IRS Issues Guidance on W-2 Reporting of EPSL and PHEL Payments

Written by
Stephanie Vaz

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Earlier this month, the Internal Revenue Service (IRS) released guidelines on reporting qualified sick leave and family leave wages paid in compliance with the Families First Coronavirus Response Act (FFCRA). Employers will be required to report the amounts paid either on Form W-2 or a separate statement.

For Employees

Due to the COVID-19 pandemic, employers with fewer than 500 employees will be required to provide paid leave to certain employees. Under the Emergency Paid Sick Leave (EPSL) provision of the FFCRA, these employees may be eligible for up to two weeks of paid sick leave.

Employees are eligible for up to 100% of wages (up to a dollar maximum of $511 per day ($5,110 aggregate) for leave to address their illness or exposure requiring isolation or quarantine for up to a 2-week period. If an employee needs to care for a family member or child (due to illness or lack of childcare) they are entitled to 2/3 pay up to a maximum of $200 per day ($2,000 aggregate) also for up to 2 weeks.

Employees may also be eligible for up to 10 weeks of paid family leave through the Public Health Emergency Leave (PHEL) program. Employees are eligible for this expanded family leave if they are unable to work due to school closing or a lack of childcare.  The benefit is up to $200 per day ($10,000 aggregate).

Employees who qualify for EPSL and PHEL may apply from April 1, 2020, through December 31, 2020. For further details on who is eligible for both EPSL and PHEL, click here.

For Employers

In addition to including qualified EPSL and PHEL payments in boxes 1, 3, and 5 on W2 Forms; employers must also include these amounts as part of the “Instructions for Employee” in Box 14 on W2 Forms, or in a separate statement sent to employees.

If the Employer opts to report EPSL and/or PHEL benefits in Box 14, the language will vary depending on the situation. Below are the phrases to use next to the amount paid shown in Box 14:

  • Use “sick leave wages subject to the $511 per day limit” if EPSL is paid due to one of the following circumstances:
    • The employee is under a government quarantine or isolation order because of COVID-19
    • The employee is under the advice of a health care provider to self-quarantine for COVID-19
    • Or the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis
  • Use “sick leave wages subject to the $200 per day limit” if EPSL is paid due to the employee caring for another individual under any of the aforementioned circumstances.
  • Use “emergency family leave wages” if PHEL is paid to the employee.

If the Employer opts to report EPSL and/or PHEL benefits in a separate statement, the model language provided by the IRS below can be adapted and used for this purpose:

“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
  • 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.”

For both EPSL and PHEL reporting, if the employer wishes to use separate statements and the employee receives a paper version of the W-2 Form, the separate statements must be included with the form and provided to the employee. If the employee is given an electronic form, the separate statement must be provided alongside the electronic form.

Employers should be aware of the monetary value that will need to be reported. It is important to determine whether to report this information in Box 14 or a separate statement as this will impact what language will be used. Employers should discuss their options with their payroll department or external payroll vendor that provides Forms W-2 services.

How Insource Can Help

If you have any questions about reporting EPSL and PHEL, please contact us at info@insourceservices.com or call us at (781) 235-1490.

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