W-2 Reporting Rules for FFCRA Leave

Under the Families First Coronavirus Response Act (FFCRA), businesses with fewer than 500 employees must give eligible employees paid sick and family leave. Because these wages are taxable to the employee, you must report them on the employee’s Form W-2, in accordance with the IRS’s instructions.

Before we review the IRS’s guidance for reporting FFCRA leave on Form W-2, let’s take a brief look at the FFCRA’s requirements.

Key provisions of the FFCRA

• The Emergency Paid Sick Leave Act (EPSLA) requires up to 80 hours of paid sick leave for eligible COVID-19-related reasons. Eligible reasons are described in paragraphs 1, 2, 3, 4, 5, and 6 of section 5102(a) of the EPSLA. Depending on the reason, employees can receive a maximum of $511 per day ($5,110 total) or $200 per day ($2,000 total) for EPSLA leave.
• The Emergency Family and Medical Leave Expansion Act (EFMLEA) requires up to 12 weeks of family and medical leave for eligible COVID-19-related reasons. The first 2 weeks of EFMLEA leave are unpaid, and the remaining 10 weeks are paid. For the 10 paid weeks, employees can receive a maximum of $200 per day ($10,000 total).

The FFCRA is effective from April 1, 2020 to December 31, 2020.

Whereas the EPSLA covers all employees, the EFMLEA covers only those who have been employed for at least 30 days.

Signed into law on March 18, 2020, the FFCRA is effective from April 1, 2020 to December 31, 2020.

Covered private sector employers

Generally, private-sector employers with less than 500 employers must comply with the FFCRA. However, according to the United States Department of Labor, “Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.”

If you provided FFCRA leave to your employees, you must abide by specific Form W-2 reporting rules.

W-2 reporting criteria for FFCRA leave

Per IRS Notice 2020-54, employers must include FFCRA leave wages paid between April 1, 2020 and December 31, 2020, in boxes of the recipient’s 2020 Form W-2. The requirements include Box:

• 1: shows all wages subject to federal income tax withholding
• 3: shows all wages subject to Social Security tax withholding, up to the annual wage limit of $137,700 for 2020
• 5: shows all wages subject to Medicare tax withholding

Employers must also report the taxes withheld from the employee’s wages (including FFCRA leave wages) in Box:

• 2: federal income tax withheld
• 4: Social Security tax withheld
• 6: Medicare tax withheld

Additionally, employers must give employees certain information about their FFCRA leave wages. You can report this information in Box 14 of the employee’s Form W-2, or on a separate statement. The required information includes:

• The amount of qualified sick leave wages paid for reasons outlined in paragraphs 1, 2, or 3 of section 5102(a) of the EPSLA. When labeling this amount, use this (or similar) language: “sick leave wages subject to the $511 per day limit.”
• The amount of qualified sick leave wages paid for reasons outlined in paragraphs 4, 5, or 6 of section 5102(a) of the EPSLA. When labeling this amount, use this (or similar) language: “sick leave wages subject to the $200 per day limit.”
• The amount of qualified family leave wages paid under the EFMLEA. When labeling this amount, use this (similar) language: “emergency family leave wages.”

Employers must give employees certain information about their FFCRA leave wages. You can report this information in Box 14 of the employee’s Form W-2, or on a separate statement.

Giving employees additional FFCRA leave information

You can — but are not required to — give employees more details on the information supplied in Box 14 (of their Form W-2) or in the separate statement.

If you choose to give this extra information, you may use the IRS’s model language to further explain the FFCRA leave wages paid to the employee. The model language can be found in Notice 2020-54, under Model Language for Employee Instructions. Simply tweak the model language as needed.

You may use the model language, as well, to provide instructions to employees who have self-employment income along with wages you paid them. In this case, if the employee plans to claim equivalent credits for FFCRA sick or family leave, they must report their FFCRA sick or family leave wages on IRS Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, when filing their federal income tax return.

2020 Form W-2 deadline

Technically, employers are supposed to file 2020 Form W-2s with the Social Security Administration (and give employees their copies) by January 31, 2021. But since January 31, 2021 falls on a Sunday, employers have until February 1, 2021 (the next business day) to file and distribute 2020 Form W-2s.

Delivering separate statements

If you use separate statements — rather than Box 14 of Form W-2 — to report FFCRA leave information to employees, you must furnish the separate statement to employees at the same time you send them their Form W-2, and in the same manner. For instance, if you furnish Form W-2s to employees digitally, then you must simultaneously send the separate statement to employees, in the same digital format as the W-2s.