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New W-2 reporting requirement: Employees’ pandemic leave

07/21/2020

Here’s something we didn’t see coming. You must report the total amount of employees’ pandemic-related family/sick leave wages on their 2020 W-2s in Box 14 or on a separate statement.

Reason: Employees with side gigs qualify for a refundable tax credit in their own right. But to prevent double-dipping, they have to subtract their employer-provided leave from their entitlement.

Wrinkle: Since you can’t ask employees if they have side gigs, you’ll have to do this for everyone.

The amount of qualified family/sick leave paid to employees is reported in W-2 Boxes 1, 3 and 5, and must be reported in Box 14, with these descriptive entries:

  • For employees who take leave to care for themselves: “Sick leave wages subject to the $511 per day limit”
  • Employees who take leave to care for others: “Sick leave wages subject to the $200 per day limit”
  • For employees who take paid FMLA leave: “Emergency family leave wages.”

You must notify employees. The IRS has provided model language:

Included in Box 14, if applicable, are amounts paid to you as qualified sick leave wages or qualified family leave wages under the Families First Coronavirus Response Act. Specifically, up to three types of paid qualified sick leave wages or qualified family leave wages are reported in Box 14:

  • Sick leave wages subject to the $511 per day limit because of care you required;
  • Sick leave wages subject to the $200 per day limit because of care you provided to another; and
  • Emergency family leave wages.

If you have self-employment income in addition to wages paid by your employer, and you intend to claim any qualified sick leave or qualified family leave equivalent credits, you must report the qualified sick leave or qualified family leave wages on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, included with your income tax return and reduce (but not below zero) any qualified sick leave or qualified family leave equivalent credits by the amount of these qualified leave wages. If you have self-employment income, you should refer to the instructions for your individual income tax return for more information.

Note: A draft of Form 7202 hasn’t been released yet. We suspect it will be released later in the fall, since it will need to be attached to employees’ 1040s.