COVID-19: Highlights from the IRS FAQs on Emergency Paid Sick and Family Leave Tax Credits for U.S.-based Small and Mid-sized Employers
May 7, 2020
Authored by: Randy Scherer and Richard Arenburg
We recently summarized the provisions from the Families First Coronavirus Response Act (“FFCRA”) that provide for tax credits for small employers to offset costs associated with paid sick leave and emergency FMLA benefits (see here). The IRS has been compiling a set of FAQs regarding these tax credits, which covers a number of topics. Here are a few of the highlights:
- To claim the credits, eligible employers will report their total qualified leave wages and the related credits for each quarter on their federal employment tax returns (usually Form 941). In anticipation of the credits, employers may fund qualified leave wages, allocable qualified health plan expenses, and the employer’s share of Medicare tax on the qualified leave wages by either using federal employment taxes the employer has set aside for deposit with the IRS or by requesting an advance from the IRS.
- To substantiate eligibility for the medical and family leave credits, employers should obtain a statement from the employee requesting leave in which the employee provides:
- The employee’s name;
- The date(s) for which leave is requested;
- A statement that the employee is not able to work (including telework) for that reason.
- If the leave is requested due to a quarantine order or self-quarantine medical advice, the statement should include the governmental entity ordering quarantine or medical professional advising self-quarantine.
- If the leave is due to school closing or lack of childcare availability, the statement should include the name(s) and