Hold on to Your Hat! The IRS Gives Us Some Good News
Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.
The IRS has just issued a new set of FAQs that essentially give us an outline of what some of the FFRCA-related forms should look like. This outline is contained in the IRS’s new list of Frequently Asked Questions. For those of you who want to wade through the original document, you can find it here https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs
For those of you with better things to do, I have included the most relevant provisions of the FAQs below.
- You need to get a written request from your employees to use paid EPSLA or EFMLA leave and that request needs to contain specific information.
- An employee must be the only person providing care for a child if they want to use paid EPSLA or EFMLA leave due to a school closure of the unavailability of a child care provider.
- You are going to have to create and maintain very detailed records of who you paid, why and how much.
I have included the most significant sections below.
How Should an Employer Substantiate Eligibility for Tax Credits for Qualified Leave Wages?
44. What information should an Eligible Employer receive from an employee and maintain to substantiate eligibility for the sick leave or family leave credits?
An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if the employer receives a written request for such leave from the employee in which the employee provides:
- 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.
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 IRS takes the position that the employee alone must be providing care to the child, making clear that leave then would be unavailable if both parents or another individual is present to care for the child. Also, in the case of a 15- to 17-year old child, the employee must identify “special circumstances” requiring the employee to provide care. If the employee cannot do so, they cannot take EPSL or FMLA+.)
45. What additional records should an Eligible Employer maintain to substantiate eligibility for the sick leave or family leave credit?
An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if, in addition to the information set forth in FAQ 44 (“What information should an Eligible Employer receive from an employee and maintain to substantiate eligibility for the sick leave or family leave credits?”), the employer creates and maintains records that include the following information:
- Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave.
- Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages. See FAQ 31 (“Determining the Amount of Allocable Qualified Health Plan Expenses”) for methods to compute this allocation.
- Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.
- Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS (or, for employers that use third party payers to meet their employment tax obligations, records of information provided to the third party payer regarding the employer’s entitlement to the credit claimed on Form 941).
- How long should an Eligible Employer maintain records to substantiate eligibility for the sick leave or family leave credit?
An Eligible Employer should keep all records of employment taxes for at least 4 years after the date the tax becomes due or is paid, whichever comes later. These should be available for IRS review.
Employers should use this guidance to immediately create their forms and checklists to be used with employees taking leave under the FFCRA. Don’t hesitate to contact me if you would like assistance in creating these forms and checklists.