8994 Instructions for Form 8994

2019

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.

What’s New

The employer credit for paid family and medical leave is
scheduled to expire for tax years beginning after 2019.
At the time these instructions went to print,
Congress had not enacted legislation on expired
CAUTION provisions. To find out if legislation has been
enacted, go to IRS.gov/Extenders.

!

General Instructions
Purpose of Form

An eligible employer (defined below) uses Form 8994 to
figure the employer credit for paid family and medical
leave for tax years beginning in 2018 and 2019. The credit
ranges from 12.5% to 25% of certain wages paid to a
qualifying employee while the employee is on family and
medical leave.
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.
Partnerships and S corporations must file this

TIP form to claim the credit. All other taxpayers must

not complete or file this form if their only source for
this credit is a partnership or S corporation. Instead, they
must report this credit directly on line 4j in Part III of Form
3800, General Business Credit.

Eligible Employer

An eligible employer is an employer with a written policy in
place that provides paid family and medical leave and
satisfies minimum paid leave requirements (see Minimum
Paid Leave Requirements, later). In addition, if the
employer employs any qualifying employees who aren’t
covered by title I of the Family and Medical Leave Act
(FMLA), the employer’s written policy must include
“non-interference” language.
Non-interference language. If an employer employs at
least one qualifying employee who isn’t covered by title I
of the FMLA (including any employee who isn’t covered
by title I of the FMLA because he or she works less than
1,250 hours per year), the employer must include
“non-interference” language in its written policy and
Jul 29, 2019

comply with this language to be an eligible employer. This
requirement applies to:
• An employer subject to title I of the FMLA that has at
least one qualifying employee who isn’t covered by title I
of the FMLA, and
• An employer not subject to title I of the FMLA (that has
no employees covered by title I of the FMLA).
The “non-interference” language must ensure that the
employer will not interfere with, restrain, or deny the
exercise of or the attempt to exercise, any right provided
under the policy, and will not discharge, or in any other
manner discriminate against any individual for opposing
any practice prohibited by the policy. The following
“non-interference” language is an example of a written
provision that would satisfy this requirement: [Employer]
will not interfere with, restrain, or deny the exercise of, or
the attempt to exercise, any right provided under this
policy. [Employer] will not discharge, or in any other
manner discriminate against, any individual for opposing
any practice prohibited by this policy.
Written policy documentary requirements. An eligible
employer’s written policy may be set forth in a single
document or in multiple documents. For example, an
employer may maintain different documents to cover
different classifications of employees or different types of
leave, and those documents collectively will constitute the
employer’s written policy. An eligible employer’s written
policy also may be included in the same document that
governs the employer’s other leave policies.
Written policy in place. Except as provided in the
transition rule for the first tax year of an employer
beginning after 2017 (discussed next), the employer’s
written policy must be in place before the paid family and
medical leave for which the employer claims the credit is
taken. The written policy is considered to be in place on
the later of the following dates.
• The policy’s adoption date.
• The policy’s effective date.
Example. You adopt a written policy that satisfies all of
the requirements discussed in these instructions on June
15, 2019, with an effective date of July 1, 2019. Assuming
all other requirements for the credit are met, you can claim
the credit with respect to family and medical leave paid in
accordance with that policy to qualifying employees for
leave taken on or after July 1, 2019.
Providing notice of written policy to employees.
Employers aren’t required to provide notice of the written
policy to qualifying employees to claim the credit.
However, if an employer chooses to provide notice of the
written policy to qualifying employees, the policy will not
be considered to provide for paid leave to all qualifying
employees (see Minimum Paid Leave Requirements,
later), unless the availability of paid leave is
communicated to employees in a manner reasonably

