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IRS Issues New Form 8994 for Employer Tax Credit for Paid Family and Medical Leave

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EBIA  

IRS Form 8994 (Employer Credit for Paid Family and Medical Leave) and Instructions

Form 8994

Instructions

The IRS has issued the 2018 Form 8994, which is used by employers to figure the tax credit created by the Tax Cuts and Jobs Act for providing paid family and medical leave (see our Checkpoint article). To claim the credit, eligible employers must have a written program that pays at least 50% of wages to qualified employees for at least two weeks of annual paid family and medical leave. Eligible employers paying 50% of wages may claim a general business credit of 12.5% of wages paid for up to 12 weeks of family and medical leave a year, with the credit increasing to as much as 25% if the rate of payment exceeds 50%. The credit is available for tax years beginning after 2017 and before 2020. A transition rule allows eligible employers that set up a qualifying program (or amended an existing program) by December 31, 2018, to claim the credit for eligible leave already provided during their 2018 tax year.

Form 8994 requires the employer to confirm that (1) it has a written policy providing for at least two weeks of annual paid family and medical leave for qualifying employees; (2) the written policy provides paid family and medical leave of at least 50% of wages; (3) the employer provided paid family and medical leave to at least one qualifying employee during the tax year; and (4) the written policy includes the required “non-interference” language if at least one qualifying employee was not covered by the Family and Medical Leave Act. The form also includes lines for calculating the credit and references a worksheet in the instructions that can be used to figure the credit amount. In addition, the instructions provide detailed definitions, rules, and examples—much of which was previously provided in IRS Notice 2018-71 (see our Checkpoint article).

EBIA Comment: Employers that provided paid family and medical leave during the 2018 tax year will want to carefully review the form and instructions while preparing their tax returns. The instructions will also provide helpful guidance to those employers considering offering paid family and medical leave during 2019. The IRS has indicated that it intends to issue proposed regulations on the credit, so employers will want to be on the lookout for those as well. For more information, see EBIA’s Group Health Plan Mandates manual at Section XVII.M.7 (“Employer Tax Credit for Paid Family and Medical Leave”).

Contributing Editors: EBIA Staff.

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