The IRS released new FAQs in June about tax credits for eligible employers who voluntarily provide paid employee leave under the Families First Coronavirus Response Act (FFCRA). The previous-required FFCRA paid sick and family leave expired Dec. 31, 2020, but subsequent legislation—most recently the American Rescue Plan Act (ARPA)—extended and enhanced the tax credits available for employers that choose to provide the FFCRA leave through Sept. 30, 2021.
There are 123 new FAQs, divided into 16 subtopics. They include information on how employers may claim the tax credits, including how to file for and compute the applicable credit amounts and how to receive advance payments for and refunds of the credits. The FAQs clarify the following issues, among others:
- Daily and aggregate wage limits do not include health plan expenses or the employer’s share of Social Security and Medicaid taxes.
- Qualified leave wages do not include federal taxes on the wages.
- The last day an employer may file for advance payment of the credit.
- The credit may apply for leave between April and September 2021, even if the employer did not pay the employee initially.
- Employers must collect and maintain specific information from employees (and may require more than that specified) to substantiate eligibility for the credits. Records must be kept for six years.
As a reminder, the tax credits apply to employers with fewer than 500 employees and are refundable and advanceable. Wages are subject to daily and total limits.
Our bulletin below and the IRS website contain additional information about the tax credit and recently issued FAQs.
If you have questions or need help, please contact one of our benefit consultants.