San Francisco Tax Preparation / CPA: IRS Rules Encourage Leave-Based Donation Programs for Victims of COVID-19
The IRS has provided relief to support employer leave-based donation programs to aid victims of the COVID-19 (coronavirus) pandemic. Under these programs, employees may forgo vacation, sick or personal leave in exchange for cash payments the employer makes to charitable organizations providing relief for the victims of the pandemic.
An employer’s donations under a leave-based donation program are not gross income or wages for the employees who surrendered leave so long as the donations are made in cash to a charitable organization for the relief for victims of the COVID-19 pandemic, before January 1, 2021. Similarly, the employee does not receive income or wages from the opportunity to forgo leave. Thus, the employer does not have to report its leave-based donations on the employee’s Form W-2.
An employee may not claim a charitable contribution deduction for the value of leave that is surrendered in a leave-based donation program and excluded from the employee’s wages. However, the employer can deduct its cash payments as a charitable contribution under Code Sec. 170 or as a ordinary and necessary business expense under Code Sec. 162 if the employer otherwise meets the respective requirements.