As part of the emergency disaster declaration made by President Trump on March 13, 2020, it became possible for employees to donate their unused paid vacation time, sick leave, and personal time off to qualified charities that provided COVID-19 relief in 2020.
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The IRS recently extended leave donations through 2021. Check with your employer to see if they are participating and for more details. It is an opportunity for you to make donations without costing you out of pocket cash.
Here is how it works: if your employer is participating, you can relinquish any unused and paid vacation time, sick leave, and personal leave for cash payments which your employer will donate to COVID-19 relief charitable organizations. The cash payment will not be treated as wages to you and your employer can deduct the amount donated as a business expense. However, since the income isn’t taxable to you, you will not be allowed to claim the donation as a charitable deduction on your tax return. Even so, excluding income is often worth more as tax savings than a potential tax deduction, especially if you generally claim the standard deduction or are subject to AGI-based limitations.
Those in one of the disaster areas are eligible for a variety of tax benefits. Of immediate concern is avoiding penalties for not meeting your tax filing obligations. A federal disaster declaration extends many federal tax filing deadlines and are different for each disaster.
This special relief applies to all donations made before January 1, 2022, giving individuals plenty of time to forgo their unused paid vacation, sick and leave time and have the cash value donated to a worthy cause.
This is a great opportunity to provide sorely needed help in the ongoing COVID-19 emergency without costing you anything but time. Contact your employer to see about participating. If your employer is unaware of his program, refer them to IRS Notice 2020-46 and 2021-42 for further details.
If you have questions related to donating leave time for COVID-19 relief efforts or other charitable contributions, please contact this office at 551-249-1040.
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