Qualified COVID-19 paid leave benefits: Reporting on Form W-2.

• Author: Salam, Debera J.

In Notice 2021-53, the IRS explained how employers must report to their employees qualified sick leave or family leave wages paid in 2021. Under the guidance, employers are required to report these wages either in box 14, "Other," of Form W-2, Wage and Tax Statement, or in a separate statement.

The IRS imposed this additional Form W-2 reporting requirement so that employees who also have self-employment income can properly claim their qualified sick or family leave equivalent credits. Self-employed individuals can claim credits for equivalent amounts if they would have received qualified leave wages had they been treated as an employee of an employer, but they may have to reduce their qualified leave equivalent amount by some or all of any qualified leave wages they received from an employer. In other words, qualified leave wages received from an employer may limit the amount of the qualified sick leave equivalent or qualified family leave equivalent credits to which the employee may be entitled with respect to any self-employment income.

Only employers that claim tax credits under these provisions are required to separately report qualified sick leave wages and qualified family leave wages to their employees. Similarly, governmental employers that are prohibited from claiming credits for qualified leave wages are not required to separately report any qualified sick leave or family leave wages paid to their employees.

Background

The Families First Coronavirus Response Act (FFCRA), P.L. 116-127, as amended, generally required covered employers to provide their employees with emergency paid sick leave and expanded family and medical leave for specified reasons related to COVID-19 beginning April 1, 2020, through Dec. 31, 2020. At the same time, the act provided eligible employers with fully refundable tax credits to cover the cost of these benefits (see U.S. Department of Labor fact sheet, available at www.dol.gov; and IRS FAQs, available at www.irs.gov).

Although the federal requirement to provide leave benefits under the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA) did not apply after Dec. 31, 2020, subsequent coronavirus-related legislation extended the tax credits, first through March 31, 2021, and later through Sept. 30, 2021, for paid leave that would have satisfied the EPSLA and EFMLEA requirements.

Reporting instructions for boxes 1, 3, and 5

According to Notice 2021-53, FFCRA...