The IRS has updated its frequently asked questions (FAQs) on tax credits for paid leave under the Families First Coronavirus Response Act (FFCRA) for leave beginning before April 1, 2021.
The FFCRA initially qualified covered employers for dollar-for-dollar tax credits. This stands for amounts paid to employees who took leave for qualifying reasons. The credits also applied to amounts paid or incurred in order to keep health insurance coverage. The American Rescue Plan Act of 2021 amended and extended the tax credit.
On March 3, 2022, two new FAQs were added. They are as follows:
FFCRA Frequently Asked Questions
This FAQ clarifies whether an eligible employer claims the tax credits for qualified leave wages paid after December 31, 2021. For leave taken by an employee in 2020 or 2021, they need to provide the employee with a Form W-2c. This aids to correct the amount of sick leave and family leave wages reported in Box 14 of the employee’s 2020 and/or 2021 Form W-2.
Yes, it is. In this case, the employer must provide the employee with a Form W-2c (Corrected Wage and Tax Statement). This must include the corrected amounts of sick leave and family leave wages paid after December 31, 2021, in Box 14. OR the employer must provide the employee with a corrected statement correcting the prior reporting.
If the leave wages are paid after December 31, 2021, but the leave was taken in 2020, the employer must provide the employee with a Form W-2c. This corrects the leave wage amount reported in Box 14 (or a separate statement) of the employee’s 2020 Form W-2, Wage, and Tax Statement.
Do not file a Form W-2c with the Social Security Administration just to correct Box 14.
Leave that is permissible
Employees can take Emergency Paid Sick Leave Act (EPSLA) if they were:
- subject to a federal, state, or local quarantine or isolation order related to COVID-19
- advised by a healthcare provider to self-quarantine due to COVID-19 related concerns
- seeking a diagnosis due to COVID-19 symptoms, seeking or awaiting COVID-19 test results due to exposure, or requested by their employer to get a test or diagnosis; or obtaining COVID-19 immunization or recovering from any injury, disability, illness, or condition related to such immunization
- caring for an individual subject to a federal, state, or local quarantine or isolation order related to COVID-19 or advised by a healthcare provider to self-quarantine due to COVID-19 related concerns
- caring for a child because the child’s school or place of care closes, or childcare provider was unavailable, due to COVID-19 related reasons, and
- experiencing other conditions similar to COVID-19 (identified by the Secretary of Health and Human Services).