Employer Credit for Paid Family and Medical Leave

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2018

Instructions for Form 8994

Department of the Treasury
Internal Revenue Service

Employer Credit for Paid Family and Medical Leave
Section references are to the Internal Revenue Code
unless otherwise noted.

Future Developments

For the latest information about developments related to
Form 8994 and its instructions, such as legislation
enacted after they were published, go to IRS.gov/
Form8994.

General Instructions
Purpose of Form

For wages paid in 2018, an employee with
compensation of more than $72,000 in 2017 is not a
qualifying employee. For wages paid in 2019, an
employee with compensation of more than $72,000 in
2018 is not a qualifying employee.

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Paid Family and Medical Leave

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An eligible employer (defined below) uses Form 8994 to
figure the employer credit for paid family and medical
leave for tax years beginning after 2017. The credit is
generally equal to up to 25% of certain wages paid to a
qualifying employee while the employee is on family and
medical leave.

The credit is based on certain wages paid to a qualifying
employee (defined earlier) while the employee is on family
and medical leave.

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Wages paid to an employee who is not a
qualifying employee are not wages for purposes
of this credit.

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You can claim or elect not to claim the employer credit
for paid family and medical leave any time within 3 years
from the due date of your return on either your original
return or an amended return.

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Partnerships and S corporations must file this form to
claim the credit. All other taxpayers aren’t required to
complete or file this form if their only source for this credit
is a partnership or S corporation. Instead, they can report
this credit directly on Form 3800, General Business
Credit.

Eligible Employer

An eligible employer is an employer who has a written
policy in place that meets certain requirements, including
providing:
1. At least 2 weeks of paid family and medical leave
(annually) to all qualifying employees who work full time
(prorated for employees who work part time), and
2. The paid leave is not less than 50% of the wages
normally paid to the employee.
For purposes of this credit, wages paid by a third-party
payer (including an employee leasing company, a
professional employer organization, or a Certified
Professional Employer Organization) to qualifying
employees of an eligible employer are considered wages
paid by the eligible employer. Only the eligible employer,
and not the third-party payer, can take into account such
wages in claiming the credit.

Qualifying Employee

A qualifying employee is any employee under the Fair
Labor Standards Act who has been employed by the
employer for 1 year or more and who, for the preceding
year, had compensation of not more than a certain
amount.
Jul 24, 2018

CAUTION

Wages. Wages qualifying for this credit generally have
the same meaning as wages subject to the Federal
Unemployment Tax Act (FUTA) (determined without
regard to the $7,000 FUTA tax wage base). However, any
wages taken into account in determining any other
general business credit may not be used to figure this
credit.

Family and medical leave. For this purpose, family and
medical leave is generally up to 12 weeks of leave
provided for one or more of the following reasons.
Birth of an employee’s child and to care for the child.
Placement of a child with the employee for adoption or
foster care.
To care for the employee’s spouse, child, or parent who
has a serious health condition.
A serious health condition that makes the employee
unable to perform the functions of his or her position.
Any qualifying exigency due to an employee’s spouse,
child, or parent being on covered active duty (or having
been notified of an impending call or order to covered
active duty) in the U.S. Armed Forces.
To care for a service member who is the employee’s
spouse, child, parent, or next of kin.
However, vacation leave, personal leave, and medical
or sick leave (any leave specifically for one or more of the
purposes stated above), isn’t considered family and
medical leave. In addition, any leave paid by a state or
local government or required by state or local law will not
be considered in determining the amount of
employer-provided paid family and medical leave.
A qualifying employer may take into account payments
that exceed any family and medical leave payments
mandated by state law or paid by the government, but
only if the payments otherwise meet the requirements
discussed earlier.
Example 1. You provide 6 weeks of paid family and
medical leave at 75% of pay. State law requires you to
provide 4 weeks of paid leave at 50% of pay. The leave
runs concurrently. You would be eligible to claim the credit

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Line 1

for only 2 weeks. This is because, disregarding the
payments made under state law, your rate of payment
(which must be at least 50%) is only 25% during the first 4
weeks of paid leave (75% paid minus 50% required by
state law = 25%).

Use the Paid Family and Medical Leave Worksheet to
figure any credit amount to enter on line 1.
In general, you must reduce your deduction for salaries
and wages by the amount on line 1. You must make this
reduction even if you can’t take the full credit this year and
must carry it back or forward. If you capitalized any costs
on which you figured the credit, reduce the amount
capitalized by the credit attributable to these costs.

