By Peter O. McDonald, CPA, Member of the Firm

As a refresher, the Families First Coronavirus Response Act (FFCRA) required employers to provide employees with up to 80 hours of paid sick leave (up to $511 per day) if the employee was unable to work or telework because the employee was:

1. subject to a Federal, state, or local, quarantine order related to COVID-19,
2. advised by a health care provider to self-quarantine due to COVID-19,
3. experiencing symptoms of COVID-19 and was seeking medical diagnosis,
4. caring for an individual who was subject to a Federal, state, or local quarantine order related to COVID-19,
5. caring for a child of the employee if the school or daycare was closed or childcare provider was unavailable due to COVID-19,
6. experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of the Treasury and Labor.

The FFCRA also required employers to provide expanded paid family and medical leave to employees who were unable to work or telework because the employee was caring for their child whose school or daycare were closed or childcare provider was unavailable due to COVID-19.

The expanded paid family and medical leave was 2/3 of the employee’s regular pay rate, up to $200 per day and $10,000 in the aggregate.

In order to provide self-employed individuals who may also receive compensation as employees with the necessary information to claim any equivalent credits for qualified sick leave and qualified family leave, guidance issued by the IRS in Notice 2020-54 requires employers to report amounts paid to employees for qualified sick leave and qualified family leave wages on Form W-2, Box 14 or on a separate statement.

Employers must report to each employee the following type and amount of wages that were paid, with each amount separately reported in either Box 14 of Form W-2 or on a separate statement:

1. total amount of qualified sick leave wages paid and label the amount using the following, or similar, language: “sick leave wages subject to $511 per day limit.”
2. total amount of qualified sick leave wages paid and label the amount using the following, or similar, language: “sick leave wages subject to the $200 per day limit.”
3. total amount of qualified family leave wages paid and label the amount using the following, or similar, language: “emergency family leave wages.”

If a separate statement is provided, the statement must be included with the W-2 when provided to the employee. If the W-2 is provided electronically, the statement must be provided in the same manner and at the same time.

The IRS has provided model language for employee instructions regardless of whether the reported wages are included in Box 14 or are reported on a separate statement. The language is as follows: “Included in Box 14, if applicable, are amounts paid to you as qualified sick leave wages or qualified family leave wages under the Families First Coronavirus Response Act. Specifically, up to three types of paid qualified sick leave wages or qualified family leave wages are reported in Box 14

• Sick leave wages subject to the $511 per day limit because of care you required;
• Sick leave wages subject to the $200 per day limit because of care you provided to another; and
• Emergency family leave wages"

Suppose you have self-employment income in addition to wages paid by your employer, and you intend to claim any qualified sick leave or qualified family leave equivalent credits. In that case, you must report the qualified sick leave or qualified family leave wages on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, included with your income tax return and reduce (but not below zero) any qualified sick leave or qualified family leave equivalent credits by the amount of these qualified leave wages. If you have self-employment income, you should refer to the instructions for your individual income tax return for more information.”