New IRS Guidance on the Family First Coronavirus Response Act Tax Credit

04.08.20Baylee Olsen

As employers are working to educate and offer their employees the benefits of paid leave under the Families First Coronavirus Response Act (FFCRA), the employers are seeking information on how to claim their tax credits for the payment of wages during the Paid Sick Leave and the expanded Family Medical Leave provisions.

The IRS recently put out several FAQ’s to provide information to employers about this. The information includes:

  • Eligible Employers are entitled to receive a credit in the full amount of the qualified sick leave wages and qualified family leave wages, plus qualified health plan expenses and the employer’s share of Medicare tax, paid for leave during the period beginning April 1, 2020, and ending December 31, 2020.
  • Eligible Employers will claim the credits on their federal employment tax returns (e.g., Form 941, Employer’s Quarterly Federal Tax Return), but they can benefit more quickly from the credits by reducing their federal employment tax deposits.
  • An Eligible Employer that pays qualified leave wages to its employees in a calendar quarter before it is required to deposit federal employment taxes with the IRS for that quarter may reduce the amount of federal employment taxes it deposits for that quarter by the amount of the qualified leave wages (and qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) paid in that calendar quarter.

The IRS also addresses how an employer substantiates eligibility for the FFCRA sick leave or expanded family leave tax credits.

  • The employer should require a written request from the employee to substantiate the need for the paid leave under FFCRA which includes:
    1. The employee’s name;
    2. The date or dates for which leave is requested;
    3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
    4. A statement that the employee is unable to work, including by means of telework, for such reason.
  • In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
  • In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.

The Department of Labor has stated that employers are not required to provide the leave if the employee does not provide materials sufficient to be used as documentation for the applicable tax credit as indicated above.

You may find more detailed information on the IRS website, including what to do if your federal tax obligation is lower than what you have paid out in FFCRA leave to employees, at COVID-19 Related Tax Credits FAQs.

In order to ensure that you have the documentation necessary to claim your tax credits San Diego HR Consulting has developed a Leave Request Form you can have employees complete when they are asking for leave for one of the FFCRA reasons.  It includes the documentation you will need fro the employer in order to approve the leave and claim your tax credits. To learn more about the FFCRA paid leave requirements, see our blog, COVID-19 FFCRA.

As always, we are here to help if you have any specific questions about your companies situation! Contact us today or learn more about our COVID eShield Hotline that is complimentary for 90-days.