Draft Form 7202 Released for Self-Employed Individuals & New Guidance on Paid Leave for School-Related Absences

Thoughtware Alert Sep 14, 2020
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Under the Families First Coronavirus Response Act (FFCRA), government entities and employers with fewer than 500 workers must provide 80 hours of paid sick leave to all covered employees and up to 10 weeks of paid family leave for certain employees affected by COVID-19 who have worked at the company for at least a month. The FFCRA also provides corresponding tax credits to employers and self-employed individuals to help cover the mandated paid leave through December 31, 2020.

Since the FFCRA’s enactment, which took effect April 1, 2020, the IRS and the U.S. Department of Labor (DOL) have issued guidance on these provisions, including the types of circumstances that qualify employees for the FFCRA paid leave. The IRS also has updated the payroll tax forms used to report FFCRA tax credits.

New Guidance on Paid Family Leave for School-Related Absences

Since many school districts across the U.S. have moved to full-time or partial online learning this fall, the DOL recently issued new guidance clarifying how school closings and remote learning programs for school-age children affect FFCRA family leave eligibility. While this article summarizes some of these key clarifications, be sure to refer to the DOL’s website for additional information on how the FFCRA affects the workplace.

If a child’s school is operating in a hybrid system where students alternate between days attending school in person and days participating in remote learning, employees are eligible to take paid leave under the FFCRA on days when their child isn’t permitted to attend school in person and must instead complete their studies online. Effectively, the school is “closed” to the child on remote learning days. The caveat is the employee must need the leave to actually care for the child during that time and no other suitable person is available to provide child care.

However, if the school gives the employee the choice to physically send the child to school or participate in a remote learning program, then the employee isn’t eligible for paid leave under the FFCRA because this leave isn’t available to take care of a child whose school is open for full-time, in-person attendance. Note, if the child stays home due to a quarantine order or is advised by a healthcare provider to self-isolate or self-quarantine, then the employee may be eligible to take paid leave to care for the child even if the school remains open for in-person attendance.

As a reminder, the documentation for substantiating FFCRA paid leave for child care purposes must include:

  1. The name of the employee requesting leave
  2. The date(s) for which leave is requested
  3. The reason for leave
  4. A statement from the employee that he or she is unable to work because of the reason
  5. The name of the child
  6. The name of the school, place of care, or child care provider that has closed or become unavailable
  7. A statement that no other suitable person is available to care for the employee’s child

This information should be provided in writing by the employee when requesting leave, as employers may be required to provide this documentation to the IRS in support of the tax credits claimed.

New Draft Form for Self-Employed Individuals Taking FFCRA Paid Leave

Self-employed individuals also are eligible to receive qualified sick leave wages or qualified family leave wages under the FFCRA. The qualified family leave equivalent amount with respect to an eligible self-employed individual is an amount equal to the number of days (up to 50) during the taxable year that the self-employed individual can’t perform services for which that individual would be entitled to paid family leave, multiplied by the lesser of two amounts: 1) $200 or 2) 67 percent of the average daily self-employment income of the individual for the taxable year. Refer to these IRS frequently asked questions for more details on how self-employed individuals may qualify for these credits.

Self-employed individuals claiming qualified sick leave equivalent or qualified family leave equivalent credits must complete and file Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, with their individual income tax return. As of the date of publication, only a draft version of Form 7202, without form instructions, has been released.

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