IRS extends deadline for COVID-19 employee leave donations

The IRS has extended the deadline for COVID-19 donations that are made under employers' leave-based donation programs. A recent IRS notice allows tax-favored treatment for payments made by Jan. 1, 2022.

Employer leave-based donation programs allow workers to forgo vacation, sick, or personal leave in exchange for their employers making cash payments to charitable organizations. That donated leave is taxable to employees unless the IRS makes an exception, which it does in response to specific situations like the pandemic.

The IRS explained in an earlier June 2020 notice that employee leave donations under an employer’s program would not be treated as employee income if:

• The employer’s cash payments were made to help victims of the pandemic in parts of the U.S. where the president had declared a major disaster; and

• The payments were made to 170(c) organizations before Jan. 1, 2021.

Employers could deduct the payments if certain requirements were met.

Citing the ongoing nature of the COVID-19 pandemic, this latest IRS notice extends that favorable tax treatment to cash payments made between Dec. 31, 2020 and Jan. 1, 2022.