IRS provides more insight into COVID-19 tax credits

The IRS issued four new answers this month to frequently asked questions about tax credits provided for employee leave taken under the Families First Coronavirus Response Act and the American Rescue Plan Act. The new answers focus on issues related to employer and employee reporting of wages paid for leave taken under the FFCRA and ARPA during different time periods.

New FAQs on Leave Taken Under the FFCRA:

IRS Fact Sheet 2022-16 adds two FAQs about tax credits for paid leave under the FFCRA for leave taken before April 1, 2021:

• FAQ 54g addresses when employers claiming tax credits for wages paid after 2021 for leave taken during the period of April 1, 2020 - March 31, 2021 must provide employees a Form W-2c to correct wages reported on the employee’s 2020 or 2021 Form W-2.

• FAQ 65c explains when a self-employed individual in receipt of a Form W-2c from their employer correcting wages paid for this period must file an amended tax return.

New FAQs on Leave Taken Under the ARPA:

IRS Fact Sheet 2022-15 adds two similar FAQs about tax credits for paid leave, but for time off taken under the ARPA after March 31, 2021:

• FAQ 98a explains when an employer claiming tax credits for wages paid after 2021 for leave taken April 1- Sept. 30, 2021, must provide employees a Form W-2c to correct the wages on the employee’s 2021 Form W-2.

• FAQ 116a addresses when a self-employed worker in receipt of a Form W-2c correcting wages received for this period must file an amended tax return.