Changes to W-2 Reporting for Tax Year 2020? You Can Thank COVID-19

If you thought keeping up with yearly tax law changes was hard enough, you might not be happy to hear this news. There are a couple changes to Form W-2 reporting you may need to pay attention to.

Read on to learn about important changes to W-2 reporting for tax year 2020 and what you need to do to comply. 

Form W-2 reporting changes

Each year, employers are responsible for reporting employees’ annual wages and withheld taxes on Form W-2. And, you might need to enter additional benefits like retirement plan earnings and third-party sick pay.

This year, Congress enacted a number of emergency pieces of legislation to financially help employers and employees navigate the uncharted waters that are COVID-19. 

That means it’s your responsibility, as an employer, to report the financial help employees received from the coronavirus legislation. 

You must report the following on any employee’s W-2 who received one of these COVID-19 benefits:

Paid COVID-19 sick or family leave Deferred employee Social Security tax Reporting paid COVID-19 sick or family leave on Form W-2

The Families First Coronavirus Response Act (FFCRA) required that qualifying employers provide paid sick and family leave to eligible employees between April 1, 2020 and December 31, 2020. 

Background 

Under the FFCRA, employees could receive paid leave in the following situations:

10 days of paid sick leave at the employee’s regular rate of pay: Employees who are quarantined or isolated due to the coronavirus, up to a maximum daily rate of $511 ($5,110 total maximum).  10 days of paid sick leave at two-thirds of the employee’s regular rate of pay: Employees who are caring for someone who is quarantined or isolated due to the coronavirus, up to a maximum daily rate of $200 ($2,000 total maximum).  10 weeks of paid family leave at two-thirds of the employee’s regular rate of pay: Employees caring for a child whose school or childcare center had closed, up to a maximum daily rate of $200 ($10,000 total maximum). 

If you doled out one or more of the above coronavirus paid sick or family wages to employees, report the amounts on Form W-2. 

Where to report paid leave on Form W-2 

According to the IRS, you must do the following when reporting FFCRA sick pay and paid family leave: 

Include the amount in boxes 1, 3, and 5 on Form W-2 Report the amount in box 14 (Other) on Form W-2 OR report the amount in a separate statement and attach to Form W-2 

If you choose to report the paid leave in a separate statement, make sure you send it at the same time—and in the same way (e.g., paper vs. electronic)—you send the employee their Form W-2.

Describing the paid leave amounts on Form W-2 

When reporting the amount in Box 14 on Form W-2 or in a separate statement, you can use the following descriptions (provided by the IRS) to describe each amount the employee received: 

“Sick leave wages subject to the $511 per day limit.”  “Sick leave wages subject to the $200 per day limit.” “Emergency family leave wages.” Reporting deferred employee Social Security tax on Form W-2 

On August 8, the president signed an executive order allowing employers to defer eligible employees’ Social Security tax obligations between September 1,

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