Did you have an employee who was unable to work or telework due to reasons related to COVID-19 and who received wages under the Families First Coronavirus Response Act (FFCRA)? If you answer yes, did you know that these wages need to be included on Form W2 in Box 14 in addition to being included with the employee’s other taxable income in Box 1, 3, 5, and 16?
Per guidance issued by the Internal Revenue Service (IRS), employers must separately state the total amount of qualified sick leave wages and qualified family leave wages paid. There are three different categories to be used when determining COVID wages:
- National Paid Leave Employee: Your employee is sick and under quarantine with COVID-19.
- National Paid Leave Family: Your employee is taking care of a family member who is sick or impacted with COVID-19.
- National Paid Leave FMLA: Your employee is taking leave under the Family Medical Leave Act (FMLA) to care for children under 18 whose school or childcare is closed because of COVID-19.
- Note: as mentioned in a previous post, the employee is not eligible if he or she chooses the remote learning alternative when school is in person or hybrid because the school is not technically “closed.”
It will be required to report these amounts either on Form W2 Box 14, or on a separate statement that has to be provided at the same time as the W2. Because of this reporting requirement, it is imperative the employer use the above categories to individually track COVID related wages for each employee (if applicable).
There will also be W2 reporting requirements for 2020 and 2021 for the amount of Social Security that was deferred and not withheld from an employee from September 1, 2020 to December 31, 2020 if you elected as the employer to participate in the payroll tax deferral. To accurately report deferred taxes, it will be necessary for the employer to track the amount of tax withheld on an individual employee basis per payroll. The benefit of individual tracking is two-fold. It will allow the employer to easily determine the gross tax withheld should an employee choose to leave, and it will provide an accurate amount that will be due when the repayment period begins in 2021.