Cat. No. 69663D

becomes disabled after having completed 6 months of
continuous service. Under the plan, a disability caused by
or resulting from a pre-existing condition isn’t covered if
the disability begins in the first 12 months after the
effective date of coverage. For purposes of the plan, a
pre-existing condition is one for which an employee
consulted a physician, received medical treatment, or took
prescribed drugs in the 3 months immediately prior to the
effective date of coverage. The exclusion from coverage
for pre-existing conditions applies to all your employees
during the applicable 12-month period. Employees
subject to the pre-existing condition exclusion are
effectively not covered under the plan when they first
become qualifying employees. In addition, in some cases,
the requirement that the employee complete 6 months of
continuous service might exclude some qualifying
employees. Therefore, the plan will not in all cases cover
all qualifying employees. You can’t claim the credit for
paid family and medical leave provided under the written
policy with respect to any of your employees.
Example 2. Same facts as in Example 1, except that
you adopt a written policy that provides for paid leave to
any qualifying employee who isn’t covered under the
short-term disability plan as a result of the 6 months of
service requirement or the pre-existing condition
exclusion. This leave is paid from your general assets and
the length of the paid leave is the same as the leave that
would have been available under the short-term disability
plan if neither the 6 months of service requirement nor the
pre-existing condition exclusion applied to a qualifying
employee. Taking into account the leave available under
your insured short-term disability plan and your
supplemental self-insured paid leave arrangement, your
written policy doesn’t exclude any classification of
qualifying employees and, assuming all other
requirements for the credit are met, you can claim the
credit for paid family and medical leave provided under
the written policy.

designed to reach each qualifying employee. This may
include, for example, email communications, use of
Internet websites, employee handbooks, or posted
displays in employee work areas.

Qualifying Employee

A qualifying employee is an employee (as defined in
section 3(e) of the Fair Labor Standards Act of 1938
(FLSA), as amended) who has been employed by the
employer for 1 year or more, and whose compensation for
the preceding year doesn’t exceed an amount equal to
60% of the amount applicable for that year under section
414(q)(1)(B)(i).
For 2018, the applicable amount of compensation
under section 414(q)(1)(B)(i) is $120,000. Accordingly, to
be a qualifying employee in 2019, an employee must have
earned no more than $72,000 (60% of $120,000) in
compensation in the preceding year.
For 2019, the applicable amount of compensation
under section 414(q)(1)(B)(i) is $125,000. Accordingly, to
be a qualifying employee in 2020, an employee must have
earned no more than $75,000 (60% of $125,000) in
compensation in the preceding year.

For this purpose, an employer whose tax year isn’t the
calendar year can choose to use as the preceding year
either:
• The employer’s immediately preceding fiscal year, or
• The calendar year ending in the employer’s
immediately preceding fiscal year.
An employee’s compensation is determined under
section 415(c)(3).
Employed for 1 year or more. Until further guidance is
issued, an employer may use any reasonable method to
determine whether an employee has been employed for 1
year or more. Treating employees as employed for 1 year
or more if they have been employed for 12 months, as set
forth in section 825.110(b) of the FMLA regulations, 29
CFR 825.110(b), is an example of a reasonable method.
However, any requirement that an employee work 12
consecutive months to be a qualifying employee would
not be viewed as a reasonable method for determining
whether an employee has been employed for 1 year.

Family and Medical Leave

Family and medical leave generally means leave for any
one or more FMLA purposes (as defined below).
However, if an employer provides paid leave as vacation
leave, personal leave, or medical or sick leave (other than
leave specifically for one or more of the FMLA purposes),
that paid leave isn’t considered family and medical leave.

Minimum number of hours per year not required. An
employee isn’t required to work a minimum number of
hours per year to be a qualifying employee. Until further
guidance is issued, any requirement that an employee
work a minimum number of hours to be a qualifying
employee would not be viewed as a reasonable method
for determining whether an employee has been employed
for 1 year. The rules under section 101(2)(A)(ii) of title I of
the FMLA, which require an employee to work a minimum
of 1,250 hours of service to be an eligible employee under
the FMLA, don’t apply.

FMLA purposes. The following are FMLA purposes for
which paid family and medical leave may be provided to a
qualifying employee.
• The birth of a son or daughter of the employee and in
order to care for the son or daughter.
• The placement of a son or daughter with the employee
for adoption or foster care.
• Caring for the spouse, or a son, daughter, or parent of
the employee, if the spouse, son, daughter, or parent has
a serious health condition.
• A serious health condition that makes the employee
unable to perform the functions of the employee’s
position.
• Any qualifying exigency (as the Secretary of Labor
shall, by regulation, determine) arising out of the fact that
the spouse, or a son, daughter, or parent of the employee
is a member of the U.S. Armed Forces (including the

Written policy may not exclude any classification of
employees. An employer’s written policy may not
exclude any classification of employees (for example,
collectively bargained employees) if they are qualifying
employees.
Example 1. You have an insured short-term disability
plan that provides disability benefits to any employee who
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Instructions for Form 8994 (2019)

employee uses 1 week of annual paid leave to care for her
grandmother, and at a later time, uses 1 week of annual
paid leave to care for her son. Your policy provides paid
leave specifically designated for an FMLA purpose.
Although the paid leave taken by the employee to care for
her grandmother isn’t family and medical leave, the paid
leave taken by the employee to care for her son is family
and medical leave for which you can claim the credit
assuming all other requirements for the credit are met.

