IRS Issues Guidance On Reporting Qualified Sick And Family Leave Wages Paid

The IRS recently published IRS Notice 2020-54 which provides new reporting requirements for “qualified family leave” and “qualified sick leave” wages paid to employees under the Families First Coronavirus Response Act (FFCRA). The FFCRA requires employers with fewer than 500 employees to provide paid leave under certain COVID-19-related circumstances.

The Notice mandates the following reporting requirements:

• Qualified sick leave wages: Qualified sick leave wages are required to be reported in boxes 1, 3 and 5 of Form W-2. Those wages must also be separately reported, either in Box 14 or on a separate statement, and labeled “sick leave wages subject to the $511 per day limit”.

• Qualified family leave wages: Qualified family leave wages are required to be reported in boxes 1, 3 and 5 of Form W-2. Family leave must also be separately reported, either in Box 14 or on a separate statement. The employer must label this amount “emergency family leave wages” or use similar language.

Employers who sent W-2s to employees without FFCRA wages properly reported in accordance with this Notice should issue amended W-2s to the affected employees. The Employer also would need to correct the issue with the Social Security Administration (the “SSA” who is responsible for FICA taxes) as follows:

• If the error is discovered prior to the W-2 being filed with the SSA, employers should check the ‘Void’ box on Copy A of the W-2, prepare a new W-2 to file with the SSA, and include “CORRECTED” on the top of the employee’s new W-2.

• In contrast, if the error is discovered after the W-2 has been filed with the SSA, an employer should prepare Forms W-2C (Corrected Wage and Tax Statement) and W-3C (Transmittal of Corrected Wage and Tax Statement) to file with the SSA.