What Employers Need to Document to Support Families First Tax Credits
On March 18, 2020, the Families First Coronavirus Response Act (the “Act”) was signed into law which provided certain employees with emergency paid sick leave (EPSL) and emergency Family and Medical Leave Act (EFMLA) leave beginning April 1, 2020. The Act explained that employers could take a tax credit to reimburse the employer for wages paid for leave time to employees under the provisions of the Act. In accordance with the Act, the Internal Revenue Service (IRS) has issued guidance to employers regarding what kind of documentation they will need in order to substantiate their eligibility for EPSL or EFMLA tax credits.
Employee Written Request
The employer must obtain a written request for EPSL and/or EFMLA leave from the employee. The written request should include the following:
The employee’s name;
The date or dates for which leave is requested;
A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
A statement that the employee is unable to work or telework for such reason.
As reported in a prior article, there are six COVID-19 related reasons which would allow an employee to take emergency paid sick leave, and the EFMLA paid leave is available if the employee is unable to work due to caring for a son or daughter whose school or day care is closed.
If the employee is requesting leave based on a governmental quarantine, stay-at-home or shelter in place order, then the employee should include in their written request the name of the governmental entity ordering the quarantine or similar order.
If the employee is requesting leave based on an order from a health care provider to self-quarantine, then the employee should include in their written request the name of the health care professional advising self-quarantine. If the employee is requesting leave in order to care for another person subject to a health care professional’s self-quarantine order, then the employee should also include the name of the person the employee is caring for and that person’s relationship to the employee.
If the employee is requesting leave based on a school or day care closing , then the employee should include in their written request the name and age of the child to be cared for, the name of the closed school or day care, and a statement that no other person will be providing care for the child during the employee’s requested leave period. If the child is over 14 years of age and the leave period is during daylight hours, then the written request from the employee also needs to include a statement that special circumstances exist which require the employee to stay home to care for the child.
Employer Records
In addition to the written statement from the employee described above, the employer needs to retain the following information:
The employer’s calculation of the amount of EPSL and/or EFMLA wages paid to the eligible employee, including records of time worked and leave time.
The employer’s calculation of the amount of qualified health plan expenses for the eligible employee that the employer attributed to wages.
Copies of all Form 7200 (Advance of Employer Credits Due To COVID-19) submitted to the IRS by the employer.
Copies of all Form 941 (Employer’s Quarterly Federal Tax Return) submitted to the IRS by or on behalf of the employer.
All of the records that employer is required to keep in order to substantiate these tax credits should be retained for at least 4 years after the tax is paid.