Employers are required to report wages paid for leave taken under the Families First Coronavirus Response Act (FFCRA) on employees’ W-2 forms. For employers who did include this information on W-2s it may be necessary to correct already issued W-2s.
The reporting instructions were contained in IRS Notice 2020-54, which was issued July 2020. However, the reporting requirement was not detailed in the Form W-2 instructions.
The wages paid to an employee for FFCRA leave are taxable as regular wages. The qualified family-leave wages and qualified sick-leave wages are excluded from FICA wages for purposes of Social Security taxes for the employer portion of Social Security tax; however, they are included in wages for purposes of employee Social Security tax, as well as the employer and employee shares of Medicare taxes.
The IRS has issued specific guidance on how employers are expected to report wages paid for emergency paid sick leave and emergency paid Family and Medical Leave Act time off under the FFCRA. Pay for either type of FFCRA wages should be reported separately from regular wages, on Box 14 of the W-2, or on a separate statement provided concurrently with the regular W-2, according to this guidance.
There is some disagreement whether employers that are not claiming the FFCRA tax credit for providing sick-leave wages must report the wages on employees’ W-2s.
Next Steps for Employers
If W-2s have been sent out without FFCRA wages reflected on them accurately, employers should work with their tax professional and/or payroll provider to immediately correct the data in their system and issue amended W-2s.
If an error is discovered on Form W-2 after it has been issued to the employee but before it is filed with the Social Security Administration (SSA), an employer should check the ‘Void’ box on Copy A and prepare a new W-2 to file with the SSA. In addition, they should indicate ‘CORRECTED’ on the top of the employee’s new copies and furnish to the employee.
It should be noted that there is a difference between an amended original and a corrected W-2 or W-2C. Amended original means that the W-2 has not yet been filed with the federal government, whereas a W-2C means the employer has filed with the government. Where a W-2C is required, the process to correct it is more burdensome. For errors discovered on Form W-2 after it has been filed with the SSA, an employer should prepare Forms W-2C (Corrected Wage and Tax Statement) and W-3C (Transmittal of Corrected Wage and Tax Statement) to file with the SSA and provide the employee with their applicable copies of Form W-2C.