Qualified sick and family leave wage reporting

The IRS provides guidelines to employers for showing these wages on Form W-2.
By Paul Bonner

The IRS detailed how employers must report qualified sick leave wages and qualified family leave wages for leave provided to employees in 2021.

Under Notice 2021-53, employers are required to report the qualified leave wages either in box 14, "Other," of a 2021 Form W-2, Wage and Tax Statement, or on a separate statement. The reporting provides employees who are also self-employed the information they need to claim a qualified sick leave or family leave equivalent credit for the 2021 tax year.

Separate guidance issued last year in Notice 2020-54 applies to reporting qualified leave wages for leave provided beginning April 1, 2020, through Dec. 31, 2020.

Qualified sick and family leave wages are wages and compensation paid by an employer that are required to be paid for qualified leave provided to employees for the period Jan. 1, 2021, through March 31, 2021, under the Families First Coronavirus Response Act, P.L. 116-127, and, for qualified leave provided to employees for April 1, 2021, through Sept. 30, 2021, under Secs. 3131, 3132, and 3133, added by Section 9641 of the American Rescue Plan Act (ARPA), P.L. 117-2. Eligible employers who pay qualified sick and family leave wages are entitled to receive a refundable tax credit of the full amount of these wages paid with respect to each calendar quarter.

Qualified sick leave generally is provided to employees unable to work or telework due to certain COVID-19-related circumstances. Qualified family leave is generally provided for employees' inability to work or telework due to a need to care for a child if, for COVID-19-related reasons, the child's school or place of care is closed or because the child's care provider is unavailable. Self-employed individuals can claim credits for equivalent amounts if they would have received qualified leave wages if they had been treated as an employee of an employer. They may have to reduce their qualified leave equivalent amount by some or all of any qualified leave wages they also received from an employer.

Qualified leave wages paid in 2021 should be reported in box 1, "Wages, Tips, Other Compensation," of Form W-2, the notice states. To the extent they are Social Security or Medicare wages, they must also be included, respectively, in box 3, "Social Security Wages," (up to the Social Security wage base) and box 5, "Medicare Wages and Tips." Employers must also report to the employee, either in box 14 or on a separate statement, amounts of qualified leave wages separated and labeled with respect to whether they are for qualified sick leave or qualified family leave and with respect to the different limitation amounts applicable within specified date ranges in 2021.

The notice also provides model language for optional additional information and instructions to employees regarding the qualified leave reported in box 14 of Form W-2 or the separate statement.

  • Notice 2021-53

— By Paul Bonner, a JofA senior editor.

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