As you get ready to work on your taxes for next year here is some important new information to guide you on W2 forms and COVID-19 home testing reimbursements.
The Treasury Department and the Internal Revenue Service issued Notice 2021-53, which provides guidance to employers about reporting on Form W-2 the amount of qualified sick and family leave wages paid to employees for leave taken in 2021. The notice guides recent legislation, including the Families First Coronavirus Response Act (FFCRA), as amended by the COVID-Related Tax Relief Act of 2020, and the American Rescue Plan Act of 2021.
Employers will be required to report these amounts to employees either on Form W-2, Box 14 or in a separate statement provided with the Form W-2. The guidance provides employers with model language to use as part of the Instructions for Employees for the Form W-2 or on the separate statement provided with the Form W-2, according to a news release.
The wage amount that the notice requires employers to report on Form W-2 will provide employees who are also self-employed with the information necessary to determine the amount of any sick and family leave equivalent credits they may claim in their self-employed capacities.
In July 2020, the IRS issued Notice 2020-54, which guided W-2 reporting of qualified sick leave and family leave under FFCRA for wages paid to employees for leave taken in 2020.
Additional information about tax relief for employers affected by the COVID-19 pandemic can be found on IRS.gov.
Cost of home testing for COVID-19 is eligible medical expense; reimbursable under FSAs, HSAs
The Internal Revenue Service reminds taxpayers that the cost of home testing for COVID-19 is an eligible medical expense that can be paid or reimbursed under health flexible spending arrangements (health FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs), or Archer medical savings accounts (Archer MSAs). That is because the cost to diagnose COVID-19 is an eligible medical expense for tax purposes.
The IRS also reminds taxpayers that the costs of personal protective equipment, such as masks, hand sanitizer, and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19 are eligible medical expenses that can be paid or reimbursed under health FSAs, HSAs, HRAs, or Archer MSAs. Additional information is available on IRS.gov.
For more information regarding details and requirements on the deductibility of medical expenses, taxpayers can review Can I Deduct My Medical and Dental Expenses? and Publication 502, Medical and Dental Expenses.