Background Information

The Cares Act created the sick leave tax credit which allows employers to get a credit for time employees were out of work for reasons related to Covid-19 such as recovering from the illness or taking care of a family member who got sick. The second round also expanded leave to include reasons related to getting the vaccination or recovering from receiving the vaccination.

There were two rounds of the credit. The first was created by the Families First Coronavirus Relief Act. With this act the employer was allowed to apply the tax credit against their portion of social security tax due. The credit was calculated based on the sick leave wages employers paid from April 1st, 2020, through March 31st, 2021.

The credit was continued into a second round by the American Rescue Plan Act. This act allowed employers to receive a tax credit based on sick leave wages paid from April 1st, 2021, to September 30th, 2021. This time employers were allowed to apply the tax credit against their portion of the Medicare tax owed.

The credit is calculated based on the sick leave wages paid to employees during the applicable time period as detailed above.

Reporting of Sick Leave Wages on Form W2

In 2021 sick leave wages paid to employees will be reported in box one on form W2 and boxes three and five if they also covered the employee portion of Medicare and Social Security tax. However, the following wages also need to be separately stated in box 14 of form W2 or on a separate statement sent with form W2.

Employers must also report these wages in box 14 of the W-2 form. Wages need to be reported separately in box 14 or on an attached statement based on the credit that was utilized.

This information will assist employees who are also self-employed determine the amount of credit available on their self-employed income.

Contact Us

If you have questions regarding how sick leave is reported on a W2, The Innovative CPA Group is readily available to assist. Please get in touch with us at 203-489-0612 or via our contact form.

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2022-10-10T15:12:15+00:00January 5th, 2022|Business, COVID-19, Individual, Small Business, Tax, Tax Credit, Tax Return|

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