IRS Issues Guidance on Reporting Emergency Sick and Family Leave Wages

At A Glance

• Benefits provided to Employees for Emergency Sick and Family Leave are considered wages under the Families First Coronavirus Response
• IRS guidance instructs employers to report these amounts on form W2, using Box 14
• Employers may also choose an alternate method of providing the information on a separate attachment at the same time and delivery method as the form W2.
• Employers may also opt to include additional notification to employees

Details

IRS recently issued Notice 2020-54 providing instructions to employers who have provided Emergency Sick and or Family Leave benefits to employees impacted by COVID-19.  The notice instructs employers to report the amount of Emergency Sick leave taken for self, or a dependent, or any Paid Family leave as separate items in box 14 of form W2.  In addition to reporting these amounts in box 14, the amounts should also be included in boxes 1, 3 (up to the applicable wage base), and 5 of form W2.

In addition to reporting the amounts separately, IRS has provided suggested labeling for reporting the items in box 14 of form W2.  Below is a chart outlining the suggested labeling:

Employers may also opt to include instructions advising employees of potential impacts to any eligibility for credits related to self-employment.  The notification is not required for employers.  Employees will only be required to report these amounts on individual tax filings should they also wish to claim credit for any self-employment income. 

Next Steps

Our Government Relations Team has been working with the IRS to understand the required changes and prepare our tax services for supporting these changes. Development work is already underway to ensure we will be ready to file for our clients in compliance with these changes.  As we near year end, we will be developing resources to assist clients and business partners to ensure all are prepared for the coming changes.