IRS Updates FAQs on Tax Credits for FFCRA Leave

The Internal Revenue Service (IRS) recently updated its frequently asked questions (FAQs) regarding legislation that extended and amended tax relief to certain small and mid-sized employers under the Families First Coronavirus Response Act (FFCRA). The paid sick and family leave tax credits, which previously were available only until the end of 2020, have been extended for employers that voluntarily provide FFCRA leave to employees through March 31, 2021.

The FFCRA provided tax credits were intended for employers to cover certain costs associated with employee leave required by law. Specifically, the tax credits cover qualified paid sick leave and paid family leave wages, qualified health plan expenses allocable to employee leave wages, and the employer’s share of Medicare tax related to the qualified wages.

The paid sick leave credit is designed to allow qualified businesses — those with fewer than 500 employees and who pay “qualified sick leave wages” — to receive a credit for wages or compensation paid to an employee who is unable to work, at their place of employment or from home, due to:

  • a period of self-quarantine or
  • if they are experiencing COVID-19 symptoms and seeking medical diagnosis.

Employers may claim the credits on their deferral employment tax returns — Form 941, Employer’s Quarterly Federal Tax Return — but they can benefit more quickly from the credits by reducing their federal employment tax deposits. If needed, an eligible employer may request an advance of payment of the credits from the IRS by submitting Form 7200.

Employers — we encourage you to monitor updates from your state departments of labor for new laws, rules, and guidance surrounding COVID-19 and employee leave.

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Questions surrounding this information? Contact the dedicated leave experts that comprise MedLeave Solutions, LLC by calling 844-438-3652 or sending an email to fmla@medleavesolutions.com. For pertinent updates surrounding leave law and compliance, visit MedLeave’s LinkedIn page!