IRS Requires Separate Reporting of FFCRA Wages on 2020 Forms W-2 SPARK Blog

Many borrowers who received PPP loans have already completed their specified “covered period” and spent the PPP loan proceeds, and may be ready to submit the related forgiveness applications (SBA Form 3508, 3508EZ or 3508S). ADP clients can obtain the appropriate reports in their ADP solution and should gather other documentation demonstrating how PPP loan proceeds were used, including mortgage interest, rent payments and utilities. Section 2302 of the CARES Act enabled employers to defer payment of the employer share of the Social Security tax incurred beginning March 27, 2020, through December 31, 2020. Deferred tax amounts must be repaid in equal amounts due on December 31, 2021, and December 31, 2022.

FFCRA Tax Credits Fully Offset Paid Leave

In 2020, and for the first 3 months of 2021, there were up to three separate types of qualified paid sick or family leave wages that were separately reported (if applicable) in Box 14 of Form W-2. Because the qualified sick and family leave limits were reset by the American Rescue Plan Act (ARPA), P. 117-2, (March 11, 2021), for 2021 there are now up to six entries for qualified paid sick or family leave wages to be separately reported, if applicable. The tax credit effectively offsets (reduces) the amount of federal employment taxes that must be deposited with the IRS, usually within a few days of the payroll date. This is intended to provide the funds needed to pay sick and family leave benefits under the Act. However, in some cases, such as complete closure of a business, the Treasury Department and IRS will process claims for advance payments of the tax credit.

These updates are to ensure you get the important resources you need and that the college is eligible for COVID-19 related support from the federal government. Several provisions of both the CARES Act and the FFCRA that impact employers will expire at the end of 2020. Use the promotion request form at nmc.edu/promo to request promotion of your NMC-related announcement, program or event.

The following new leave types have been created under federal law to track time off required to address very specific COVID-19 related issues. As above, paid leave hours under the Act are to be paid at the Regular Rate of Pay in accordance with the Fair Labor Standards Act (29 U.S.C. 207(e)). Employers must post a notice of the requirements described in this Act, “in conspicuous places where notices to employees are customarily posted.” The DOL is to publish a model notice within seven days of enactment. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (P.L. 116–136) was enacted on March 27, 2020, to provide economic stimulus and relief to employers and individuals that are dealing with the COVID-19 pandemic and its economic consequences. We appreciate your patience and support as the College makes important updates to our leave tracking system in ADP.

Families First Coronavirus Response Act (FFCRA)

The tax credits are only available if an eligible employer complies with all aspects of the Families First Coronavirus Response Act (FFCRA). Similarly, tax credits are only available for paid sick leave for reasons related to COVID-19 described in (4), (5), or (6) above in limited amounts — that is, up to $2,000 in the aggregate. Because the sick leave wage cap was not increased from January 1 through March 31, 2021, no more than $5,110 (or $2,000 for absences described in (4), (5), and (6) above) in the aggregate may be claimed by an employer with respect to leave provided to an employee during that period. Generally, the legislation affects private-sector employers with under 500 employees.

Reporting of FFCRA Wages on 2021 Forms W-2

The views expressed on this blog are those of the blog authors, and not necessarily those of ADP. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan would have access to paid leave. Employees who have been employed for at least 30 calendar days are eligible for up to 12 weeks of job protected leave; i.e., leave under both the FMLA and the FFRCA is limited to 12 weeks total. Employers with fewer than 25 employees are not required to provide job-protected leave for an employee in specified circumstances.

• These updates are to ensure you get the important resources you need and that the college is eligible for COVID-19 related support from the federal government.
• An employee who was unable to work or telework for reasons related to COVID-19 described in items (4), (5), or (6) above was entitled to paid sick leave at two-thirds the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate.
• For employers who were subject to the FFCRA and choose to voluntarily continue to provide qualified sick and family leave payments to their employees in 2021, FFCRA extended the 100% tax credit for payments for qualifying leave taken through March 31, 2021.
• Employers are prohibited from requiring workers to find a replacement to cover their hours during time off, and from discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer.
• The following new leave types have been created under federal law to track time off required to address very specific COVID-19 related issues.

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Any otherwise-qualifying leave payments for periods after 2020 are not FFCRA leave payments, and no tax credit is allowed. Section 2206 of the CARES Act enabled employers to contribute up to $5,250 in 2020 toward student loan repayments for employees. Such payments would be excluded from the employee’s income and employment taxes. The $5,250 cap applies to both the new student loan repayment benefit and any educational assistance under Section 127 of the Internal Revenue Code (IRC).

