Taking Care of Your Own: Employers Can Make “Disaster Relief Payments” to COVID-19 impacted Employees

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CLA-OC members may not be aware that your company can provide financial support to employees and families impacted by COVID-19 during this “Presidentially declared qualified disaster” by providing direct assistance or charitable grants without creating a tax burden for the company or the employees.  The funding sources can be the corporation, the company’s private foundation, donations from fellow employees, and others. Regardless of the funding source, the financial help cannot be for wage replacement. The payment or reimbursement must be for an employee’s COVID-19 related expenses, such as:

  • Over-the-counter medications
  • Hand sanitizer and home disinfectant supplies
  • Child care or tutoring due to school closings
  • Work-from-home expenses (setting up a home office, Increased utilities expenses and higher Internet costs)
  • Increased commuting costs (taking taxi or Uber instead of using public transit)
  • Unreimbursed health-related expenses (insurance co-payments and deductible).

See IRS Publication 3833 – Disaster Relief: Providing Assistance Through Charitable Organizations

An employee COVID-19 disaster relief program can be structured in three ways:

  • Direct Corporate Assistance – Your Company funds and manages your own employee disaster relief program using non chartable dollars and provides direct payment assistance to your employees that are not reported as employee income or taxed.   
  • Private Company Foundation – Your company foundation can receive charitable contributions from the corporation and coworkers to make deserving individual employee and family member grants.
  • Public Charity – Your company can engage a third-party nonprofit organization to assess the employees need, receive your charitable funds, and reimburse approved expenses.   

For each method there are important company policies and procedures that must be adhered to per IRS Publication 3833.

OneOC, a local 501c3 organization, can assist your company in determining the best way to create your COVID-19 relief program.  Call LaVal Brewer 949.945.3508 or email [email protected]

In the comment section below, share your employee disaster relief program experiences or ask related questions.