The IRS just approved leave-based donation programs to aid victims of Hurricane Sandy.

The IRS just approved leave-based donation programs to aid victims of Hurricane Sandy.

Employees can elect to forego their vacation, sick or personal leave time.   The employer makes a cash payment to charitable organizations for the relief of victims of Hurricane Sandy by December 31, 2013 (yes, 2013). The cash payment is equivalent to the vacation, sick or personal leave time foregone by the employees.

The donated vacation, sick or personal leave time is NOT income to the employee and the employee CANNOT take a charitable deduction for the donated time. The donated time is EXCLUDED from the employee's Form W-2. The payment is not subject to OASDI, FICA and Medicare taxes. Do not include donated leave time in the employee's Form W-2 Box 1, Box 3, or Box 5 wages.

The employer gets a business deduction for the cash payment to the charity.

We recommend that the employer set up a separate general ledger expense account called "Hurricane Sandy Relief Payments" to record all payments made under this donation program. They are deductible as a normal business expense.

Article provided by: Lance, Soll & Lunghard LLP