IRS Guidance on Tax Credits for Employee Leave Under the FFCRA

The Families First Coronavirus Response Act (FFCRA), passed in March 2020, required small and midsized employers to provide paid employee leave for specific COVID-19-related reasons through Dec. 31, 2020. The FFCRA also provided tax credits for employers to cover the cost of the leave.

The FFCRA employee leave requirements expired in December 2020; however, subsequent legislation extended the tax credits for employers that continued to offer FFCRA leave on a voluntary basis. The credits are currently in effect through Sept. 30, 2021. They are taken against employment taxes and are fully refundable and advanceable.

The IRS has maintained guidance on the tax credits, including answers to frequently asked questions (FAQs), a fact sheet and a snapshot document. Note that the IRS FAQs have not been updated since the American Rescue Plan Act (ARPA) amended the tax credit provisions in March 2021.

LINKS AND RESOURCES

  • IRS FAQs on COVID-19-related tax credits for paid leave provided by small and midsized businesses (the FAQs do not currently reflect changes made by the American Rescue Plan Act)
  • IRS fact sheet about tax credits for paid employee leave under the FFCRA
  • IRS snapshot document about tax credits for FFCRA leave

IRS FAQ Topics

Key topics covered by the IRS FAQs include:

  • Eligible employers
  • Qualified sick leave wages
  • Qualified family leave wages
  • Qualified health plan expenses
  • How to claim the credits
  • Periods during which credits apply
  • Substantiating eligibility
  • Deductibility of tax credits
  • Interaction of tax credits
  • Third-party payers
  • Self-employed individuals

Important Dates

  • March 18, 2020 – Families First Coronavirus Response Act passed, providing employer tax credits for required paid employee leave.
  • Dec. 27, 2020 – Consolidated Appropriations Act, 2021, extended the tax credits through March 2021.
  • March 11, 2021 – American Rescue Plan Act extended the credits through September 2021.
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