While Congress has enacted several new tax law changes to help with the US combat COVID-19’s economic effects, a prior tax law enacted shortly after 9/11 has been a boon for companies. Under IRC 139, businesses can deduct expenses paid to employees for qualified disaster relief payments. The main expenses that qualify are reasonable and necessary personal, family, living or funeral expenses incurred as a result of the disaster. Ordinarily, these payments would be included in income for the employee, however IRC 139 specifically exempts these payments from being income.
As an example, an employee has a spouse pass due to COVID-19, then their company offers to pay $10,000 to reimburse for funeral costs. The company would get a $10,000 tax deduction for the payments and the employee does not need to report this as income.
Eligible expenses can include, but are not limited to, masks, telework supplies, doctors’ appointments, testing, and hand sanitizer.
Contact your local YHB advisor today and they can help you setup an IRC 139 plan!
Nich Preusch is a Manager at YHB. Nick’s expertise includes helping high wealth individual and large business entities with complex tax compliance, along with specializing in international, non-for-profit tax issues, and tax ethics issues.