The IRS has released guidance on the federal income and employment tax treatment of employer leave-based donation programs that aid victims of the COVID-19 pandemic. The guidance is issued subsequent to the emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the COVID-19 pandemic.
Under leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to charitable organizations before January 1, 2021. These leave-based donation programs to aid victims of COVID-19 will not be treated as compensation. Similarly, the employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the leave that they donated to their employer.
However, employers may deduct these cash payments as a business expense or as a charitable contribution deduction if the employer otherwise meets the respective requirements.
Please contact our office for more information on the treatment of leave-based donation programs made to aid victims of the COVID-19 pandemic and how it impacts your federal income and employment tax treatment.
Venkat Iyer. CPA(USA). CPA(Canada). MBA
Venkat holds a CPA credential both in the USA and Canada, and he is very proficient in tax and compliance requirements in both countries. He is a Seasoned Business Adviser with 18+ years of extensive experience in diversified industries and accounting firms.He is also very prominent in implementing Lean Principles and Strong Financial Foundations for Hotels and Restaurants. He believes the key to any business success is knowing their indicators and their impact. He has been helping businesses with predictive analytics, transforming data from their enterprise's system for delivering meaningful insights.He is also a Business Automation Expert helping streamline the workflows from marketing to management to ensure optimal business performance.