The Internal Revenue Service (IRS) recently issued guidance for employers addressing the reporting of qualified sick leave wages and qualified family leave wages paid to employees under the Families First Coronavirus Response Act (FFCRA). The FFCRA generally requires employers with fewer than 500 employees to provide paid leave due to certain circumstances related to COVID-19 through two separate provisions: the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act.
The IRS guidance, Notice 2020-54, states that employers will be required to report FFCRA leave compensation on either the employee's W-2, Box 14, or on a separate tax statement. If a separate statement is provided and the employee receives a paper W-2, then the statement must be included with the W-2 provided to the employee. If the employee receives an electronic W-2, then the statement must be provided in the same manner and at the same time as the electronic W-2.
Paid Sick Leave
Emergency paid sick leave wages paid to the employee should be included as taxable wages on a W-2 form in Box 1 (wages, tips and other compensation), Box 3 (Social Security wages) and Box 5 (Medicare wages and tips).
Additionally, in Box 14 of the W-2, sick leave on account of the employee's own illness or isolation due to COVID-19 must be labeled as "sick leave subject to $511 per day limit," or use similar language. Sick leave used for caring for another individual, including a minor child, must use the following, or similar, language: "sick leave subject to $200 per day limit."
Emergency FMLA
Like sick leave, emergency family and medical leave wages paid to the employee should be included as taxable wages on a W-2 form in Boxes 1, 3, and 5. In Box 14, the W-2 must identify the emergency family and medical leave as "emergency family leave wages," or use similar language.
Conclusion
Employers subject to the FFCRA paid leave requirements (those with fewer than 500 employees) should ensure that this paid leave is reported on the 2020 W-2 or in a statement included with the W-2.
Please reach out to the FWW Employment team with your questions about FFCRA paid leave or reporting requirements. For more information and resources, check out the FWW COVID-19 resource page here.
