IRS Issues Guidance on Leave Donation Programs for COVID-19
Updated: Sep 2
Employees Won’t be Taxed on Donated Leave
Employee leave donated to COVID-19 charities through employer-based programs will not be taxed as income of the donor employees, according to recent guidance by the IRS.
In Notice 2020-46, the IRS said that cash payments an employer makes in exchange for vacation, sick or personal leave that its employees elect to forgo will not be treated as employee wages or compensation, or otherwise included in employees' gross income, if the payments are:
Made to a Section 170(c) organization for the relief of victims of the COVID-19 pandemic in affected geographic areas; and
Paid to a Section 170(c) organization before Jan. 1, 2021.
“Affected geographic areas” are each of the 50 states, the District of Columbia, and five U.S. territories, which have all been declared major disaster areas by President Donald Trump in response to the COVID-19 pandemic.
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