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November 22, 2002/Kislev 17 5763, Vol. 55, No. 13
Scholarship contributions are painless
BARRY SINGER
Special to Jewish News
You have probably already received the green brochure about the Arizona tax credit and how you can contribute up to $625 to the Jewish Community Day School Scholarship Fund at absolutely no cost to you.
Right now you are possibly wondering: Why is our state doing this? How could this cost me nothing? What's the catch?
Or, maybe even more likely, I'd love to do this, but I can't afford to lay out all this money now, and have to wait until April or even later to get it back in my refund.
Obviously, the first question has to deal with politics and public policy and the costs involved in educating Arizona's children. Whether this is good public policy or not is not the question here; these credits are written into law.
Essentially, what the law really enables us to do is to direct $625 (for a married couple filing jointly) of our state tax dollars into the Jewish Community Day School Scholarship Fund. Last year the fund was able to award nearly $1 million in scholarships to children attending the Jewish day schools in our community. All of the area day schools are now participating in this fund. Single taxpayers are able to direct $500, while married taxpayers filing separately can each direct half of the $625. Additionally, and separately, married taxpayers can also similarly direct $250 to a public or charter school for extracurricular activities or "character education," as well as another $200 to organizations that serve the working poor, such as Jewish Family Services.
This totals $1,075 ($625 + $250 + $200) for most married taxpayers, and is a credit, not a deduction. This costs you nothing.
However, financial realities sometimes get in the way of even free good works. With my 10 years of payroll experience, I have planned a few strategies that will allow you to painlessly do this mitzvah.
First of all, look at your check stub from your last paycheck. Find the amount of your current Arizona state withholding tax deduction. Multiply that by the number of pay dates left in this year. If the resulting number is $625 or more, simply file a new Arizona Form A-4 with your employer, checking box #3 that says "I hereby elect an Arizona withholding percentage of zero." Then put that extra money into a separate account until you pay the scholarship fund with it. In fact, you can even use a credit card payment to get the tax credit, as long as the credit card is charged in 2002.
Be sure to file a new A-4 form beginning with the first payroll of 2003. This should initially be the same as you had before filling out the "No Tax Withheld A-4."
Now, to make this even easier for next year, when you complete your 2002 Arizona income tax return, look at your total Arizona tax liability for the year (line 20 in 2001). Subtract $1,075 from that. Look at your payroll check stub at that time, subtract your year-to-date Arizona state withholding and divide the result by the number of payrolls left. The result is the amount of Arizona withholding that you want taken from your check each pay period. Since Arizona withholding is a percentage of the federal withholding, simply reduce that percentage to make up for the difference. (Example: Your Arizona tax was $3,075. Subtract $1,075. This calculation gets done when there are 20 pays left in next year. That $3,075 - $1,075 = $2,000, meaning $100 per pay period as the desired deduction. The normal deduction was 23 percent, and had resulted in a $200 per pay period state withholding deduction. Simply change that to 10 percent, putting the difference in a separate bank account until the end of next year.) Your withholding plus next year's "givings" should basically even out.
The idea of course, is for us, the Valley's Jewish community to maximize our "contributions" to the Jewish Community Day School Scholarship Fund, and to do so in the easiest, and most painless way.
Singer is the president and general manager of CompuPay Payroll Service.
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