Leave-based Donation Programs Provide Opportunity to Provide Hurricane Harvey Assistance

Due to the extreme need for financial assistance for victims of Hurricane Harvey, the Internal Revenue Service has provided special provisions to allow employers and employees to team up in making charitable contributions for Hurricane Harvey relief through 2018.

Employers can set up leave-based donation programs which allow employees to elect to forgo vacation, sick, or personal leave in exchange for cash payments the employer makes to charitable organizations which are providing Hurricane Harvey relief assistance. From the employee perspective, under the provisions provided by the IRS, no income is recognized for the leave hours donated. The employees cannot claim a charitable deduction for the forgone leave.

The employer is allowed to claim a deduction as a business expense, as opposed to a charitable donation, for the payments made to qualifying charitable organizations for the relief of victims of Hurricane Harvey. Payments must be made before January 1, 2019.

No payroll taxes will be paid by either the employee or the employer for payments made through a leave based donation program.

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