IRS Guidance on FFCRA Tax Credits
April 1, 2020
Late yesterday, the IRS published a series of FAQs on tax credits for FFCRA/COVID-19 related leave. This guidance includes the documentation an employer must have in order to substantiate its eligibility for these tax credits. Questions 44-46 of the FAQs address the documentation requirements. While some of the documentation requirements are not unexpected, those associated with leave to care for a child are more specific than most expected.Specifically, Question 44 indicates that an employee’s request for leave must be in writing and must include the following:The employee’s name;The date(s) for which leave is requested;A statement of the coronavirus related reason the employee is requesting leave and written support for such reason; andA statement that the employee is unable to work, including by means of telework, for such reason.For leave requests based on a quarantine order or advice to self-quarantine, the employee’s request should include the name of the governmental entity ordering the quarantine or the name of the health care provider advising the employee to self-quarantine. Finally, if the person subject to quarantine or advised to self-quarantine is not the employee, the request must include that person’s name and relationship to the employee. For leave requests based on a school closing or child care provider unavailability, the employee’s request must include the following: The name and age of the child (or children) to be cared for;The name of the school that has closed or place of care that is unavailable;A representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave; andIf the employee’s leave is for the purpose of providing care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.Question 45 addresses other records an employer must maintain in order to substantiate eligibility for a tax credit. These include: 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.Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages.Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.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).Finally, Question 46 states that employers must keep the above records for at least 4 years after the date the tax becomes due or is paid, whichever is later, and the records must all be available for IRS review.