National Guard and Reserves) who is on covered active
duty (or has been notified of an impending call or order to
covered active duty).
• Caring for a service member with a serious injury or
illness if the employee is the spouse, son, daughter,
parent, or next of kin of the service member.
The FMLA purposes are the purposes for which an
employee may take leave under the FMLA. These terms
have the same meaning as defined in section 825.102 of
the FMLA regulations, 29 CFR 825.102.

Leave provided by employer’s short-term disability
program. Paid leave provided under an employer’s
short-term disability program, whether self-insured by an
employer or provided through a short-term disability
insurance policy, may be characterized as family and
medical leave if it otherwise meets the requirements to be
family and medical leave.

Leave specifically designated for FMLA purposes.
Other than paid leave to care for additional individuals,
paid leave made available to an employee is considered
family and medical leave only if the leave is specifically
designated for one or more FMLA purposes, may not be
used for any other reason, and is not paid by a state or
local government or required by state or local law.
Example 1. Your written policy provides 6 weeks of
annual paid leave for the birth of an employee’s child, and
to care for that child (an FMLA purpose). The leave may
not be used for any other reason. No paid leave is
provided by a state or local government or required by
state or local law. Your policy provides 6 weeks of family
and medical leave.
Example 2. Your written policy provides 3 weeks of
annual paid leave that is specifically designated for any
FMLA purpose and may not be used for any other reason.
No paid leave is provided by a state or local government
or required by state or local law. Your policy provides 3
weeks of family and medical leave.
Example 3. Your written policy provides 3 weeks of
annual paid leave for any of the following reasons: FMLA
purposes, minor illness, vacation, or specified personal
reasons. No paid leave is provided by a state or local
government or required by state or local law. Your policy
doesn’t provide family and medical leave because the
leave isn’t specifically designated for one or more FMLA
purposes and can be used for reasons other than FMLA
purposes. This is true even if an employee uses the leave
for an FMLA purpose.

Minimum Paid Leave Requirements

For an employer to be eligible to claim the credit, the
employer’s written policy must meet certain minimum
requirements with respect to paid family and medical
leave. These requirements are:
• The policy must provide at least 2 weeks of annual paid
family and medical leave to all qualifying employees who
aren’t part-time employees, and at least a proportionate
amount of paid family and medical leave to qualifying
employees who are part-time employees;
• The policy must require a rate of payment that isn’t less
than 50% of the wages normally paid to the qualifying
employee for services performed for the employer; and
• If the employer employs one or more qualifying
employees who aren’t covered by title I of the FMLA, the
employer’s written policy also must include the “noninterference” language discussed earlier.
Any leave that is paid by a state or local government or
required by state or local law isn’t taken into account for
any purpose in determining the amount of paid family and
medical leave provided by the employer.

Minimum Period of Leave Requirement

An employer’s written policy must provide qualifying
employees who aren’t part-time employees with at least 2
weeks of annual paid family and medical leave and must
provide at least a proportionate amount of annual paid
family and medical leave to qualifying employees who are
part-time employees. For part-time employees, the paid
leave ratio must be at least equal to the ratio of the
expected weekly hours worked by a qualifying employee
who is a part-time employee to the expected weekly hours
worked by an equivalent qualifying employee who isn’t a
part-time employee. In determining the amount of paid
family and medical leave provided by the employer, any
leave paid by a state or local government or required by
state or local law isn’t taken into account.
Example. Your written policy provides 4 weeks of
annual paid family and medical leave to a qualifying
employee expected to work 40 hours per week, and 2
weeks of paid family and medical leave to an equivalent
qualifying employee who is a part-time employee and is
expected to work 20 hours per week. All of your
employees work either 20 or 40 hours per week. Your
policy meets the minimum paid leave requirements
because each employee who isn’t a part-time employee

