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What You Need to Know to Claim Covid-related Tax Credits

A new federal law will allow the government to provide economic relief to churches to pay their employees’ salaries. $250 billion has been sanctioned to the Small Business Administration which will give out loans to small businesses affected by the coronavirus shutdowns. Churches and religious organizations will be considered “businesses” and thus receive financial aid to pay bills and salaries. In order to be reimbursed for the amount spent on covid-related wage payments, there are a few considerations to be noted.

Under the Families First Coronavirus Response Act (FFCRA), churches will need to submit the FFCRA leave compensation report, stating the amount of qualified sick and family leave wages paid to the employees, on either the Box 14 of Form W-2, or in a statement provided along with the Form W-2. This guidance was issued by the agencies on July 8, 2020 and was provided in Notice 2020-54, under the guidance from the IRS and the U.S Treasury Department.

Self-employed individuals who are also employees are required to report- with the necessary information- to claim sick and family leave tax credits if they are credible. They must also report on Form 7202, Credits for Sick Leave and Family Leave For Certain Self-Employed Individuals, along with their income tax returns.

The guidance also provides the employers with optional language to use in the W-2 form for the instructions for the employees, which explains that the FFCRA leave wages may limit the employees tax credits with respect to any additional self-employment income for the leave. This FFCRA requires the employees under this act to be provided with up to 80 hours of paid sick leave and up to 10 weeks of partially compensated leave, by the employers, under the Family and Medical Leave Act for specified reasons related to COVID-19. The employers may also take a complete reimbursement through the tax credits for all qualifying wages paid under this act. Applicable tax credits are also extended to amounts paid to maintain health insurance coverage.


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