IRS Guidance on Required Documentation for Tax Credits under FFCRA

The IRS has also provided guidance on the required documentation, which can be found here: https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs.

The IRS provided that eligible employers claiming tax credits for qualified leave wages "must retain records and documentation related to and supporting each employee's leave to substantiate the claims for the credits," as well as retain:

  • Form 941, Employer's Quarterly Federal Tax Return.
  • Form 7200, Advance of Employer Credits Due to COVID-19.
  • Any other applicable filings made to the IRS requesting the credit.

Question 44 in the IRS guidance outlines the information an eligible employer must receive from an employee and maintain to substantiate eligibility for sick leave or family leave credits.
The employee must provide:

  • His or her name.
  • The date or dates for which leave is requested.
  • A statement of the COVID-19 reason the employee is requesting leave and written support for such reason.
  • A statement that the employee is unable to work, including by means of telework, for such reason.

In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine. If the person subject to quarantine is not the employee, that person's name and relation to the employee shall be provided.

If a school closes or child care provider is unavailable, the statement from the employee should include:

  • The name and age of the child or children.
  • 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.
  • With the care of a child older than 14 during daylight hours, a statement that special circumstances exist requiring the employee to provide care.

Question number 45 from the IRS provides further guidance about additional documentation that must be maintained, including:

  • 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, 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.