Example 2. You provide 2 weeks of paid family and
medical leave at 100% of pay. State law requires you to
provide 2 weeks of paid leave at 50% of pay. The leave
runs concurrently. You can claim the credit for the amount
you paid in addition to the amount required to be paid
under state law because, even when the state-mandated
payments are disregarded, you paid 50% of pay for those
2 weeks of leave.

Line 2

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Enter total paid family and medical leave credits from:
Schedule K-1 (Form 1065), Partner’s Share of Income,
Deductions, Credits, etc., box 15 (code P); or
Schedule K-1 (Form 1120S), Shareholder’s Share of
Income, Deductions, Credits, etc., box 13 (code P).

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Member of Controlled Group or
Business Under Common Control

For purposes of figuring the credit, all members of a
controlled group of corporations (as defined in section
52(a)) and all members of a group of businesses under
common control (as defined in section 52(b)), are treated
as a single taxpayer. As a member, figure your credit
based on your proportionate share of wages giving rise to
the group’s credit. Attach a statement showing how your
share of the credit was figured, and enter “See Attached”
next to the entry space for line 1.

Partnerships and S corporations must always report the
above credits on line 2. All other filers figuring a separate
credit on line 1 also must report the above credits on
line 2. All others not using line 1 to figure a separate credit
can report the above credits directly on Form 3800, Part
III, line 4j.

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More Information

Instructions for Paid Family and
Medical Leave Worksheet
Although you only need to provide summary

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For more information about this credit, see the following.
Section 45S.
Notice 2018-xx.
IRS.gov/Section45S.

TIP information to claim the credit, keep separate

records to support the information on the Paid
Family and Medical Leave Worksheet. This includes the:

Name and social security number of each qualifying
employee,
Wages paid to each qualifying employee,
Name and employer identification number of each
qualifying employer, and
Applicable percentage and family and medical leave
policy.

Specific Instructions
Line A

Answer “Yes” if you meet the first requirement discussed
earlier under Eligible Employer. If you answer “No,” don’t
file Form 8994 unless you are filing it for a partnership or S
corporation that received from another entity a credit that
must be reported on line 2. For more information, see the
instructions for line 2.

Column (a), Qualifying Employees

Enter the name or other identifying information for each
qualifying employee (defined earlier) to whom wages
were paid while on family and medical leave (also defined
earlier).

Line B

Answer “Yes” if you meet the second requirement
discussed earlier under Eligible Employer. If you answer
“No,” don’t file Form 8994 unless you are filing it for a
partnership or S corporation that received from another
entity a credit that must be reported on line 2. For more
information, see the instructions for line 2.

Column (b), Paid Family and Medical Leave

Enter the total family and medical leave wages (defined
earlier) for the tax year for each employee listed in column
(a).

Line C

Column (c), Applicable Percentage

Enter the applicable percentage for each qualifying
employee. The minimum percentage is 12.5% and is
increased by 0.25% for each percentage point by which
the amount paid to a qualifying employee exceeds 50% of
the employee wages. The maximum applicable
percentage is 25%.

Answer “Yes” if you paid family and medical leave to at
least one qualifying employee during the tax year. See
Paid Family and Medical Leave and Qualifying Employee,
earlier. If you answer “No,” don’t file Form 8994 unless
you are filing it for a partnership or S corporation that
received from another entity a credit that must be reported
on line 2. For more information, see the instructions for
line 2.

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Instructions for Form 8994 (2018)

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Keep for Your Records

Paid Family and Medical Leave Worksheet

Use this worksheet to figure your credit for certain wages paid during your tax year to any qualifying employee(s) while
on family and medical leave during your tax year. If you need more rows, use a separate sheet and include the additional
amounts in the totals below.
(a)
Qualifying Employee

(b)
Paid Family and Medical Leave

(c)
Applicable Percentage
(shown as a decimal (25% = 0.25))

(d)
Credit Amount
(multiply column (b) by column (c))

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Total amount shown in column (d) from all sheets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We need it to ensure that you are complying with these laws
and to allow us to figure and collect the right amount of tax.
Instructions for Form 8994 (2018)

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You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be
retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax
returns and return information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden
for individual and business taxpayers filing this form is approved under OMB control numbers 1545-0074 and 1545-0123
and is included in the estimates shown in the instructions for their individual and business income tax returns. The
estimated burden for all other taxpayers who file this form is shown below.

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Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Learning about the law or the form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xx min.
xx min.
xx min.

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If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,
we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

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Instructions for Form 8994 (2018)