required as the T4 satisfies that requirement. 
 Hope this helps

Rose99 · Answer

Alwyn, I am very grateful for your reply. Your answer was EXACTLY what I needed to get this set up correctly. Thank you so much for detailing each step clearly for me.

Sage 50 Canada

How to deduct charitable donations from payroll, show on T4, get tax receipted?

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