Documentation Required to Support Federal Paid Leave Requests and Related Tax Credits
Author:
Anne Scheer, Esq.
April 14, 2020
US Department of Labor Regulations and IRS Requirements
A. Requests for Paid Leave
On Monday, April 6, 2020, the US Department of Labor (“DOL”) issued Regulations on the recently enacted Emergency Paid Sick Leave and Emergency Family and Medical Leave Expansion Act(“Paid Leaves”) (https://www.federalregister.gov/documents/2020/04/06/2020-07237/paid-leave-under-the-families-first-coronavirus-response-act). The IRS has also published guidance, and IRS Form 7200 – Advance Payment of Employer Credits Due to COVID-19, on what is required to substantiate tax credits related to these Paid Leaves (https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs). The DOL’s Regulations and the IRS’ Information cross-reference each other and state that an employer can require an employee to provide whatever additional support is allowed or required by the other.
Combined, the DOL’s Regulations and the IRS’ requirements state that for leave to be approved under the Paid Leave laws an employee must provide the employer in writing**:
- Their name;
- The date(s) for which leave is requested;
- A statement of the COVID-19 related reason for the request and support for such reason; and
- A statement the employee is unable to work or telework because of the COVID-19 related reason the employee has given for the requested leave.
- A statement how many hours, if any, of Emergency Paid Sick Leave the employee has already taken through other employment.
In addition to the above, if the request is for Emergency Paid Sick Leave because the employee:
- Is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or to care for an individual who is subject to such order, the employee must provide the employer with the name of the government entity that issued the quarantine or isolation order. And, if the leave is for the employee to care for someone else, the name of the other person and the person’s relationship to the employee.
- Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19, or to care for an individual who has been so advised, the employee must provide the employer with the name of the health care provider. And, if the leave is for the employee to care for someone else, the name of the other person and the person’s relationship to the employee.
If the request is for Emergency Paid Sick Leave or Emergency Family Medical Leave Expansion leave:
- To care for a son/daughter whose school or place of care is closed or whose child care provider is unavailable, due to COVID-19, an employee must provide the employer with: 1) the name and age of the son/daughter being cared for; 2) the name of the school, place of care or child care provider that is closed or unavailable; 3) a representation that no other suitable person will be caring for the son/daughter during the leave; and, 4) if the son/daughter is over age 14 and the request for leave includes daylight hours a statement that special circumstances exist requiring the employee to provide care to such son/daughter during daylight hours.
An employer is not required to provide leave if the employee fails to provide sufficient materials to support the tax credit.
** The DOL’s regulations allow an employee to provide information about his/her request for Paid Leave orally to the employer, and obligate the employer to document all such oral statements. Whereas, to substantiate tax credits the IRS requires the employee to provide this information to the employer in writing. What’s an employer to do? If an employee’s oral statements meet the criteria for the Paid Leave requested the employer should: 1) grant the leave; 2) document the employee’s oral statements; and 3) have the employee acknowledge, verify, sign, and date the employer’s written documentation of the employee’s statements.
B. Paid Leave Recordkeeping
- Employers are required to retain all documents an employee provides to support a Paid Leave request, whether leave is granted or denied, and to keep all such information and documents the employee provides for 4 years.
- If an employer denies leave under the Paid Leave Small Business exception the employer must document and retain for 4 years the determination by the employer’s authorized officer that the exemption applies.
- To substantiate tax credits an employer must retain for 4 years:
- Documentation of how the amount of paid leave eligible for the credit was determined.
- Documentation of how the amount of qualified health plan expenses employer allocated to wages was determined.
- Copies of the completed IRS Forms 7200 employer submitted to the IRS.
- Copies of completed IRS Forms 941 employer submitted to the IRS or records of information employer provided to a third party payer regarding employer’s entitlement to the tax credit claimed on IRS Form 941.
- All other documents needed to support employer’s request for tax credits, pursuant to IRS applicable forms, instructions, and information for procedures that must be followed to claim a tax credit.
C. Paid Leave Policies and Forms:
Employers should review and update their Paid Leave Policies and Forms to include the documentation requirements in the DOL’s recently published Regulations and the IRS’ published Information on tax credit substantiation.
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