I am not sure many of us can afford to do this for all our employees, but if we can, it’s a great morale booster- and may actually help our bottom line (tax wise).

And, don’t forget that if YOU are an employee of your own company, this applies to you, too.  (However, do not for a minute think you can apply this JUST to you.  You will be in great tax and labor law jeopardy if you so act.)

First, a little history.  Think back two decades.  As I was leaving Manhattan, where I celebrated my 50^th birthday by pigging out on Broadway and Off-Broadway shows, four airplanes were hijacked.  And, among the things that Congress did in reaction to this disaster was pass a tax provision.  (Of course- we do most of our social engineering via the tax code.)

Why do I mention it now?  Because that tax code change allows businesses to deduct certain payments to employees during a terrorist attack or a federally declared disaster.

Wouldn’t you know it?  The IRS agrees that this pandemic is a federally declared disaster [Code Section 165(i)(5)(A)], since TheDonald invoked the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

So….

We can now provide TAX-FREE (remember, the TCJA [Tax Cut and Jobs Act (sic)] made these non-deductible) to our employees…

1.  Funds for necessary personal, family, living, or funeral expenses incurred due to COVID-19

1. 1. This means out-of-pocket medical, not covered by health insurance.
   2. Funeral costs for an employee (G-d forbid) or a member of the employee’s family.
   3. Child care costs so folks can work without being deviled by the kids running around the newly designated home office space.
3. 2. Fund to rehabilitate, repair, or replace the contents of their personal residence, as long as it’s attributed to COVID-19.

Obviously, since we are all working from home, our home needs updates/adjustments to afford safe, secure, workspaces.  Things like computers, office equipment, telephones, and supplies are covered.

And, those funds don’t incur the imposition- to them or to us-  of  income tax, payroll taxes, or self-employment taxes. And, we can still deduct these costs as business expenses on our tax returns. Isn’t that special?

Please do NOT try to extend this special provision for wages (lost or otherwise), unemployment compensation, etc.  And, no payments to other businesses are deductible.  (Yes, that means if these folks are independent contractors, you cannot cover their costs.)

Make sure, however, that you follow the belt and suspenders rule.  In other words, prepare a written plan that stipulates the start and ending dates (we chose 15 February and 1 May 2020, with the latter date automatically extended if any Governor of any state where we operate or the Federal Government (ha!) extends the self-quarantine program), what costs we will cover for our staff, any maximum amounts per employee, the total funds behind the plan (in essence, this is a stop-loss provision), and procedures/processes by which employees can request said funds.

Since we granted each member the right to obtain a new computer (we stipulated the specifications)- plus to cover some of their home utilities- we provided each of them a payments of  $ 1200.  That means each of our staff got a new computer and help with their utility bills at no cost to them.  We got an a substantial reduction to our net profits, without jeopardizing any 179 or depreciation limits, to boot.

A silver lining in this pandemic?

Need help with your plan?   We are available.