Leave to care for additional individuals. An
employer’s written policy may provide paid leave that
otherwise would be specifically designated for an FMLA
purpose (for example, to care for a spouse, child, or
parent who has a serious medical condition), except for
the fact that the leave is available to care for additional
individuals not specified in the FMLA (for example, a
grandchild or grandparent who has a serious medical
condition). In this limited circumstance, the fact that the
leave could also be used to care for additional individuals
for whom care under the FMLA purpose isn’t required
doesn’t prevent the leave from being considered
specifically designated for an FMLA purpose. However,
the employer can’t claim the credit for any leave taken to
care for an individual other than a qualifying employee’s
spouse, parent, or child.
Example. Your written policy provides 4 weeks of
annual paid leave to care for family members with a
serious health condition. The policy’s definition of “family
members” includes the individuals specified in the FMLA
(spouse, children, and parents), and also includes
grandparents, grandchildren, and domestic partners. Your
Instructions for Form 8994 (2019)

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employee for services performed for the employer.
Consequently, in the aggregate, a qualifying employee
can receive 6 weeks of annual paid family and medical
leave at a rate of payment of 80% of the wages normally
paid to the employee. Your policy doesn’t independently
satisfy the requirement that the rate of payment be at least
50% of the wages normally paid to an employee.
Example 2. Same facts as Example 1, except that your
written policy provides each qualifying employee with 6
weeks of annual paid family and medical leave at a rate of
payment of 50% of the wages normally paid to the
employee that runs concurrently with the state leave.
Consequently, in the aggregate, a qualifying employee
can receive 6 weeks of annual paid family and medical
leave at a rate of payment of 100% of the wages normally
paid to the employee. Your policy independently satisfies
the requirement that the rate of payment be at least 50%
of the wages normally paid to an employee. Only wages
paid under your written policy (50% of wages normally
paid to the employee) can be used to figure the credit.
Wages paid pursuant to state law aren’t used to figure the
credit.
Example 3. Under state law, employers are required to
provide employees 6 weeks of family and medical leave,
and the state law permits this leave to be either paid or
unpaid. Your written policy provides each qualifying
employee with 6 weeks of annual paid family and medical
leave at a rate of payment of 50% of the wages normally
paid to the employee. Your policy independently satisfies
the requirement that the rate of payment be at least 50%
of the wages normally paid to an employee.

may take at least the minimum 2 weeks of annual paid
leave and each part-time employee may take at least a
proportionate number of weeks of leave. Specifically, with
respect to the proportionate amount, the ratio of expected
weekly hours worked by a qualifying employee who is a
part-time employee (20 hours) to the expected weekly
hours worked by an equivalent qualifying employee who
isn’t a part-time employee (40 hours) is 1:2, and the policy
provides 2 weeks of paid leave to qualifying employees
who are part-time employees and 4 weeks of paid leave to
equivalent qualifying employees who aren’t part-time
employees, satisfying the 1:2 ratio.
Part-time employees. A part-time employee is an
employee who is customarily employed for fewer than 30
hours per week. Until further guidance is issued, an
employer may use any reasonable method to determine
how many hours an employee customarily works per
week for the employer. Reasonable methods include the
methods set forth in 29 CFR section 2530.200b-2 for
calculating hours of service in connection with certain
plans, such as qualified pension plans, subject to the
Employee Retirement Income Security Act of 1974, as
amended.

Minimum Rate of Payment Requirement

The employer’s written policy must provide that each
qualifying employee who is on paid family and medical
leave will be paid at least 50% of the wages normally paid
to the employee for services performed for the employer.
In determining the rate of payment under the policy, leave
paid by a state or local government or required under
state or local law isn’t taken into account.

Rate of Payment or Period Not Required To Be
Uniform

Wages normally paid to an employee. Wages
normally paid to an employee means the wages normally
paid to the employee for services performed for the
employer. Overtime (other than regularly scheduled
overtime) and discretionary bonuses are excluded from
wages normally paid. Until further guidance is issued, for
employees who are paid (in whole or in part) on a basis
other than a salaried or hourly rate, an employer must
determine wages normally paid to the employee using the
rules for determining regular rate of pay set forth in
regulations issued under the FLSA. See 29 CFR section
778.109.

