• Because of the COVID-19 Federally Declared Disaster, employers may gift amounts to their employees and not withhold payroll taxes AND still deduct the gifts – this can only be done during Federally Declared Disasters. Thus, beginning immediately, employers may provide tax-free payments to employees — while still claiming a full deduction for the payments (and not report gifted amounts on the employee’s W-2s). Some care should be taken with this (there is very little guidance on how this works in reality):
• Enacted in 2002 (as a result of the 9/11 events), but unused until now, a reasonable interpretation of the statutory text, reveals that, at a minimum, the following payments from employer to employee should be treated as deductible to the employer and tax-free to the employee, provided the expenses relate to the COVID-19 pandemic:
o Medical expenses of the employee that are not compensated for by insurance (for example, the employees deductible and out-of-pocket expenses);
o The cost of over-the-counter medications and hand sanitizer;
o Funeral costs of an employee or a member of an employee’s family;
o The costs associated with enabling an employee to work from home throughout the pandemic, including the cost of a computer, cell phone, printer, supplies, and even increased utility costs of the employee.
o The cost of an employee’s child care or tutoring for family members that are not permitted to attend school throughout the pandemic;