IRS Issues Guidance on Reporting Qualified Sick and Family Leave Wages

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The Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020, generally requires employers with fewer than 500 employees to provide paid leave due to certain circumstances related to the novel coronavirus pandemic (COVID-19) through two separate provisions: the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act. Under the FFCRA, temporary tax credits are provided for certain employers and self-employed individuals for emergency paid leave. The purpose, of course, was to provide economic assistance to employers with the goal of maintaining jobs throughout the early stages of the pandemic. (see related post)

The IRS recently issued Notice 2020-54 to provide guidance to employers regarding how to report this paid leave. Under the newly released guidance, employers will be required to report the amount of qualified sick and family leave wages paid to employees under the FFCRA on the recipient employees’ Forms W-2, Wage and Tax Statement for 2020, Box 14, or in a separate statement provided with the Form W-2. The guidance further provides employers with optional language to use in the Form W-2 instructions for employees.

Additionally, the wage amount that employers are required to report on Form W-2 will provide self-employed individuals who also are employees with the information necessary to determine the amount of any sick and family leave equivalent credits they may claim in their self-employed capacities.

It is critical that employers paying qualified sick leave wages who wish to take advantage of the employer tax credits available under these economic stimulus provisions keep articulate records documenting the payments. We assume that most quality payroll services will indeed, undertake any additional steps required to comply with the new guidance. However, feel free to contact Bob Grossman or Don Johnston at 412-338-9300, should you have comments or questions.

More information can be found on the IRS FAQS page for COVID-related tax credits or on the Department of Labor FFCRA FAQs website.

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