COVID-19 Federal: Everything Employers Need to Document to Claim Tax Credits for FFCRA Leave
On April 1, 2020, the IRS released guidance on the types of information and records an employer must maintain in order to claim a tax credit for reimbursement of paid leave they provide their employees under the Families First Coronavirus Relief Act (FFCRA). This IRS guidance is consistent with Department of Labor regulations that were also separately released on April 1, although the IRS requirements are somewhat more detailed.
Specifically, the IRS will require employers to collect the following information from their employees:
- Employee name
- Requested leave date(s)
- A written statement supporting the COVID-19 related reason for which the employee is requesting leave
- A statement that the employee is unable to work (including telework) due to such reason, and either:
- In the case of leave based on a quarantine order or self-quarantine advice of a health care professional, the name of the governmental entity or health care professional, and if the person being quarantined is not the employee, the name of such person and their relation to the employee; or
- In the case of leave based on a school closure or unavailability of a child care provider, the name(s) and age(s) of the child(ren) to be cared for, the name of the school or provider, and a representation that no other person will be providing care for the child(ren) during the period of requested leave. If the employee is required to care for a child older than 14 during daylight hours, the employee must also provide a statement that special circumstances exist requiring the employee to provide care.
In addition, the employer should maintain the following records to substantiate their eligibility for the FFCRA tax credit:
- Documentation showing how the employer determined the amount of wages to be paid to employees eligible for paid leave, including records of the employee’s regular work hours (including telework) and regular wages, both of which are used to compute the amount and pay rate of available leave, and records showing the amount of leave actually taken by the employee.
- Documentation showing how the employer determined the amount of qualified health plan expenses that the employer allocated to wages.
- Copies of any completed Forms 7200, “Advance of Employer Credits Due to COVID-19,” the employer submitted to the IRS.
- Copies of completed Forms 941, “Employer’s Quarterly Federal Tax Return,” that the employer submitted to the IRS, or copies of documentation the employer provided to a third party.
Employers need to keep records for at least four years after the applicable taxes are due or are paid, whichever comes later. Under the final DOL regulations, an employer may only require additional documentation from an employee to support the need for leave if that documentation is required by the IRS in order for the employer to claim a tax credit. Since the IRS does not require such documentation, an employer may no longer require an employee to provide, for example, a copy of a school closure notice or a note from a health care provider advising the employee to self-quarantine. This differs from the DOL’s guidance just a few days ago, so employers that have been requiring employees to provide supporting documentation in addition to that listed above should stop doing so.
Pierce Atwood has developed these forms that employers may use in connection with employee requests for paid FFCRA leave:
- Emergency Family and Medical Leave Expansion Act (EFMLEA): Request for Leave
- Emergency Family and Medical Leave Expansion Act (EFMLEA): Notice of Leave Designation
- Emergency Paid Sick Leave Act (EPSLA): Request for Leave
- Emergency Paid Sick Leave Act (EPSLA): Notice of Leave Designation