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Clarity on Families First Coronavirus Response Act tax credits documentation

April 7, 2020 Article 3 min read
Michael Krucker Michael Monaghan

Under the Families First Coronavirus Response Act, employers with fewer than 500 employees are generally required to provide certain paid sick and family medical leave benefits to eligible employees. Wondering what documentation is required? Read our alert to find out.

A woman in a modern office setting reading news on a tablet handheld device. Under the Families First Coronavirus Response Act (FFCRA), employers with fewer than 500 employees are generally required to provide certain paid sick and family medical leave benefits to eligible employees. An employer who is required to provide the paid sick or family medical leave benefits is eligible for a dollar-for-dollar refundable credit up to certain maximums.

While all of the details haven’t yet been worked out, the Department of Labor and IRS have separately issued FAQs that provide some clarity around the FFCRA, which can be found on the Department of Labor’s website and the IRS’s website. Additionally, the Department of Labor issued a temporary rule related to the FFCRA and published the model notices that covered employers are required to post, explaining the sick and family leave requirements under the FFCRA.

A series of IRS FAQs provide guidance on a covered employer’s obligation to substantiate eligibility for the credit. Under this guidance, a covered employer should retain records documenting the employee’s need for the leave and additional records documenting how the employer calculated the credit and related filings for at least four years.

1. Employee documentation evidencing need for leave

The IRS guidance provides that an employer can substantiate eligibility for the sick leave or family leave credits if the employer receives a written request from the employee for the requested leave providing:

  1. The employee’s name.
  2. The date the leave is requested.
  3. A statement of the COVID-19-related reason the employee is requesting leave and the written support for such reason.
  4. A statement that the employee is unable to work, including telework, for such reason.

In case of a leave request based on a quarantine order or self-quarantine advice, the employee should provide the name of the governmental entity ordering the quarantine or the name of the healthcare provider advising self-quarantine. If the employee is caring for another individual subject to a self-quarantine, the employee should provide that individual’s name and relation to the employee.

In the case of a leave request to care for a child based on a school or childcare provider closing, the statement should include the name and age of the child, the name of the school or place of care that’s unavailable, and a representation from the employee that no other person will be providing care for the child during the leave period. Additionally, if the need is to care for a child over the age of 14 during daylight hours, a statement that special circumstances exist requiring the employee to provide the care.   

2. Employer documentation evidencing calculation and related filings

The employer should also retain documentation showing how the employer determined the amount of sick and family leave wages paid to eligible employees including records of work, telework, qualified sick leave, and qualified family leave. In addition, the employer should retain documentation evidencing how the employer determined the amount of qualified health plan expenses that the employer allocated to wages.

Finally, the employer should retain any completed Forms 7200, Advance of Employer Credits due to COVID-19, and any copies of completed Forms 941 that the employer submitted to the IRS.

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