July 28, 2020
Pennsylvania hazard pay grants are taxable to employees but deductible to businesses
The Pennsylvania Department of Revenue explained in its COVID-19 news release that the additional hazard pay employees receive from their employers through the state's hazard pay grant funding is wages subject to Pennsylvania state income tax and income tax withholding.
For Pennsylvania corporate income tax purposes, businesses are not required to include as income grants they receive through the state's hazard pay program; however, they may take a deduction for the hazard pay they provide to their employees.
As previously reported (EY Tax Alert 2020-1881), the Department announced a COVID-19 hazard pay grant program to help employers provide hazard pay to employees in life-sustaining occupations during the COVID-19 emergency. Hazard pay means additional wages paid to employees for performing hazardous duty or work involving physical hardship in connection with COVID-19.
Employers may submit applications for the hazard pay grant of up to $1,200 per eligible full-time equivalent (FTE) employee. The hazard pay must be paid to the eligible employee over the 10-week period of August 16, 2020 through October 24, 2020 as a $3/hour hazard pay increase to their regular hourly pay rate.
Applications will be accepted between July 16, 2020, and July 31, 2020, leaving employers a short time to take advantage of this program.
EY Payroll News Flash