IRS Issues Instructions on Reporting Emergency Paid Leave Wages
On July 8, 2020, the Internal Revenue Service (IRS) released guidance for employers on reporting qualifying wages paid to employees under the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA). Both laws are part of the “phase one” coronavirus legislation, the Families First Coronavirus Response Act (FFCRA), passed on March 18, 2020. The FFCRA requires employers with fewer than 500 employees to provide paid emergency sick and family leave to qualifying employees between April 1, 2020, and December 31, 2020.
The IRS guidance clarifies that FFCRA qualifying leave wages paid to employees must be added to the sum of wages reported in Boxes 1, 3 (as applicable), and 5 of Form W-2. Additionally, employers must separately report three categories of leave wages in Box 14 (or on a separate statement), labeling them using the model or similar language, as specified below:
- EPSLA sick leave wages paid to an employee because the employee: (1) “is subject to a Federal, State, or local quarantine or isolation order related to COVID-19”; (2) “has been advised by a health care provider to self-quarantine due to concerns related to COVID-19”; or (3) “is experiencing symptoms of COVID-19 and seeking a medical diagnosis.” These wages must be reported using the language: “sick leave wages subject to the $511 per day limit.”
- EPSLA sick leave wages paid to an employee because the employee: (1) “is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19”; (2) “is caring for a son or daughter of such employee if the school or place of care … has been closed, or the child care provider … is unavailable, due to COVID-19 precautions”; or (3) “is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of the Treasury and Labor.” These wages must be reported using the language: “sick leave wages subject to the $200 per day limit.”
- EFMLEA family leave wages must be reported using the language: “emergency family leave wages.”
In addition, employers may provide further detail to employees about the FFCRA leave wages reported in the Box 14 instructions or in a separate statement. The IRS guidance contains model language, which explains the type of FFCRA leave wages paid by an employer, as well as specific instructions for individuals with self-employment income.
If employers use a separate statement to report FFCRA leave wages, the statement must be included with the Form W-2 sent to the employee. Employees receiving an electronic Form W-2 must receive the separate statement electronically “in the same manner and at the same time as the Form W-2.”