IRS Issues Guidance on Claiming Credit for
Paid Leave

On March 31, 2020, the IRS issued an FAQ for employers seeking to claim the tax credit for providing paid Emergency Sick Leave and Emergency FMLA Leave under the Families First Coronavirus Response Act (the Act). The FAQ provides detailed instructions on:

• Determining the total amount of the credit
  • Emergency Sick Leave wages

  • Emergency FMLA Leave wages

  • Qualified health plan expenses

  • Employer’s share of Medicare taxes
     

• How to claim the credit

  • Reducing federal employment tax deposits in the quarter after it pays qualified leave wages to employees (and account for the reduction in deposits on the Form 941, Employer's Quarterly Federal Tax Return, for the quarter)

  • Requesting an advance of the credit by filing Form 7200 if the employer does not have sufficient federal employment taxes set aside for deposit to cover the payment of qualified leave wages to employees
     

• Other issues

  • Documentation to substantiate eligibility to claim the credit

  • Period of time for which the credit is available

  • Taxability of and deductions from leave wages

CAAs should read this FAQ closely and work with their finance departments and tax advisors to ensure they are able to take full advantage of the tax credits. CAPLAW will be monitoring the response to the IRS FAQ and will provide additional analysis as necessary.

For information about the paid leave requirements under the Act, see CAPLAW's March 31st webinar and handout, and updates on our coronavirus page.

This News Flash is part of the Community Services Block Grant (CSBG) Legal Training and Technical Assistance (T/TA) Center. It was created by Community Action Program Legal Services, Inc. (CAPLAW) in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Cooperative Agreement – Grant Award Number 90ET0467-03. Any opinion, findings, conclusions, or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.

The contents of this news flash are intended to convey general information only and do not constitute legal advice. Any communication through this publication or through CAPLAW’s website does not constitute or create an attorney-client relationship. If you need legal advice, please contact CAPLAW or another attorney directly.