SIKICH: Section 139 Offers Opportunities for Businesses & Employees During a Disaster

Business leaders across the country, while struggling themselves, are looking for ways to assist their employees impacted by the COVID-19 pandemic. The concern for their employees is genuine—yet at some point, employers may ask “What are the tax consequences of this assistance?” and “Are there any tax issues or opportunities with this employee assistance?” On March 13, 2020, the federal government declared the Coronavirus crisis a disaster, under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. An employer can utilize Section 139, Disaster Relief Payment, of the tax law allowing employers to provide monetary assistance to its employees after a disaster. Under Section 139, an employee can receive tax-free relief payments, which the employer can deduct. These payments are deductible for the employer and not taxable to the employee. Further, an employer is also not required to report these amounts with their payroll returns, and the employee will not receive any tax documents.