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In Notice 2020-54, the IRS has instructed employers that additional Form W-2 reporting requirements apply to qualified sick and family leave wages under the Families First Coronavirus Response Act. Specifically, in addition to Form W-2, boxes 1, 3 (up to the Social Security wage base) and 5, these amounts must also be reported in box 14 or on a separate statement. The IRS explains that this reporting requirement is imposed so that employees who are also self-employed can properly claim their qualified sick and family leave equivalent credits.

Instructions for self-employed individuals

Self-employed individuals claiming qualified sick or family leave equivalent credits must report these amounts on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, included with their Form 1040 or equivalent federal income tax return. Self-employed individuals reduce (but not below zero) any qualified sick or qualified family leave equivalent credits by the amount of these qualified leave wages.

Reporting qualified sick leave wages

In addition to including qualified sick leave wages in the amount of wages paid to the employee reported in boxes 1, 3 (up to the Social Security wage base), and 5 of Form W-2 (or, in the case of compensation subject to the Railroad Retirement Tax Act (RRTA), in the amount of RRTA compensation paid to the employee reported in boxes 1 and 14 of Form W-2), employers must report to the employee the following type and amount of wages that were paid, with each amount separately reported either in Form W-2, box 14 or on a separate statement:

• The total amount of qualified sick leave wages paid for reasons described in paragraphs (1), (2), or (3) of Section 5102(a) of the Emergency Paid Sick Leave Act (EPSLA). In labeling this amount, the employer must use the following, or similar, language: "sick leave wages subject to the $511 per day limit."
• The total amount of qualified sick leave wages paid for reasons described in paragraphs (4), (5), or (6) of Section 5102(a) of the EPSLA. In labeling this amount, the employer must use the following or similar language: "sick leave wages subject to the $200 per day limit."

If a separate statement is provided and the employee receives a paper Form W-2, then the statement must be included with the Form W-2 provided to the employee, and if the employee receives an electronic Form W-2, then the statement must be provided in the same manner and at the same time as the Form W-2.

Reporting qualified family leave wages

In addition to including qualified family leave wages in the amount of wages paid to the employee in boxes 1, 3 (up to the Social Security wage base), and 5 of Form W-2 (or, in the case of compensation subject to RRTA, in the amount of RRTA compensation paid to the employee reported in boxes 1 and 14 of Form W-2), employers must separately report to the employee the total amount of qualified family leave wages paid to the employee under the EFMLEA, either in box 14 of Form W-2 or on a separate statement.

In labeling this amount, the employer must use the following, or similar, language: "emergency family leave wages."

If a separate statement is provided and the employee receives a paper Form W-2, the statement must be included with the Form W-2 sent to the employee, and if the employee receives an electronic Form W-2, the statement must be provided in the same manner and at the same time as the Form W-2.

Model language for employee instructions

As part of the Instructions for Employee for Form W-2, box 14, or in a separate statement sent to the employee, the employer may provide additional information about qualified sick leave wages and qualified family leave wages and explain that these wages may limit the amount of the qualified sick leave equivalent or qualified family leave equivalent credits to which the employee may be entitled in connection with self-employment income.

Notice 2020-54 states that the following model language (modified as necessary) may be used:

"Included in box 14, if applicable, are amounts paid to you as qualified sick leave wages or qualified family leave wages under the Families First Coronavirus Response Act. Specifically, up to three types of paid qualified sick leave wages or qualified family leave wages are reported in box 14:

• Sick leave wages subject to the $511 per day limit because of care you required;
• Sick leave wages subject to the $200 per day limit because of care you provided to another; and
• Emergency family leave wages.

If you have self-employment income in addition to wages paid by your employer, and you intend to claim any qualified sick leave or qualified family leave equivalent credits, you must report the qualified sick leave or qualified family leave wages on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, included with your Form 1040 or equivalent federal income tax return and reduce (but not below zero) any qualified sick leave or qualified family leave equivalent credits by the amount of these qualified leave wages. If you have self-employment income, you should refer to the instructions for your Form 1040 or equivalent for more information."

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