COVID Activates Program to Give Employees Tax-Free Payments
When President Trump declared a disaster in every state earlier this year, he activated a program in which employers can make direct, tax-free payments to employees to reimburse or pay reasonable expenses related to COVID-19.
The declaration brought to life the Qualified Disaster Relief Payments program, defined in U.S. Code as I.R.C. § 139.
Employers can make payments to reimburse or pay reasonable expenses for employees’ personal, family, living, or funeral expenses incurred as a result of a “qualified disaster” if those expenses are not otherwise compensated by insurance.
For employees working remotely, payments can cover related utilities, wi-fi, and paper and ink, as examples. Employees in offices may use payments for hand sanitizer or masks and increased costs related to childcare and transportation.
Payments through I.R.C. 139 are not intended to cover lost wages, unemployment compensation, or other lost business income.
Employers may choose not to require receipts as long as expenses are reasonable. The IRS does not require employers to report the payments. Typical payments range between $100 to $500.
Dave Burger with KCoe Isom said that because the payments need not be reported, it is difficult to assess the extent of the program’s use, but participation appears to be significant.
Source: KCoe Isom