Government lets employees donate pay for unused sick days

By Kartikay Mehrotra

The Department of Treasury and the Internal Revenue Service has created a program that allows employees to sell unused sick days in exchange for employer donations to a relief fund for Hurricane Katrina victims.

Under the current program, employees of corporations, universities, school districts or anyone employing individuals full-time can authorize employers to donate the money from paid sick days to a qualified tax-exempt organization, according to an IRS news release Sept. 8.

“For example, if an employee has an extra eight hours of leave at a rate of $10 an hour, the employee can authorize their employer to donate $80,” IRS Spokesperson Sue Hales said.

The IRS is allowing companies that take advantage of the program to make a deduction on tax returns in the form of a charitable donation or a business expense.

Employers do not have to include the donated leave in their income, Hales said.

The only issue employers need to be careful of is staying within the “caps for charitable donations,” which will vary for each company, according to Hales.

The program will be available for payments made prior to Jan. 1, 2007. “It’s really a win-win situation,” Hales said. “There are no tax consequences and all funds will go directly to Katrina relief.”

The IRS or Department of Treasury is not monitoring the amount of money raised by the program because the only direct involvement either department has is providing the tax incentive for companies, Hales said. The rest of the program is strictly between the company and organization to which they make the contribution.