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Instructions for Form 8994 (Rev. January 2021)

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Instructions for Form 8994 (Rev. January 2021) Userid: CPM Schema: Leadpct: 100% Pt. size: 10 Draft Ok to Print instrx AH XSL/XML Fileid: … ns/I8994/202101/A/XML/Cycle08/source (Init. & Date) _______ Page 1 of 10 14:46 - 22-Jan-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Instructions for Form 8994 Internal Revenue Service (Rev. January 2021) Employer Credit for Paid Family and Medical Leave Section references are to the Internal Revenue Code Eligible Employer unless otherwise noted. An eligible employer is an employer with a written policy in Future Developments place that provides paid family and medical leave and For the latest information about developments related to satisfies minimum paid leave requirements (see Minimum Form 8994 and its instructions, such as legislation Paid Leave Requirements, later). In addition, if the enacted after they were published, go to IRS.gov/ employer employs any qualifying employees who aren’t Form8994. covered by title I of the Family and Medical Leave Act (FMLA), the employer’s written policy must include What’s New “non-interference” language. Periodic updating. Form 8994 and its instructions will no Non-interference language. If an employer employs at longer be updated annually. Instead, they’ll only be least one qualifying employee who isn’t covered by title I updated when necessary. See Which Revision To Use. of the FMLA (including any employee who isn’t covered by title I of the FMLA because he or she works less than New employment tax credits. You may have claimed 1,250 hours per year), the employer must include coronavirus (COVID-19)-related employment credits on “non-interference” language in its written policy and an employment tax return such as Form 941, Employer’s comply with this language to be an eligible employer. This QUARTERLY Federal Tax Return. Wages used to figure requirement applies to: these employment credits can’t also be used to figure a • An employer subject to title I of the FMLA that has at credit on Form 8994. For more information, see Wages least one qualifying employee who isn’t covered by title I defined under How To Figure the Credit. of the FMLA, and Credit extension. The Taxpayer Certainty and Disaster • An employer not subject to title I of the FMLA (that has Tax Relief Act of 2019 extended the credit for paid family no employees covered by title I of the FMLA). and medical leave to cover tax years beginning in 2020. The “non-interference” language must ensure that the The Taxpayer Certainty and Disaster Tax Relief Act of employer will not interfere with, restrain, or deny the 2020 extended the credit to cover tax years beginning in exercise of, or the attempt to exercise, any right provided 2021 through 2025. under the policy, and will not discharge, or in any other manner discriminate against any individual for opposing any practice prohibited by the policy. The following General Instructions “non-interference” language is an example of a written Purpose of Form provision that would satisfy this requirement: [Employer] will not interfere with, restrain, or deny the exercise of, or An eligible employer (defined below) uses Form 8994 to the attempt to exercise, any right provided under this figure the employer credit for paid family and medical policy. [Employer] will not discharge, or in any other leave. The credit ranges from 12.5% to 25% of certain manner discriminate against, any individual for opposing wages paid to a qualifying employee while the employee any practice prohibited by this policy. is on family and medical leave. Written policy documentary requirements. An eligible You can claim or elect not to claim the employer credit employer’s written policy may be set forth in a single for paid family and medical leave any time within 3 years document or in multiple documents. For example, an from the due date of your return on either your original employer may maintain different documents to cover return or an amended return. different classifications of employees or different types of Partnerships and S corporations must file this leave, and those documents will collectively constitute the TIP form to claim the credit. All other taxpayers must employer’s written policy. An eligible employer’s written not complete or file this form if their only source for policy may also be included in the same document that this credit is a partnership or S corporation. Instead, they governs the employer’s other leave policies. must report this credit directly on line 4j in Part III of Form Written policy in place. The employer’s written policy 3800, General Business Credit. must be in place before the paid family and medical leave for which the employer claims the credit is taken. The Which Revision To Use written policy is considered to be in place on the later of Use the