The IRS has extended the tax relief provided in Notice 2020-46 for calendar year 2021 for employers whose employees forgo sick, vacation or personal leave because of the COVID-19 pandemic.
Notice 2021-42 provides that cash payments employers make to charitable organizations providing relief to victims of the pandemic in exchange for sick, vacation or personal leave that their employees forgo is not treated as compensation.
Employers, however, may deduct these cash payments as a business expense or as a charitable contribution deduction if the employer otherwise meets the respective requirements of either section.