November 29, 2001 | Read Time: 1 minute
Employees who donate the value of their unused paid leave to charity this year or next won’t have to pay income taxes on the money, the Internal Revenue Service says in a notice.
Following the terrorist attacks, several employers considered allowing their workers to give up paid vacation, sick leave, or personal time in exchange for the employer’s sending a donation to relief organizations, the IRS said.
However, that was not as easy as it seemed because such donations fall under “assignment of income” rules that are intended to prevent high-income taxpayers from shifting earnings to friends and relatives in lower tax brackets.
Under those rules, donated leave is still subject to income, Social Security, and Medicare taxes.
In Notice 2001-64, the IRS says it will suspend the rules for donations of leave to charitable organizations made before January 1, 2003.
An explanation of the notice and the full text are available online at: http://www.treas.gov/press/releases/po720.htm.
