IRS Provides Information About Tax Credits for Employers Voluntarily Providing FFCRA Leave in 2021
The IRS has recently released a lengthy FAQ answering many different questions regarding the tax credits offered to employers who have voluntarily given employees leave under FFCRA law in 2021. As a reminder, the Families First Coronavirus Response Act (FFCRA) contained requirements for employers to provide certain forms of Emergency Paid Leave to employees in 2020 during the COVID-19 pandemic. Later that year, the FFCRA requirements were repealed, but the federal government allowed employers to offer these benefits voluntarily to its employees in exchange for tax credits.
The new IRS FAQ spells out in more detail how exactly these tax credits will work. The 123-question document covers a wide range of issues that employers may deal with when attempting to collect tax credits for the optional leave they have chosen to provide. Important topics covered include:
- The amount of paid leave an employer may claim a tax credit on. Depending on the type of leave taken by the employee, that amount will be a maximum of either $2,000 aggregate ($200 per day) or $5,110 aggregate ($500 per day). These maximums do not include any federal taxes on wages, health plan expenses of employer, or Social Security/Medicaid taxes.
- FFCRA tax credits are available for employers who offer FFCRA leave to employees between the periods of April 1, 2021-September 30, 2021.
- The process for claiming the tax credits. The FAQ directs eligible employers to report their total leave wages paid on their federal employment tax returns (usually Form 941).
- Employers may reduce their federal employment tax payments in anticipation of leave credits.
- The process for an employer to request advancement of tax credits (Form 7200). This includes detailed information about the Form 7200 and the information required to complete it.
- The Forms and other information that must be kept by the employer in order to substantiate a claim of FFCRA tax credits. Any such records outlined in the FAQ must be retained for at least six years.
You can read the entire FAQ HERE.