Documenting COVID-19 employment tax credits.

• Author: Nellen, Annette

COVID-19 legislation enacted in March 2020 created significant temporary employment tax credits to help employers continue to pay workers even if they were unable to work due to illness, child care needs, or reduced business activity. The first credits, created by the Families First Coronavirus Response Act (FFCRA), P.L. 116-127, were for paid sick and family leave provided by employers with fewer than 500 employees. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, created the employee retention credit (ERC), available to all businesses that continued to pay workers during the pandemic and met specific criteria.

This item focuses on documentation required in claiming these COVID-19 employment tax credits. It does not delve into the operational details. For that, see other articles in The Tax Adviser, AICPA member resources, and, of course, the public laws and guidance from the IRS. The table, "Summary of Key Elements of the COVID-19 Employment Tax Credits," provides a brief summary of the FFCRA and CARES Act employment tax credits as enacted and as modified by later laws.

Summary of key elements of the COVID-19 employment tax credits Basics after four public FFCRA,P.L.116-127 CARES Act, Act, 2021, P.L laws P.L. 116-136 116-260 Paid sick For paid leave Minor 12/31/20 leave and taken starling technical expiration paid family 4/1/20, through corrections. date leave 12/31/20. extended (also Paid leave is to 3/31/21, available mandatory for but paid for serf- small business leave is not employed and tax-exempt mandatory individuals employers for these applicable (under 500 2021 dates. against self- employees); employment limited (Sec. 1402} exception taxes) if under 50 employees (see DOL FAQ 59, available at tinyurl. com/8n768a56) Employee - For qualified Extended and retention wages paid increased credit after 3/12/20 for 1/1/21 to (ERC) and before 6/30/21. 1/1/21. Retroactively allows Paycheck Protection Program bOnOwer to also claim ERC for 2020 but not on the same wages. Basics after IRS guidance four public (In addition to public laws and laws nonblnding FAQs) Paid sick Extended for 4/1/21 Notice 2020-21 leave and through 9/30/21 but paid Notice 2020-22 paid family leave is not mandatory. Notice 2020-54 leave Employee eligibility period Notice 2021-24 (also starts anew at 4/1/21 (new Notice 2021-53 available Code Sec. 3131(c)(1) and T.D. 9953 for serf- Sec. 3132(c)(1)). Eligibility REG-109077-21 employed reasons expanded. individuals Family leave time frame is applicable 12 weeks rather than 10. against self- Credit includes employer employment share of OASDI and (Sec. 1402} Hospital Insurance (HI) (new taxes) Sec. 3133) (employer pays these, while before, no employer...