IRS Issues Updated Form 8894

The Internal Revenue Service (IRS) has issued an updated Form 8994, which is used by employers to determine the tax credit for providing paid family and medical leave.

To claim the credit, eligible employers must have a written program that pays at least 50% of wages to qualified employees for at least two weeks of annual paid family and medical leave. An eligible employer that pays 50% of wages may claim a general business credit of 12.5% of wages paid for up to 12 weeks of family and medical leave a year.

The credit, which was initially available only for tax years beginning in 2018 and 2019, was later extended through 2020. The Consolidated Appropriations Act (CAA) of 2021 extended the credit through 2025.

Form 8994 and its instructions have been updated for the extension. The instructions speak to the interaction of this credit with the COVID-19-related tax credit for the provision of paid leave, which is currently available for wages paid for certain leaves taken through March 31, 2021.

The instructions explain that the same wages cannot be used to figure both credits. The updated form can be found here.