Lies That HR Tells

Wednesday, January 18, 2006
I was in my company meeting the other day and the HR lady told people they made a mistake about how a charity we are running would work. Instead of the money being taken out of on a pre-tax basis, it would be taken out post-tax. But she assured everyone it would be OK because you can just take care of it at the end of the year on your tax return.

I couldn't believe the crap I was hearing. If you know anything about taxes (and you really should if you don't) you know that THIS IS NOT THE SAME THING! I can't believe any HR person can get away with saying that it is.

What am I talking about? Most people DO NOT itemize their tax bill. Most people take the standard deduction which is $5000. That means, you are better off taking the standard deduction until you have at least $5000 in deductions. How many people have $5,000 in deductions ($10,000 if you are married)? Fully 2/3 of all Americans take the standard deduction. That means they get NO tax benefit from donating to charity, having a mortgage, or having any business expenses. Zip, zilch, nada. All those tax breaks you supposedly get (my favorite being the mortgage deduction) actually don't benefit you unless you have $5,000 in other deductions.

Now, should the #1 concern about giving to charity be your tax break? Of course not. But for an HR person to say that it is equivalent is just a flat out lie.


David Cho said...

Does the $5,000 figure outside your contributions to the 401K account? I would think that a lot of people contribute pretty close to that amount.

Either way, you are right.

Anonymous said...

My only comment, is consider who said that in the meeting. I don't know a lot of people that would consider one of the sharper tools in the shed. I'm not calling her dumb, but to her it may be an incidental detail she mixed up.

T said...


401K money has nothing to do with the standard deduction. The standard deduction is a huge issue that most people just don't understand correctly. It's a big subject so maybe I'll write a blog about it.

David Cho said...

When it comes to personal finacial matters or, just finance in general, I am pretty illiterate, but I wouldn't say that makes me "dumb."

For one thing, I think it would be great for high school to offer a mandatory course in personal finance. Even by the time I graduated from college, I had no idea how the stock market worked or what a a mutual fund was. Nobody in my immigrant family had a clue, and my engineering courses never taught me those things.

But as far as the HR person is concerned, it falls under the category of if-you-don't-know-STFU. It's okay if you don't know. But it is not okay when you don't know that you don't know

Jenny said...

What charity is GNP running?

T said...

united way