On June 30, 2021, the IRS issued Notice 2021-42, which extends certain tax relief originally provided in Notice 2020-46. Under Notice 2020-46, which was issued on June 11, 2020, cash payments that employers make to qualified tax-exempt organizations for the relief of victims of the COVID-19 pandemic in exchange for vacation, sick or personal leave that their employees elect to forgo will not be treated as income to the employees. In addition, employees electing to forgo leave will not be treated as having constructively received gross income or wages (or compensation, as applicable). The relief provided under Notice 2020-46 applied to payments made before January 1, 2021.
Notice 2021-42 extends this relief to the end of 2021. Employers who have instituted such plans should be aware of this extension.
Source: NFP BenefitsPartners