IRS guidance for employers claiming tax credits under the Families First Coronavirus Response Act (“FFCRA”) provides important information. This article details some of the highlights of the IRS guidance. The complete guidance is available here. To learn about the basic leave requirements under FFCRA, read our previous summaries here and here. To learn more about the tax credits available to non-government employers, read our previous summary here.
Employers must obtain documentation necessary to substantiate the employee’s eligibility for leave under the FFCRA. Failure to do so may result in the employer being unable to take the tax credits. Under the guidance:
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 documentation requirement thus clarifies that FFCRA leave for childcare is available only if no other person will be providing care for the child during the period of family and medical leave (the FMLA expansion provided for childcare reasons only). Further, an employee is not presumed to be unable to work or telework for childcare reasons when the child is older than 14. For these children, special circumstances must exist that require the employee to provide care. The IRS does not detail what would qualify as “special circumstances.”
The IRS guidance also explains that the employer must retain the following documentation for at least 4 years after the date the tax becomes due or is paid, whichever comes later:
- 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).
The labor and employment attorneys at Berchem Moses PC are staying on top of all the latest legislation and guidance to help you navigate the new legal terrain brought about by the coronavirus pandemic. Please call us if we can be of assistance.