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July 8, 2020

Disaster Relief Donation Option

Often when a significant national or local emergency or disaster event occurs, an employee may wish to assist those individuals impacted by the event by donating his/her unused paid time off.  Specific to the coronavirus pandemic, the IRS developed a mechanism (IRS Notice 2020-46) to provide certain tax relief for employees and employers to facilitate this process. 

This IRS guidance allows employees to forego unused paid time off such as vacation, sick or personal leave.  The employer, in turn, can donate the equivalent cost of this time to qualified tax-exempt organizations, as described in Code Section 170(c), who aid victims of the COVID-19 pandemic in the affected geographic areas.

The employees are not taxed on donated time.  The employer can take a deduction under Code Sections 162 and 170, as appropriate.  Neither the employer nor employee are subject to employment taxes on these amounts.  An employee cannot take a deduction on the value to the amount of the donated leave on his/her tax return.  This leave donation applies through December 31, 2020.

 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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