On its website, the IRS has updated its answers to frequently asked questions (FAQs) to reflect the changes made to the sick and family leave credits by the Consolidated Appropriations Act, 2021 (CAA, 2021). This article addresses changes the IRS made to its “eligible employer” FAQs.
Background—FFCRA credits.
The Families First Coronavirus Response Act (FFCRA; PL 116-127) provides paid sick and family leave for COVID-19 related reasons and creates the refundable paid sick leave credit and the paid family leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide paid sick and family under the FFCRA. The Consolidated Appropriations Act, 2021 (CAA, 2021; PL 116-260) extended the deadline for claiming the FFCRA credits and made other changes to these credits.
Under the CAA, 2021, eligible employers may claim the FFCRA credits for qualified paid leave that took place on or before March 31, 2021. See Index to Payroll Provisions in the Consolidated Appropriations Act, 2021 (01/04/21).
Updated eligible employer FAQs.
The IRS has now updated the FAQs on its website to reflect the changes made to the FFCRA tax credits by the CAA, 2021. The FAQs below are those on the subject of eligible employers, that were updated on January 28, 2021.
19a. If an eligible employer excludes a health care provider or an emergency responder from eligibility for paid sick or family leave for one or more reasons but not for other reasons, may the eligible employer claim the credit for paid leave it provides to the employee for any “non-excluded” reason?
Yes. For periods of leave between April 1, 2020, and December 31, 2020, the FFCRA provides that eligible employers may exclude employees who are health care providers or emergency responders from the paid sick and family leave requirements. Also, while there isn’t any requirement to provide paid sick or family leave for periods of leave between January 1, 2021, and March 31, 2021, an eligible employer may claim credits for paid leave that otherwise meets the requirements of the FFCRA. However, if an employer does not elect to exclude a health care provider or emergency responder from taking paid leave under FFCRA it is subject to all other requirements of the FFCRA.
For example, if an eligible employer excludes an employee who is a health care provider from taking paid sick leave to care for a family member, but does not exclude the employee from taking paid sick leave for reasons relating to the employee’s own health, the eligible employer is required to provide the employee with paid sick leave if the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19 or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis. In this case, the eligible employer may claim the credit for any such qualified sick leave wages it pays to the employee, as well as the credit for allocable qualified health plan expenses and the eligible employer’s share of Medicare tax on those qualified sick leave wages.
For information on who is a health care provider and emergency responder, see “Who is a ‘health care provider’ who may be excluded by their employer from paid sick leave and/or expanded family and medical leave?”
19b. Can government employers receive tax credits for providing paid leave wages under the FFCRA?
No. Federal and state governments, their political subdivisions and any agencies or instrumentalities of those governments, are not eligible employers and, therefore, are not entitled to receive tax credits for providing paid leave wages under the FFCRA. However, for periods of leave between April 1, 2020, and December 31, 2020, non-federal public sector employers generally must provide paid sick and family leave under the FFCRA, while federal public sector employers generally must provide paid sick leave under the FFCRA. (The requirement to provide paid leave under the FFCRA ended on December 31, 2020.)
For more information on whether and to what extent public sector employers must provide paid leave under the FFCRA, go here.
The FAQ notes that to the extent that public sector employers provide paid leave under the FFCRA, the wages paid during the employee’s leave (“paid leave wages”) are not subject to the employer’s share of social security tax.
19e. Are household employers eligible for the tax credits?
Yes. Assuming a household employer is otherwise an eligible employer, the household employer may claim tax credits for “paid leave wages” under the FFCRA. Whether a household employer provides paid leave to a household worker under the FFCRA depends on whether the household employer is an employer under the Fair Labor Standards Act (FLSA).
For more information on how the DOL classifies household workers, see here.
19f. Can employers claim the tax credit for amounts paid to H-2A visa holders?
Yes. Eligible employers are entitled to tax credits under the FFCRA for qualified leave wages paid to H-2A workers.
To continue your research on the employer credit for qualified paid sick leave, see FTC 2d/FIN ¶H-4687 For the employer credit for qualified paid family leave, see FTC 2d/FIN ¶H-4687.
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