January 2021 revision of Form 8994 for tax years the following dates. beginning in 2020 or later, until a later revision is issued. • The policy’s adoption date. Use prior revisions of the form and instructions for earlier • The policy’s effective date. tax years. All revisions are available at IRS.gov/ Example. You adopt a written policy that satisfies all of Form8994. the requirements discussed in these instructions on June 15, 2020, with an effective date of July 1, 2020. Assuming Jan 22, 2021 Cat. No. 69663D Page 2 of 10 Fileid: … ns/I8994/202101/A/XML/Cycle08/source 14:46 - 22-Jan-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. all other requirements for the credit are met, you can claim employee would not be viewed as a reasonable method the credit with respect to family and medical leave paid in for determining whether an employee has been employed accordance with that policy to qualifying employees for for 1 year. The rules under section 101(2)(A)(ii) of title I of leave taken on or after July 1, 2020. the FMLA, which require an employee to work a minimum Providing notice of written policy to employees. of 1,250 hours of service to be an eligible employee under Employers aren’t required to provide notice of the written the FMLA, don’t apply. policy to qualifying employees to claim the credit. Written policy may not exclude any classification of However, if an employer chooses to provide notice of the employees. An employer’s written policy may not written policy to qualifying employees, the policy will not exclude any classification of employees (for example, be considered to provide for paid leave to all qualifying collectively bargained employees) if they are qualifying employees (see Minimum Paid Leave Requirements, employees. later), unless the availability of paid leave is Example 1. You have an insured short-term disability communicated to employees in a manner reasonably plan that provides disability benefits to any employee who designed to reach each qualifying employee. This may becomes disabled after having completed 6 months of include, for example, email communications, use of continuous service. Under the plan, a disability caused by Internet websites, employee handbooks, or posted or resulting from a pre-existing condition isn’t covered if displays in employee work areas. the disability begins in the first 12 months after the effective date of coverage. For purposes of the plan, a Qualifying Employee pre-existing condition is one for which an employee A qualifying employee is an employee (as defined in consulted a physician, received medical treatment, or took section 3(e) of the Fair Labor Standards Act of 1938 prescribed drugs in the 3 months immediately prior to the (FLSA), as amended) who has been employed by the effective date of coverage. The exclusion from coverage employer for 1 year or more, and whose compensation for for pre-existing conditions applies to all your employees the preceding year doesn’t exceed an amount equal to during the applicable 12-month period. Employees 60% of the amount applicable for that year under section subject to the pre-existing condition exclusion are 414(q)(1)(B)(i). effectively not covered under the plan when they first become qualifying employees. In addition, in some cases, For 2019, the applicable amount of compensation the requirement that the employee complete 6 months of under section 414(q)(1)(B)(i) is $125,000. Accordingly, to continuous service might exclude some qualifying be a qualifying employee in 2020, an employee must have employees. Therefore, the plan will not in all cases cover earned no more than $75,000 (60% of $125,000) in all qualifying employees. You can’t claim the credit for compensation in the preceding year. paid family and medical leave provided under the written For 2020 and 2021, the applicable amount of policy with respect to any of your employees. compensation under section 414(q)(1)(B)(i) is $130,000. Example 2. The facts are the same as in Example 1, Accordingly, to be a qualifying employee in 2021 or 2022, except that you adopt a written policy that provides for an employee must have earned no more than $78,000 paid leave to any qualifying employee who isn’t covered (60% of $130,000) in compensation in the preceding year. under the short-term disability plan as a result of the 6 months of service requirement or the pre-existing For this purpose, an employer whose tax year isn’t the condition exclusion. This leave is paid from your general calendar year can choose to use as the preceding year assets and the length of the paid leave is the same as the either: leave that would have been available under the short-term • The employer’s immediately preceding fiscal year, or disability plan if neither the 6 months of service • The calendar year ending in the employer’s requirement nor the pre-existing condition exclusion immediately preceding fiscal year.
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