The Family First Coronavirus Response Act (FFCRA), The Emergency Paid Sick Leave Act (EPSLA), and the Emergency Family and Medical Leave Expansion Act (EFMLEA) mandated employers to provide their employees with qualified sick leave and qualified family leave paid wages for COVID-19 related reasons.
The FFCRA furnished employers with less than 500 employees with refundable tax credits, reimbursing them for the cost of qualified leave wages paid. These tax credits are increased by the qualified health plan expenses allocable to, and the Eligible Employer’s share of Medicare tax on, the qualified leave wages.
Qualified paid leave applied to wages paid beginning April 1, 2020, and ending on December 31, 2020. The FFCRA was amended by the Covid-Related Tax Relief Act of 2020, which extended the tax credits for qualified paid wages for periods beginning January 1, 2021, through March 31, 2021. The American Rescue Act of 2021, then extended the credits for qualified paid leave starting on April1, 2021 and ended on September 30, 2021.
In 2021, employees who were unable to work for Covid-19 related reasons were eligible to receive up to $511 per day ($5,110 in total).
Qualified sick and family leave wage reporting
The IRS recently updated guidance for the Form W-2 reporting requirements regarding qualified sick leave and paid family leave wages paid in 2021 through Notice 2021-53. Employers are required to report the Qualified wages on Box 1 of Form W-2, as well as on Box 3 and Box 5 – to the extent of eligible Social Security and Medicare wages.
Employers must also report to their employees amounts paid for qualified sick leave and family leave wages on Box 14 and describe the provision under which the payments were made.
Some examples of the disclosures are:
- Sick leave wages are subject to the $511 per day limit paid for leave taken after December 31, 2020, and before April 1, 2021.
- Sick leave wages subject to the $200 per day limit paid for leave taken after December 31, 2020, and before April 1, 2021.
- Emergency family leave wages paid for leave taken after December 31, 2020, and before April 1, 2021.
Self-employed individuals
Self-employed individuals are also eligible to claim these refundable tax credits for a qualified sick leave equivalent amount or qualified family leave equivalent amount if they were unable to work due to COVID-19 related reasons.
In order to claim these credits, they must complete Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, and include it with their 2021 Income tax returns.
