Form W-2 reporting of COVID-19-related sick leave and family leave

   

• Learn about the new guidance provided by the IRS regarding qualified sick leave and family leave wages.
• Find out what employers must report on W-2s in addition to reporting qualified sick leave wages.
• Learn about the specific language employers must include on the form W-2.
• Learn more about what employers are required to report to employees regarding qualified family leave wages.

In Notice 2020-54, the IRS recently provided new guidance for employers. The guidance advises employers on Form W-2 reporting of qualified sick leave wages and qualified family leave wages. These constitute wages paid to employees under the Families First Coronavirus Response Act.

The guidance requires employers to report the amount of qualified sick and family leave wages paid to those employees. Doing so enables self-employed individuals who also receive wages or compensation as employees with the information they need to properly claim any qualified sick leave equivalent or qualified family leave equivalent credits for which they’re eligible.

The purpose of the guidance is to furnish information to self-employed individuals who also receive compensation as employees. However, its requirements apply to all employers — whether or not they employ such self-employed individuals.

Qualified sick leave wages

In addition to reporting qualified sick leave wages in the amount of wages paid to an employee, employers must report on Form W-2:

1. The total amount of qualified sick leave wages paid for reasons described under the Emergency Paid Sick Leave Act. In labeling this amount, the employer must use the following or similar language: “Sick leave wages subject to the $511 per day limit.”

2. The total amount of qualified sick leave wages paid for reasons described under the Emergency Paid Sick Leave Act. In labeling this amount, the employer must use the following or similar language: “Sick leave wages subject to the $200 per day limit.”

If employers provide a separate statement and the employee receives a paper Form W-2, the employer must include the statement with the Form W-2 provided to the employee. If the employee receives an electronic Form W-2, the employer must provide the statement in the same manner and at the same time as Form W-2.

Qualified family leave wages

In addition to providing qualified family leave wages in the amount of wages paid to an employee on Form W-2, employers have another task. Employers must separately report to the employee the total amount of qualified family leave wages paid to the employee under the Emergency Family and Medical Leave Expansion Act. In labeling this amount, the employer must use the following or similar language: “Emergency family leave wages.”

If the employer provides a separate statement and the employee receives a paper Form W-2, the employer’s statement must include the Form W-2 sent to the employee. If the employee receives an electronic Form W-2, the employer must provide the statement in the same manner and at the same time as Form W-2.

Additional explanation

On Form W-2, or in a separate statement sent to the employee, the employer may provide additional information about qualified sick leave wages and qualified family leave wages. This information can explain that these wages could limit the amount of the qualified sick leave equivalent or qualified family leave equivalent credits to which the employee may be entitled with respect to any self-employment income.

Have questions regarding W-2s and qualified sick and family leave? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!

For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.