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As the impact from the COVID-19 pandemic intensifies, employers around the United States are looking for ways to provide relief from the outbreak’s financial burden on employees. One option available for employers from Section 139 of the Internal Revenue Code (the Code) is the Qualified Disaster Relief Payment program.
In general, payments made by an employer to, or for the benefit of, an employee must be included in the employee’s gross income and cannot be treated as a nontaxable gift.
However, Section 139 allows employers to provide qualified disaster relief payments to their employees free of income and employment taxes (Social Security, Medicare and federal unemployment taxes). A qualified disaster relief payment includes any amount paid by an employer to, or for the benefit of, an employee to reimburse or pay “reasonable and necessary” personal, family, living or funeral expenses incurred as a result of a qualified disaster.
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