Guidance for Federal Agency Special Allowances
On January 8, 2009, the IRS issued a memorandum to a Federal agency, indicating that special allowances paid to Federal agency employees to reimburse certain expenses incurred while evacuating from disaster areas and staying in a safe haven are excludable from employment taxes. This policy applies to all Federal executive agencies.
The memorandum indicates that this policy, which was established by Notice 2006-10 to apply to the Hurricane Katrina core disaster area, is expected to be applied by the IRS to other qualified disasters, as defined in IRC section 139(c).
View the memorandum.