In response to the extreme need for charitable relief for victims of Hurricane Harvey, some employers are adopting leave-based donation programs. Under these programs, employees can essentially donate their vacation and sick pay to charitable organizations.
The IRS recently issued a notice that cash payments an employer makes to a charitable organization in exchange for vacation, sick, or personal leave that its employees elect to forgo will NOT constitute income or wages of the employee if the payments are:
- Made to charitable organizations for the relief of victims of Hurricane Harvey and Tropical Storm Harvey and
- Paid to the charity before January 1, 2019
The IRS will not allow double dipping—employees won’t have to claim the donated vacation, sick, or personal leave time as income but they will also not be allowed a charitable donation for the amount donated.
The employer will take a business (and not a charitable deduction) for the amount of vacation, sick, or personal leave time donated.
People also need to be aware of scam artists that have created fraudulent charities. The IRS cautions people wishing to make disaster-related charitable donations to avoid scam artists by following these tips:
- Be sure to donate to recognized charities.
- Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. The IRS website at IRS.gov has a search feature, Exempt Organizations Select Check, through which people may find qualified charities; donations to these charities may be tax-deductible.
- Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution. Scam artists may use this information to steal a donor’s identity and money.
- Never give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the donation.
- Consult IRS Publication 526, Charitable Contributions, available on IRS.gov. This free booklet describes the tax rules that apply to making legitimate tax-deductible donations. Among other things, it also provides complete details on what records to keep.
Comments or questions about this post? Please let us know through the comment area below!
If you found this article informative, subscribe to our Tax Newsletter.
Contact us for a Free Initial Consultation
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.