Documentation Required for Tax Credits for FFCRA Leave

As of April 1, employees are eligible for the paid sick leave and expanded family and medical leave available under the Families First Coronavirus Response Act (FFCRA).

On March 31^st, the IRS published guidance (FAQs) on what employers must provide the IRS to support a claim for sick leave or family leave tax credits. The guidance also clarified that only one caretaker can take leave for a child whose school or childcare is closed, and if the child is 14 or older, the parent must provide an explanation of the special circumstances that require the employee to provide care to receive the tax credit (at this point it appears that you still must provide the paid FMLA leave under the FFCRA).

The relevant portion of the IRS guidance provided as FAQs (from questions 44-46) is quoted and explained below.

What Information Do Employers Need to Show Eligibility for the Sick Leave or Family Leave Credits?

An employer can show 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:”

1. The employee’s name;

2. The date or dates for which leave is requested;

3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and

4. A statement that the employee is unable to work, including by means of telework, for such reason.

If the Leave is Requested Based on an Order to Quarantine or Self-Quarantine Advice, then the Statement from the Employee Should Include:

1. the name of the governmental entity ordering quarantine or

2. the name of the health care professional advising self-quarantine, and,

3. if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.

If the Leave is Based on the Closing of a Child’s School or Childcare, Then the Statement Should Include:

1. the name and age of the child (or children) to be cared for,

2. the name of the school that has closed or place of care that is unavailable, and

3. 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,

4. 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.

“What Additional Records Should an Eligible Employer Maintain to Substantiate Eligibility for the Sick Leave or Family Leave Credit?”

An employer should maintain the following records to show that an employee legitimately took paid sick leave or emergency FMLA and to show that they are eligible for the tax credit:

1. 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.

2. 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.

3. Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.

4. 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 These Records?

Employers “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.”

The information provided in this blog is for educational purposes only and is not legal advice. If you need legal advice, then you should speak with a lawyer about your specific issues. Every legal issue is unique. A lawyer can help you with your situation. Reading the blog, contacting me through the site, emailing me or commenting on a post does not create an attorney-client relationship between any reader and me.

The information provided is my own and does not reflect the opinion of my firm or anyone else.