Helping Employees With Mitigating Expenses; COVID-19 Disaster relief
Updated: Apr 21
With the Coronavirus pandemic continuing a lot of companies and their employees are negatively affected. If you are an employer who is trying to ascertain in what ways you can assist your employees through these financially burdensome times you can look into Section 139 of the U.S. Internal Revenue Code.
Disaster relief payments per IRC 139 allows an employer flexibility of an alternate method of tax-free reimbursement for qualifying mitigation expenses which were a result of Disaster, in this case COVID-19. Thus, the qualifying reimbursement are deductible to employers and not subject to federal income or employment taxes. Keep in mind this is tax deductibility at a federal level and the payment can subject to state taxation.
Qualified disaster relief payment defined
For purposes of this section, the term "qualified disaster relief payment" means any amount paid to or for the benefit of an individual
(1) to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster,
(2) to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster,
(3) by a person engaged in the furnishing or sale of transportation as a common carrier by reason of the death or personal physical injuries incurred as a result of a qualified disaster, or
(4) if such amount is paid by a Federal, State, or local government, or agency or instrumentality thereof, in connection with a qualified disaster in order to promote the general welfare,
Please consult your tax expert regarding tax deductibility claim.
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