Section 139 Helps Employers Support Their Employees During Crisis

April 03, 2020

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Many business owners are dealing with a lot of worry stemming from the coronavirus pandemic. Among their many concerns is how to support their employees during this difficult time. A recent article from Forbes outlines a little-known tax provision that allows employers to support the well-being of their employees financially during times of crisis.

Here is a look at what legislators have been doing to combat the economic fallout of the current situation, thus far:

  • President Trump declared a state of emergency
  • The IRS delayed the April 15th tax deadline to July 15th
  • Congress passed the Coronavirus Relief Act
  • Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act

In addition to these relief measures, businesses should be aware of an already-existing provision that can be helpful at this time. Section 139 of the U.S. Tax Code enables employers to give “qualified disaster relief payments” to their employees. For employees, the payments are tax free; for employers, the payments are tax deductible.

It is important to understand which expenses qualify and which do not. For example, payments of sick pay or family leave do not qualify. According to the author, using “a reasonable interpretation of the statutory text” indicates that the following expense qualify:

  • Medical expenses that are not covered by insurance
  • The expense for hand sanitizer and over-the-counter medicine
  • The expense for a funeral (for an employee or their family member)
  • Expenses for purchasing items needed to allow an employee to work from home
  • Expenses associated with childcare or tutoring for an employee’s child(ren)

While there are not stringent regulations in place regarding records keeping for these types of payments, the authors strongly recommend that employers keep records, nonetheless.

For further details, click here to read the article in full.