Documentation Requirements for Payroll Tax Credits and Employee Eligibility Under FFCRA

Brownstein Hyatt Farber Schreck

Under the Families First Coronavirus Response Act (FFCRA), employers with fewer than 500 employees are required to provide certain paid sick and family leave to their employees. Refundable payroll tax credits are available, on a quarterly basis, to an eligible employer for the paid family and sick leave wages (qualified wages) required to be paid under the FFCRA. The Internal Revenue Service (IRS) recently provided guidance, in the form of frequently asked questions (FAQs), related to those refundable payroll tax credits for required paid sick and family leave. Included in the myriad of topics addressed in the FAQs is the identification of the documentation that an employer is required to collect and maintain in order to support the payroll tax credits taken by the employer. The IRS has indicated that these FAQs will be updated as necessary.

DOL Guidance Echoes IRS Guidance. We note that the U.S. Department of Labor (DOL) also issued FAQs on the paid sick and family leave requirements under the FFCRA. In its guidance, the DOL stated that an employer must retain the same information that the employer is required under IRS guidance to maintain to support the payroll tax credit for FFCRA-required paid sick and family leave (discussed below). Moreover, if an employee fails to provide the documentation necessary to support the tax credit, an employer is not required to provide the requested paid sick or family leave.

While the payroll tax credits for qualified leave wages apply only to qualified wages paid with respect to leave taken during the period beginning on April 1, 2020, and ending on Dec. 31, 2020, wages paid after Dec. 31, 2020, that relate to leave taken on or before Dec. 31, 2020, are eligible for the payroll tax credit.

Required Documentation. The chart linked here identifies the documentation required to be (i) collected and maintained by an employer in order to support its payroll tax credits and (ii) submitted by the employee seeking leave, and provides practical considerations for collecting and maintaining both types of documentation.

Please contact your regular Brownstein attorney for assistance with the FFCRA and/or the CARES Act, including questions about the documentation requirements for payroll tax credits discussed below. Our employment law attorneys can help you navigate the employment law aspects of the paid sick and family leave requirements.

Click here for the chart for the required documentation. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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