October 12, 2005 in Business

IRS program aids Katrina donations

Joyce M. Rosenberg Associated Press

NEW YORK — The government is making it easier for small companies and their employees to give to Hurricane Katrina victims, allowing businesses of any size to donate the value of employees’ unused leave and vacation to Katrina-related charities.

Companies can get a double break: a tax deduction and an exemption from employment taxes on the money. But here’s some advice from management consultants — don’t take those breaks and run. Make sure your employees who’ve given up their time off feel appreciated by you.

Under what the IRS is calling its leave donation program, employees can forgo vacation time, sick leave or personal days, and their employers can then donate the value of that time — computed according to their salary or wages — to a qualified tax-exempt organization specifically for the relief of Katrina victims. The program runs through 2006, so employees who have used up all their 2005 leave and vacation can still donate time next year.

The program is likely to be quite helpful for small companies that don’t have the resources to make sizeable charitable contributions. It also gives employees who want to donate but don’t have available cash a way to help Katrina victims.

The one possible catch that employers need to look out for is the fact that the employees don’t get a tax benefit from the contribution. Employees aren’t taxed on the money, but they also can’t deduct it in the same way they would deduct a direct cash contribution on their income tax returns. And so some workers might have some hard feelings when the boss gets a deduction and they don’t.

Leslie Yerkes, president of Catalyst Consulting Group in Cleveland, suggests employers match the contribution by sending in extra cash. “Matching gifts is another way of saying, ‘we’re all together,”’ she said.

© Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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