UPDATED APRIL 8, 2020
The Families First Coronavirus Response Act (the “FFCRA”), was signed by the President March 18, 2020, and provides employers subject to the FFCRA refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. For more information about the FFCRA, please visit our detailed blog post.
Last week, the Internal Revenue Service (IRS) released a series of frequently asked questions (IRS FAQs) regarding the employer requirements, limitations on benefits, and application of the paid leave credits highlighting the documentation employers should require from employees to substantiate an employee’s need for leave under the FFCRA.
This article provides an overview of what employers need to know with respect to recordkeeping requirements for leave provided under the FFCRA.
Requesting Leave Under the FFCRA
What Must an Employee’s Request for Paid Leave Under the FFCRA Include?
Employees must submit a written request for leave that includes the following:
- The employee’s name;
- The date(s) for which leave is requested;
- A statement of the COVID-19 related reason they are requesting leave and written support for such reason*; and
- A statement that they are unable to work, including telework, due to the stated reason.
*For leave based on a quarantine order or self-quarantine advice, the written statement from the employee above should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine. If the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee should be included in the written statement.
For a leave request based on a school closing or child care provider unavailability, the written statement should include the name and age of the child (or children) to be cared for, the name of the school or place of care that has closed, and a representation that no other person will be providing care for the child during the leave. With respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
Authority: IRS FAQ, #44
Obtaining Tax Credits Under the FFCRA
Employers may begin claiming tax credits for qualified leave wages paid to employees due to paid sick leave or expanded family and medical leave for reasons related to COVID-19 (beginning on April 1, 2020 and ending on December 31, 2020). The IRS expects to begin processing these requests during April 2020.
What Records Does an Employer Need to Substantiate Leave to Obtain Tax Credits?
In addition to maintaining the documentation described above when leave is requested by an employee, the employer must create and maintain records that include the following information:
- Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick and family leave;
- Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages. (See, IRS FAQ #31 for methods to compute this allocation);
- Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS;
- Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS (or, for employers that use third party payers to meet their employment tax obligations, records of information provided to the third party payer regarding the employer’s entitlement to the credit claimed on Form 941).
Authority: IRS FAQ, #45
How Long Must an Employer Keep Records to Substantiate Eligibility for the Tax Credit?
Employers subject to the FFCRA should keep all records of employment taxes for at least 4 years after the date the tax becomes due or is paid, whichever comes later. These should be available for IRS review.
Authority: IRS FAQ, #46
As always, employers should consult with tax professionals on questions related to their ability to obtain these tax credits.
Employers Must Post an FFCRA Notice
What are the Notice Requirements?
Employers are required to post a notice informing employees of their right to COVID-19-related paid sick leave and family medical leave under the FFCRA in a conspicuous place. An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website. The Secretary of Labor released a Model Employee Rights Poster and FAQs on the posting requirement. Employers are not required to post this notice in other languages, however, the DOL working on making translated versions available. Employers may want to consider updating their existing leave materials to include information about taking leave under the FFCRA.
Are Employers Required to Provide Notice to Applicants, Recently Laid Off Individuals or New Hires?
The DOL has clarified that the requirements under the FFCRA apply only to current employees and therefore, employers are not required to provide the notice to recently laid-off individuals or prospective employees.
Employers are required to provide this notice to new hires, either by email, direct mail, or by posting this notice on the premises or on an employee information internal or external website.
When Must Employers Post the Notice?
Employers must post the notice by April 1, 2020.
For additional information specific to the notice requirement, please review the DOL’s Families First Coronavirus Response Act Notice – FAQs.
The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.