What Are the Key Takeaways from the IRS’s New Guidance and the DOL’s Proposed Rules?
April 2, 2020
The federal government continues to provide additional guidance and rulemaking on the Families First Coronavirus Response Act’s Emergency Paid Sick Leave (EPSL) and Expanded FMLA (E-FMLA) requirements, which went into effect on April 1.
- The IRS’s new guidance is available here.
- Additionally, the Department of Labor (DOL) has issued proposed rules on the enforcement of the FFCRA, available here.
Below are the highlights. To read our initial write-up of the FFCRA, and our summaries of the IRS’s and DOL’s previous guidance, click here.
- Requests for leave need to be in writing and contain specific information depending on the need for the leave.
- Leave to care for an “individual” only covers immediate family members, people in the household and other similar people.
- Where leave is to care for a child aged 15-18, and provided that work is during daylight hours, employee must provide special justification of their need for leave.
- Shelter-in-Place and Stay-at-Home orders do constitute government quarantine/isolation orders, but employees can only claim leave for one of these reasons if they are subject to the order (i.e. not essential) and there is work for them to do (i.e. workplace is open) – leaving very few situations where an employee could claim EPSL based on such an order.
Is there more information on how to claim the tax credits for providing EPSL and E-FMLA?
Yes! Employers will report the amount of EPSL and E-FMLA (“qualified leave wages”) on their quarterly federal employment tax returns (typically a Form 941).
Employers may receive the tax credit in advance by reducing the amount of federal employment taxes they deposit for that quarter by the amount of the qualified leave wages paid in that quarter.
The IRS provides the following example:
An employer paid $5,000 in qualified leave wages and is otherwise required to deposit $8,000 in federal employment taxes, including taxes withheld from all of its employees, for wage payments made during the same quarter as the $5,000 in qualified leave wages. The employer may keep up to $5,000 of the $8,000 of taxes it was going to deposit, and it will not owe a penalty for keeping the $5,000. The employer is then only required to deposit the remaining $3,000 on its required deposit date. The employer will later account for the $5,000 it retained when it files its Form 941, Employer's Quarterly Federal Tax Return, for the quarter.
What about tax credits for “qualified health plan expenses”?
Tax credits for qualified leave wages may be increased by the amount employers pay to provide and maintain a group health plan (“qualified health plan expenses”) allocable to each type of qualified leave wages. Qualified health plan expenses are properly allocated to EPSL or E-FMLA if the allocation is made on a pro rata basis among covered employees (for example, the average premium for all employees covered by a policy) and pro rata on the basis of periods of coverage (relative to the time periods of leave to which such wages relate).
What form do I use to request advance payment of tax credits?
Form 7200. The form, and instructions for completing it, are available here.
What information do I need to request from an employee to substantiate the tax credits?
Employers need to request the following information in writing in order to substantiate the need for leave:
- The employee’s name;
- The date or dates for which leave is requested;
- A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
- A statement that the employee is unable to work, including by means of telework, for such reason.
Additional information is also required for the following:
- If the need for leave is based on a quarantine order, the statement from the employee should include the name of the governmental entity ordering quarantine.
- If the need for leave is based on the advice of a health care provider to self-quarantine, the statement from the employee should include the name of the health care professional advising self-quarantine.
- If the need for leave is to care for a person subject to a quarantine order or advised to self-quarantine, the employee will need to provide the person’s name and relation to the employee (in addition to the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine.)
- If the need for leave is based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
What records do I need to retain to request the tax credit?
In addition to retaining the information provided by the employee, employers should retain the following documentation:
- Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave.
- Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages.
- Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.
- Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS.
How long will I need to retain these records?
For four years after the date the tax becomes due or is paid, whichever comes later.
How long are the tax credits available?
The credits are available for EPSL and E-FMLA leave taken between April 1, 2020, through December 31, 2020, even if paid after December 31, 2020.
DOL’S Temporary Rule
Note that the temporary rule is effective as of April 1, but the DOL has noted that the version currently available may vary slightly from the published rule.
Employees may receive EPSL if they are subject to a quarantine or isolation order or are caring for an individual who is subject to quarantine or isolation order. What is a “quarantine or isolation order”?
A quarantine or isolation order includes quarantine, isolation, containment, shelter-in-place, or stay-at-home orders issued by any Federal, State, or local government authority that cause the employee to be unable to work. It also includes instances where the Federal, State, or local government authority has advised categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter in place, stay at home, isolate, or quarantine.
An employee is eligible for EPSL if the employer has work available, but the employee cannot perform available work because of such an order.
Employees may receive EPSL if they are advised by a health care provider to self-quarantine. What type of advice does this cover?
An employee qualifies for EPSL if a health care provider advised them to self-quarantine based on a belief that (a) the employee has COVID-19, (b) the employee may have COVID-19, or (c) the employee is particularly vulnerable to COVID-19; and following the advice to self-quarantine prevents the employee from being able to work at the workplace or by telework.
Employees may receive EPSL to care for an individual subject to a quarantine or isolation order or advised by a health care provider to self-quarantine. Does this mean any individual the employee cares for?
No, but the definition of “individual” is broad. “Individual” means an employee’s immediate family member, a person who regularly resides in the employee’s home, or “a similar person with whom the employee has a relationship that creates an expectation that the employee would care for the person if he or she were quarantined or self-quarantined.” It does not include persons with whom the employee has no personal relationship.
How may employers provide notice to employees of the FFCRA?
The FFCRA requires employers to post a notice on its premises, in conspicuous places. Employers may also satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.
What documentation may I request from employees?
The DOL does not require employees to provide all of the information that the IRS requires employers to retain in order to support the tax credit (see above) to be eligible for EPSL or E-FMLA, but it permits employers to deny leave if the employee does not provide all information required to request a tax credit.
Note that for leave taken under the FMLA for an employee’s own serious health condition related to COVID-19, or to care for the employee’s spouse, son, daughter, or parent with a serious health condition related to COVID-19, the normal FMLA certification requirements still apply.
What type of notice may an employer require of the employee’s need to take EPSL or E-FMLA?
Notice may not be required in advance, and may only be required after the first workday (or portion thereof) for which the employee takes EPSL or E-FMLA. After the first workday, the employer may require the employee to follow “reasonable notice procedures.” Generally, the following notice requirements will be reasonable:
- Requiring notice as soon as practicable under the facts and circumstances of the particular case.
- Requiring notice to be given by the employee, or the employee’s spokesperson if the employee is unable to do so personally.
- Requiring oral notice and sufficient information for an employer to determine whether the requested leave is covered by the EPSL or E-FMLA.
- Requiring employee to comply with the employer’s usual and customary notice requirements for requesting leave, absent unusual circumstances.
Employers may not require employees to provide more information beyond what is needed to support the tax credit when providing notice.
How do I elect the small business exemption?
Employers with fewer than 50 employees may be exempt from having to provide E-FMLA and EPSL Category #5 (leave to care for a child due to the school or childcare provider being closed/unavailable due to COVID-19).
To elect this small business exemption, the employer must document that a determination has been made pursuant to the criteria for the exemption. The employer does not need to submit this documentation, but must simply retain the records in its files.
Does the employee maintain health benefits during EPSL or E-FMLA leave?
Yes. Employers must maintain the employee’s coverage under any group health plan (on the same conditions as coverage would have been provided if the employee had been continuously employed during the entire leave period.
What documentation do I need to retain?
In addition to the documentation required to be maintained to request the tax credits (see above), employers must retain all documentation provided by employees requesting leave, regardless of whether leave was granted or denied. These documents need to be retained for four years.
For more resources and LP's response to COVID-19, visit this webpage.