RBS News

During a recent webinar as well as in dozens of discussions with our client base, we have been asked what type of documentation can an employer request or require to substantiate a leave under the recently passed Families First Coronavirus Response Act (“FFCRA”). 

On March 28, 2020 the Department of Labor (“DOL”) issued compliance assistance in a Questions and Answers format at https://www.dol.gov/agencies/whd/pandemic/ffcra-questions.  In Question 15, the DOL states that if an employer intends to claim a tax credit for payment of sick or E-FMLA leave, it needs to retain “appropriate documentation in your records” as required by the IRS. 

In the very recently issued IRS’ COVID-19 Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs, https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs#substantiate_eligibility, the IRS provides the information that employers need to obtain from an employee seeking leave. Question number 44 lists a variety of information depending on the reason for the leave. The form we have developed that tracks the information that the IRS has approved obtaining from employees is available by clicking the link below:

CLICK HERE FOR FORM

In addition to obtaining information from the employee requesting leave, the IRS also advises that employers maintain the following documents, which can be found in Question No. 4: Forms 941, Employer's Quarterly Federal Tax Return, and 7200, Advance of Employer Credits Due To COVID-19, and any other applicable filings made to the IRS requesting the credit. 

Question number 45 provides further instructions as to additional records that each employer must create and maintain to substantiate eligibility for the credit:

1. Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave.
2. Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages. See FAQ 31 (“Determining the Amount of Allocable Qualified Health Plan Expenses”) for methods to compute this allocation.
3. Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.
4. Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS (or, for employers that use third party payers to meet their employment tax obligations, records of information provided to the third party payer regarding the employer’s entitlement to the credit claimed on Form 941).

All of the above records must be retained for four (4) years after the date the tax becomes due or is paid, whichever occurs later.

Finally, an early release draft Instructions for Form 7200 has been published by the IRS at https://www.irs.gov/pub/irs-dft/i7200--dft.pdf.  It is not yet final and we must await the final form to be issued.

As usual, please contact Lynn Schonberg or Nick Nykulak with any questions.