Payroll Withholding

Directing Payroll Withholding Taxes

Donations made by an individual to private school tuition organizations can be made through a deduction from withholding, where the employee takes part of the individual's withholding taxes and sends it to the designated STO, such as YES Fund for Kids, Inc. Individual income tax payers authorize their employer to reduce their state withholding tax amount in order to make donations to a school tuition organization. This does not reduce the actual state tax liability. It simply changes the order in which the taxpayers tax credit donation(s) and their state taxes are collected and paid should one choose to use this option. 

Employee Information

  • The primary advantage of using this option for you as an employee is that it allows you to make your contribution without having to provide the money up front or in one large lump sum.
  • Redirecting your tax withholding amount does not change your state tax liability. It simply means that you are paying taxes to YES Fund for Kids directly, rather than having your withholding sent to the state, making a contribution and then filing your tax form in order to receive it back as a refund next year.
  • The employee is responsible for requesting this payroll tax change with their employer. YES Fund for Kids may help facilitate the process by providing the necessary forms for you and your employer.
  • Payments will be made quarterly by your employer and will be accepted by the payroll date, rather than the postmark date. In accordance with the law, employers are allowed to send payments within 15 days after the end of each calendar quarter.
  • The portion contributed to YES Fund for Kids during each pay period cannot exceed the total amount of stat3e tax withholding allocated for that pay period. It is important for you to clearly communicate how much and in what order contributions should be held if you are taking multiple state tax credits.
  • We recommend that you consult your tax adviser regarding your expected state tax liability, withholding and anticipated contribution amount. If your total contribution exceeds your state tax liability for a given year, the excess amount may be rolled over and claimed on the following year's taxes for up to 5 years.
  • You may make a separate contribution to YES Fund for Kids if the amount of withholding payroll redirect does not exactly equal the total amount you wanted to give.

Employer Participation

Employer participation in this program is purely voluntary. Check with your employer to see if this option will work for you.

Employer Information

  • The primary advantage to you as an employer for providing this option is that it is a benefit to your employees at minimal cost to you.
  • Employee communication regarding this withholding reduction is confidential information.
  • Employers will be required to make quarterly payments to YES Fund for Kids, Inc. on the employee's behalf using the Quarterly Payment of Reduced Withholding for Tax Credits From A1-C
  • You must provide an Arizona Charitable Withholding Form A1-C to each participating employee and the Arizona Department of Revenue indicating the total amount contributed through withholding reductions for the year, or upon that employee leaving the company.
  • YES Fund for Kids, Inc. will also send a tax receipt to each employee upon receipt of the quarterly payment.

Setup Steps:

  1. Check with your employer regarding participation.
  2. Fill out the Payroll Withholding Donation Form and send it to YES Fund for Kids, Inc.
  3. Fill out the Arizona Form A1-C and give it to your employer.
  4. If your employer decides to participate, they will make payments to YES Fund for Kids, Inc. on your behalf utilizing Arizona Form A1-QTC
  5. YES Fund for Kids will send you a tax receipt showing the amount of your tax credit through payroll redirects or general contributions.

Tax credits and withholding tax reduction bill