Paid leave hours are to be paid at the Regular Rate of Pay in accordance with the Fair Labor Standards Act (FLSA), which generally includes all wages and other forms of compensation, such as nondiscretionary bonuses, unless specifically excluded (29 U.S.C. 207(e)). However, employers that offer qualified leave in accordance with the FFCRA still qualify for tax credits to reimburse the cost of such leave. The ARPA extended the availability of the credits for paid leave through September 30, 2021. Paid sick leave is capped at $511 per day (and a total of $5,110) ff employee pay adp for employees in categories 1-3 above, and two-thirds of wages up to $200 per day (and a total of $2,000) for employees in categories 4-6 above. Employers may pay amounts over such limits, but the tax credit is limited to those amounts. In addition, the aggregate number of days available to an individual is limited to 10 for 2020.

• The credit may not exceed the Social Security tax imposed on the employer, reduced by any credits allowed for the employment of qualified veterans and research expenditures of qualified small businesses.
• Aggregation rules apply in determining the number of employees of the employer.
• On December 27, 2020, the Consolidated Appropriations Act (CAA) extended the refundable payroll tax credits for Emergency Paid Sick Leave (EPSL) and Emergency Paid Family Leave (EPFL), enacted in the FFCRA, through March 31, 2021.
• This notice provides details and model language for use in reporting qualified sick and family leave wages paid either in Box 14 of Form W-2, or on a separate statement.
• For any pay period that includes both 2020 and 2021 earnings, employers may need to take action to separately distinguish any 2021 wage payments that represent payment for FFCRA leave taken in 2020, versus earnings for leave taken in 2021.
• Employers must separately state each of these wage amounts either on Form W-2, Box 14 or on a separate statement.

For Employees

Section 1102 of the CARES Act established the Paycheck Protection Program (PPP), which was intended to provide employers with funds to continue operations and payment of wages during the COVID-19 pandemic. PPP loans are 100 percent forgivable if certain measures are met, such as spending at least 60 percent of the proceeds on payroll costs and maintaining specified staffing and wage levels. If a separate statement is provided and the employee receives a paper Form W-2, the statement must be included along with the Form W-2 sent to the employee.

Aggregation rules apply in determining the number of employees of the employer. Wages may not include paid family and/or sick leave under the FFCRA or the Section 455 Paid Family and Medical Leave Credit for which a credit is taken. Additionally, employers may not claim the ERTC and the Work Opportunity Tax Credit for the same employee for the same period of time. If the employee does not have six-months of work history with the employer, hours are based on “the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work.” For any pay period that includes both 2020 and 2021 earnings, employers may need to take action to separately distinguish any 2021 wage payments that represent payment for FFCRA leave taken in 2020, versus earnings for leave taken in 2021.

Nothing in the law diminishes any rights that employees may have under federal, state, or local laws; collective bargaining agreements, or an employer’s existing policy. Expanded FMLA leave is available only when an employee is unable to work (or telework) due to a need to care for a son or daughter under the age of 18 if the child’s school or child-care provider is closed due to public health emergency with respect to COVID-19 declared by a federal, state, or local authority. Depending when the loan was originated, borrowers may have eight or 24 weeks (the “covered period”) in which to spend the funds in accordance with the program. Applications for forgiveness are not required until 10 months after the expiration of a borrower’s covered period.

On December 27, 2020, the Consolidated Appropriations Act (CAA) extended the refundable payroll tax credits for Emergency Paid Sick Leave (EPSL) and Emergency Paid Family Leave (EPFL), enacted in the FFCRA, through March 31, 2021. For employers who were subject to the FFCRA and choose to voluntarily continue to provide qualified sick and family leave payments to their employees in 2021, FFCRA extended the 100% tax credit for payments for qualifying leave taken through March 31, 2021. Self-employed individuals are also eligible for a refundable tax credit for qualified sick and family leave amounts. If a self-employed individual is eligible for a refundable credit for FFCRA sick leave and also receives qualified sick leave wages as an employee, the credit amount for the self-employed individual is reduced. This notice provides details and model language for use in reporting qualified sick and family leave wages paid either in Box 14 of Form W-2, or on a separate statement. These reporting requirements are only applicable if the employer takes the related tax credits.