2020 Form W2s: New Guidance Issued By IRS

The Families First Coronavirus Response Act (FFCRA) mandates that all small employers (with less than 500 employees) pay up to two weeks of sick pay or up to 10 weeks of family leave pay for coronavirus related absences. Self-employed persons filing a Schedule C with their Form 1040 are also eligible for this benefit.

Employers will be required to report payments to employees in either Box 14 of Form W-2, Wage and Tax Statement, or a separate statement provided with the Form W-2. The guidance issued in Notice 2020-54 provides employers with language to use on the Form W-2 or in the statement to employees.

Employers must separately state the total amount of qualified sick leave wages paid because the employee was quarantined or diagnosed with COVID-19, the total amount of qualified sick leave wages paid because the employee was caring for a sick individual or for a child (or for other similar reason), and the total amount of qualified family leave wages paid.

Eligible taxpayers who receive the mandated sick or family leave pay through their employer are not eligible for duplicate benefits through their sole proprietorship. This reporting provides employees who are also self-employed with information necessary for properly claiming qualified sick leave equivalent or qualified family leave equivalent credits under the Families First Act.

Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, is a new form that will be used to claim the credit on the 2020 Form 1040.