Guidance continues to be issued almost daily on the Families First Coronavirus Response Act (FFCRA). As we previously shared with you here, the FFCRA generally requires employers with fewer than 500 employees to provide Emergency Paid Sick Leave (EPSL) and paid Emergency Family and Medical Leave (EFMLA) benefits to employees who establish certain reasons for absences related to COVID-19. The details of the covered absences are described in the article linked above.
The FFCRA also provides a means by which employers may be fully reimbursed for the payment of the required leave and sick pay through tax credits. The new IRS FAQs (found here) provide specific guidance on the mechanics of how to claim the tax credit and what records the employer must maintain to justify the tax credit. The FAQs also set forth instructions regarding how to allocate employer health plan costs to the paid sick leave wages, and the tax credit that may be recovered by employer.
The IRS FAQs further describe a process by which employers may withhold certain employment taxes that are normally deposited with the IRS with a quarterly tax form, 941. As an example, assume the employer has paid $5000 in covered FFCRA paid leave wages, and owes the government $8000 consisting of both the employer and employee share of Social Security and Medicare taxes for the quarter for all employees. The IRS will allow the employer to deposit only $3000 of the taxes, and provide a reconciliation on the 941 Form. If the taxes due for the quarter for all employees do not exceed the amount of the leave wages, the IRS has developed a new form (7200) by which the employer may request an advance payment.
The IRS has also detailed the documentation the employer needs to obtain and retain to substantiate the tax credit. Employers must obtain a written statement from employees taking paid leave under the EPSL and/or EMFLA. This employee’s written statement must include the following:
- The employee’s name;
- The date or dates for which leave is requested;
- A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
- A statement that the employee is unable to work, including by means of telework, for such reason.
For leaves based on a quarantine order or advisement, an employee also needs to provide the name of the government agency requiring the quarantine, or the name of health care professional advising the self-quarantine.
Similar detail is required when the leave request is based on a school and/or childcare provider unavailability due to COVID-19. These statements should also 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;
- 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 an 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.
These records must be kept for four years. Please do not hesitate to reach out to our Labor & Employment team for more information or assistance with this process.