The IRS has never been known as a creative beaurocracy. To promote donations to Katrina victims, however, it is being very creative.
The IRS has come up with Hurricane Katrina Leave Donation Program to help out those in need through special tax treatment rules. In a ground breaking program, employees can donate their vacation and sick leave donations by asking their employer to make a cash donation equivalent to the amount that would otherwise be paid.
Employees
Employees benefit from this new program in two ways. First, they can make donations without taking money out of their current cash savings. Second, the employee will not be responsible for paying takes on the donated time, which would obviously be a huge deterrent.
Employers
Employers also benefit in two ways with this unique program. Initially, they can work hand in hand with employees to help the relief effort. Second, the employer can deduct the cash payments as either a charitable contribution or normal business deduction. Importantly, employers are NOT required to pay employment taxes on any donations. This fact alone makes participating in the Hurricane Katrina Leave Donation Program a worthwhile venture.
The IRS has really stepped to the plate to help the victims of Hurricane Katrina. Often reviled, the Agency should get a standing ovation for taking these steps.
