The Internal Revenue Service (IRS) has finally provided employers covered by the Families First Coronavirus Response Act (FFCRA)—those employers with less than 500 employees—with guidance concerning the documentation needed in order to seek the refundable payroll tax credits provided for under the FFCRA. In so doing, the IRS has essentially established the documentation employees should be prepared to provide to employers in order to obtain the new COVID-19 related paid sick leave rights.
As previously reported, President Trump officially signed the FFCRA into law on March 18, 2020. Among its provisions, the FFCRA set out several key mandates that impact employers, including:
- New, separate paid sick leave rights for employees impacted by COVID-19 and those serving as caregivers for individuals with COVID-19; and
- New, enhanced leave entitlements under the federal Family Medical Leave Act (“FMLA”), including paid leave under FMLA.
Since its passage, employers covered by the FFCRA have worked to understand and implement the FFCRA, including how to obtain the refundable tax credits provided by Congress as a way to offset the costs of these new mandates.
Recently, the Internal Revenue Service (IRS) provided its own initial guidance to assist covered employers with the mechanics of complying with the FFCRA. Of particular importance to employers, the IRS provided some guidance regarding what information covered employers should receive from an employee in order to “substantiate” eligibility for the FFCRA tax credits. You should maintain all records noted below for at least four (4) years after the payroll tax becomes due or is paid, whichever is later.
General Required Documentation
According to the IRS guidance, a covered employer will “substantiate eligibility” for the FFCRA’s paid sick leave and/or paid 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 addition, the IRS directs covered employers to “create and maintain records” that include the following information:
- Documentation to show how you determine the amount of qualified sick and family leave wages you paid to each employee, including records of work, telework, and qualified family leave;
- Documentation to show how you determine the amount of qualified health plan expenses that the employer allocated to wages;
- Copies of any completed Forms 7200, Advance of Employer Credits Due to COVID-19, that you submit to the IRS; and
- Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that you submit to the IRS.
In addition to the general requirements outlined above, several of the specific COVID-19 related reasons for leave require their own additional details. For example, 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.
Similarly, 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.
Additionally, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen (14) during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
While this IRS guidance does provide covered employers with additional clarity on the types of forms and other documentation needed to obtain the sought-after refundable tax credits under the FFCRA, the IRS guidance also raises other questions that will need to be answered. For example, the IRS guidance does not specify what would satisfy “statement of the COVID-19 related reason the employee is requesting leave and written support for such reason.” Legal commentators recommend that any certification forms distributed to employees requesting leave also include language indicating that “additional documentation may be required.”
As the IRS and DOL continue to release additional information on the process for employers to receive these important tax credits, we will continue to monitor further proposed legislation and its potential effects on employers.