New Guidance For Employers On W-2 Reporting For Sick and Family Leave Wages Paid Pursuant To The Families First Coronavirus Response Act

Fraser Trebilcock
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Fraser Trebilcock

On July 8, 2020, the Internal Revenue Service (“IRS”) and the U.S. Department of Treasury (“Treasury”) released guidance to employers regarding the requirement to report the amount of qualified sick leave wages and qualified family leave wages paid to employees under the Families First Coronavirus Response Act (“FFCRA”). The guidance was provided in Notice 2020-54 (the “Guidance”).

Background

The FFCRA, which was enacted on March 18, 2020, requires employers with fewer than 500 employees to provide paid leave due to certain circumstances related to COVID-19 through two separate provisions: the Emergency Paid Sick Leave Act (“EPSLA”) and the Emergency Family and Medical Leave Expansion Act (“EFMLA”).

The EPSLA applies to virtually all private employers with fewer than 500 employees and to virtually all public agencies employing one or more employees. Under section 5102(a) of the EPSLA, employers shall provide employees with paid sick time if they are unable to work (or telework) due to a need for leave because:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. The employee has been advised by a health care provider to self-quarantine due to concerns relating to COVID-19;
  3. The employee has COVID-19 symptoms and is seeking a medical diagnosis;
  4. The employee is caring for an individual subject to quarantine or isolation or advised to self-quarantine as described in paragraphs (1) or (2) above;
  5. The employee is caring for his/her child if the school or place of care has been closed or the child care provider is unavailable due to COVID-19 precautions; and
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

An employee who is unable to work or telework for reasons related to COVID-19 described in (1), (2), or (3) above is entitled to paid sick leave at the employee’s regular rate of pay or, if higher, the federal minimum wage or any applicable state or local minimum wage, up to $511 per day and $5,110 in the aggregate. An employee who is unable to work or telework for reasons related to COVID-19 described in (4), (5), or (6) above is entitled to paid sick leave at two-thirds the employee’s regular rate of pay or, if higher, the federal minimum wage or any applicable state or local minimum wage, up to $200 per day and $2,000 in the aggregate.

Pursuant to the EFMLA, expanded FMLA leave applies to employees who have been employed at least 30 days by employers who employ fewer than 500 employees (and public agencies) if those employees are unable to work (or telework) because they need to care for their children due to the closure of schools or unavailability of day care due to a government declared COVID-19 public health emergency. The first 10 days of the 12-week job-protected leave is unpaid. However, subsequent days must be paid leave in an amount of not less than two-thirds of regular pay, capped at $200 per day with a maximum cap of $10,000 per employee.

Form W-2 Reporting

Pursuant to the Guidance, employers must separately state the total amount of qualified sick leave wages paid pursuant to paragraphs (1), (2), or (3) of section 5102(a) of the EPSLA, qualified sick leave wages paid pursuant to paragraphs (4), (5), and (6) of section 5102(a) of the EPSLA, and qualified family leave wages paid pursuant to the EFMLEA.

With respect to paid sick leave under the EPSLA, in addition including qualified sick leave wages in the amount of wages paid to the employee reported in Boxes 1, 3 , and 5 of Form W-2, such amounts must be separately reported either in Box 14 of Form W-2 or on a separate statement. In labeling wages paid for reasons described in paragraphs (1), (2), or (3) of section 5102(a) of the EPSLA, employers must use the following (or similar) language: “sick leave wages subject to the $511 per day limit.” For wages paid for reasons described in paragraphs (4), (5), or (6) of section 5102(a) of the EPSLA, employers must use the following (or similar) language: “sick leave wages subject to the $200 per day limit.”

When reporting family leave wages under the EFMLEA, in addition to including such wages in the amount of wages paid to the employee reported in Boxes 1, 3, and 5 of Form W-2, employers must separately report to the employee the total amount of qualified family leave wages paid in either Box 14 of Form W-2 or on a separate statement. In doing so, employers must use the following (or similar) language: “emergency family leave wages.”

According to the Guidance, if a separate statement regarding sick leave wages and/or family leave wages is provided to the employee and the employee receives a paper Form W-2, then the statement must be included with the Form W-2 provided to the employee. If the employee receives an electronic Form W-2, then the statement shall be provided in the same manner and at the same time as the Form W-2.

Model Language for Instructions

The Guidance provides model language that employers may include for instruction to employees related to wages reported in Box 14 of Form W-2 or in a separate statement:

“Included in Box 14, if applicable, are amounts paid to you as qualified sick leave wages or qualified family leave wages under the Families First Coronavirus Response Act. Specifically, up to three types of paid qualified sick leave wages or qualified family leave wages are reported in Box 14:

  • Sick leave wages subject to the $511 per day limit because of care you required;
  • Sick leave wages subject to the $200 per day limit because of care you provided to another; and
  • Emergency family leave wages.

If you have self-employment income in addition to wages paid by your employer, and you intend to claim any qualified sick leave or qualified family leave equivalent credits, you must report the qualified sick leave or qualified family leave wages on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, included with your income tax return and reduce (but not below zero) any qualified sick leave or qualified family leave equivalent credits by the amount of these qualified leave wages. If you have self-employment income, you should refer to the instructions for your individual income tax return for more information.”

Conclusion

The law and guidance regarding employer requirements related to wages for sick leave and family leave are rapidly evolving. We will continue to keep you informed of new developments.

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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