In the aftermath of two of the strongest hurricanes in history, employers are seeking ways to help those impacted. The IRS has sanctioned programs that allow employees to donate the value of their sick, vacation or other paid time off (PTO) to victims of Hurricanes Harvey and Irma without facing tax consequences.
Under a PTO donation program, an employee forgoes taking a PTO day and instead donates the value of the unused PTO to a charitable organization. The employer pays the organization a cash amount equal to the value of the PTO. Typically, the employee recognizes the PTO as taxable income subject to withholding.
The IRS recently released two separate notices specifically addressing Hurricanes Harvey and Irma. The notices provide that employers can contribute the value of the PTO to a non-profit organization and can take a business deduction for the contribution. The employee who makes the donation will not be subject to income or social security taxes on the donated amount. Contributions must be made before January 1, 2019.
Employers may wish to consider PTO leave donation programs as part of their charitable initiatives.