IRS Updates FAQs on Tax Credits for COVID-Related Leave

On January 28, 2021, the IRS posted updated Frequently Asked Questions (FAQs) on COVID-19-related employer tax credits for paid leave that is provided by certain small- and mid-size businesses. These tax credits were initially created by the Family First Coronavirus Response Act that was signed into law in March 2020.

The FAQ update clarifies that the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA) requirements that employers provide emergency leave to employees unable to work or telework applied only to periods of leave after March 31, 2020, and before January 1, 2021. However, the Consolidated Appropriations Act, 2021—enacted in December 2020—extended the employer tax credit qualifying period for such paid leave from the initial expiration of December 31, 2020, through March 31, 2021.

The updated FAQs clarify that while employers are not required to provide paid sick and family leave to employees after December 31, 2020, eligible employers that voluntarily provide such benefits that meet the emergency leave requirements may claim tax credits for leave-paid wages provided through March 31, 2021.