Employee Crisis Funds
A crisis fund helps employees through a disaster, a death or another hardship. How it is set up decides whether the money is a tax-free gift or taxable pay.
What to know.
A fund run through an independent charity, with its own written rules and review of who qualifies, is treated differently from payments the employer hands out itself. Payments made at the employer’s discretion can look like compensation.
Write down who is eligible, how requests are reviewed and who decides. Keep the employer out of choosing recipients.
Where to look next.
Giving Funds Overview
How these funds work.
Education and Giving Benefits
Related programs.
Emergency Assistance Accounts
Short-term help for employees.
Setting Up a Fund That Stays Tax Friendly.
Crisis funds help employees through hardship. They stay clearer for tax purposes when they are run through an outside charity or an independent committee, based on need and with written criteria.
Payments from an employer directly, chosen by management, risk being treated as wages. Some disaster relief payments can be tax free in declared disasters, but the rules are specific.
Ask your adviser how a fund should be structured, and write down the rules.
Common questions on this topic.
Four questions to settle before you rely on it.
Can employees receive tax-free help?
In certain situations, such as qualified disaster relief, or through an independent charity. Ask your CPA.
Who should run the fund?
An outside charity or an independent committee, not management alone.
Can the employer choose recipients?
Employer selection raises tax risk, so use independent selection.
What should be in writing?
Eligibility, need, selection, amounts and who decides.
Can the fund accept donations from employees?
Yes, often. The structure determines tax treatment of the gifts.
How do we verify need?
Use a simple application and an independent reviewer.
Does the fund need a separate account?
Usually, yes.
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General information, not legal or tax advice. Plan-specific questions belong with your counsel or CPA, and we will bring them in.
Related guides.
Giving Funds
The overview this page belongs to.
Compliance Services
How CFH supports the compliance side of your plans.
Employer Scholarship Funds for Employees’ Children
A related question on the same program.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
Qualified Disaster Relief (26 U.S.C. 139)
The rule for employer disaster relief payments.
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