IRS Issues Form 8994, Employer Credit for Paid Family Leave

February 5, 2019

The IRS recently issued 2018 Form 8994 and the corresponding instructions intended for employers to determine the tax credit available to them for providing paid family and medical leave.

As background, the Tax Cut and Jobs Act of 2017 created a new employer credit available for those that offer qualifying paid family and medical leave for tax years beginning after 2017 and before 2020. To claim the credit, eligible employers must have a written program that pays at least 50 percent of wages paid for up to 12 weeks of family and medical leave a year, with the credit ranging from 12.5 to 25 percent.

Form 8994 requires employers to confirm four statements:

  1. That there is a written policy providing for at least two weeks of annual paid family and medical leave for qualifying employees.
  2. That the written policy provides paid family and medical leave of at least 50 percent of the wages normally paid to a qualifying employee.
  3. That the family and medical leave was paid to at least one qualifying employee during the tax year.
  4. That if at least one qualifying employee that was not covered by the FMLA was employed during the year, that the written paid family and medical leave policy complies with FMLA’s “non-interference” language.

Form 8994 also provides the lines to calculate the appropriate credit amount.

Employers that provided qualifying paid family and medical leave during the 2018 tax year should work with their tax advisers to properly complete this form. If an employer didn’t offer paid family and medical leave during 2018, but is considering the opportunity for 2019, then this Form can be used as a guide. The IRS has indicated that it intends to issue proposed regulations on this tax credit, so we will continue to monitor and update as needed.

Form 8994 »
Form 8994 Instructions »