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Apr 2020
April 01, 2020

IRS Issues Guidance on Employee Documentation Necessary for Employers to Maintain and Substantiate Tax Credit Eligibility Under FFCRA

In its most recent guidance on the Families First Coronavirus Response Act (FFCRA), the Department of Labor (DOL) instructed employees to provide their employers with documentation in support of their leave “as specified in applicable IRS forms, instructions, and information.” Last night, the IRS released guidance on what information and documentation an employer may request from an employee to substantiate the employer’s eligibility for tax credits for qualified leave wages under the Emergency Family Medical Leave Expansion Act and Emergency Paid Sick Leave Act provisions of the FFCRA. The IRS Guidance is available here. The relevant provisions of the guidance are outlined below.

According to the IRS, an eligible employer (i.e, an employer with fewer than 500 employees), will substantiate eligibility for the sick leave or family leave credits if the employer receives a written request for such leave from the employee in which the employee provides: 
  1. The employee’s name;
  2. The date or dates for which leave is requested;
  3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
  4. 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 or advised to self-quarantine is not the employee, the statement should also include that person’s name and relation to the employee.

In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving leave. In addition, if the employee claims an inability to work or telework because of a need to provide care for a child older than 14 during daylight hours, the employee must provide a statement that special circumstances exist requiring the employee to provide care.

In addition to documentation received from employees, the IRS further instructs that in order for an eligible employer to maintain eligibility, the employer must create and maintain records that include the following information: 
  1. 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 and qualified sick and family leave.

  2. Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages. The amount of qualified health plan expenses taken into account in determining the credits generally includes both the portion of the cost paid by the eligible employer and the portion of the cost paid by the employee with pre-tax salary reduction contributions. However, the qualified health plan expenses should not include amounts that the employee paid for with after-tax contributions.

  3. Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, which the employer submitted to the IRS.
    1. Form 7200 is available here with instructions here.

  4. Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS (or for employers that use third-party payers to meet their employment tax obligations, records of information provided to the third-party payer regarding the employer’s entitlement to the credit claimed on Form 941).
    1. Form 941 is available here.

An eligible employer should keep all records of employment taxes for at least four years after the date the tax becomes due or is paid, whichever comes later.

If you have questions about these documentation requirements or any other issues surrounding the FFCRA, please contact any member of Warner’s Labor and Employment Practice Group.

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