An employer’s rate of payment or period of paid family
and medical leave isn’t required to be uniform with respect
to all qualifying employees and for all FMLA purposes.
However, to the extent an employer’s policy provides
different rates of payment or periods of paid family and
medical leave for different FMLA purposes, the minimum
paid leave requirements must be satisfied with respect to
each FMLA purpose for which the employer intends to
claim the credit. Conversely, if an employer’s policy
provides a uniform rate of payment and period of paid
family and medical leave for all qualifying employees and
for all FMLA purposes (or a uniform rate of payment and
period for several specified FMLA purposes), the policy as
a whole must satisfy the minimum paid leave
requirements, and it isn’t necessary for the minimum paid
leave requirements to be satisfied separately with respect
to each FMLA purpose.
Example 1. Your written policy provides each
qualifying employee with 6 weeks of annual paid leave for
the birth or adoption of the employer’s child, or to care for
that child (an FMLA purpose) at a rate of payment of
100% of wages normally paid to the employee for
services performed for you. For all other FMLA purposes,
the policy provides each qualifying employee with 2
weeks of annual paid leave at a rate of payment of 75% of
wages normally paid to the employee. Your written policy
satisfies the minimum paid leave requirements.
Example 2. Your written policy provides each
qualifying employee with 2 weeks of annual paid leave for

Leave paid by a state or local government or required by state or local law. Leave paid by a state or
local government or required by state or local law isn’t
taken into account in determining whether an employer’s
written policy provides a rate of payment of at least 50% of
the wages normally paid to an employee for services
performed for the employer. To be eligible to claim the
credit, an employer must independently satisfy the
minimum paid leave requirements, including providing a
rate of payment of at least 50% of wages normally paid to
an employee.
Example 1. Under state law, an employee on family
and medical leave is eligible to receive 6 weeks of
benefits paid by a state insurance fund at a rate of 50% of
the employee’s normal wages. Additionally, your written
policy concurrently provides each qualifying employee
with 6 weeks of annual paid family and medical leave at a
rate of payment of 30% of the wages normally paid to the
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Instructions for Form 8994 (2019)

How To Figure the Credit

the birth or adoption of the employee’s child, or to care for
that child (an FMLA purpose) at a rate of payment of
100% of wages normally paid to the employee, and also
provides each qualifying employee who isn’t covered by a
collective bargaining agreement with 2 weeks of annual
paid leave for a serious health condition that makes the
employee unable to perform the duties of his or her
position (also an FMLA purpose) at a rate of payment of
100% of wages normally paid to the employee. The
portion of your policy that provides paid leave to each
qualifying employee for the birth or adoption of the
employee’s child, or to care for that child, satisfies the
minimum paid leave requirements. However, the portion
of the policy providing only certain qualifying employees
(those who aren’t covered by a collective bargaining
agreement) with paid leave for a serious health condition
that makes the employee unable to perform the duties of
his or her position doesn’t satisfy the minimum paid leave
requirements, and you can’t claim the credit for any leave
taken under that portion of the policy.
Example 3. Your written policy provides each
qualifying employee with 2 weeks of annual paid leave for
any FMLA purpose at a rate of payment of 100% of the
wages normally paid to the employee, and each qualifying
employee who has 10 years of service with an additional 2
weeks of annual paid leave for any FMLA purpose at a
rate of payment of 100% of wages normally paid to the
employee. Your policy satisfies the minimum paid leave
requirements.

In the case of an eligible employer, the credit is an amount
equal to the applicable percentage of the amount of
wages paid to qualifying employees during any period in
which such employees are on family and medical leave.
The term “applicable percentage” means 12.5%
increased (but not above 25%) by 0.25 percentage points
for each percentage point by which the rate of payment
exceeds 50%.
The amount of family and medical leave that may be
taken into account with respect to any qualifying
employee for any tax year may not exceed 12 weeks. The
credit with respect to any qualifying employee for any tax
year can’t exceed an amount equal to the product of the
employee’s normal hourly wage rate for each hour (or
fraction thereof) of actual services performed for the
employer and the number of hours (or fraction thereof) for
which family and medical leave is taken.
Figuring the credit. The credit is equal to the applicable
percentage of the amount of wages paid to a qualifying
employee during any period (up to 12 weeks) that the
employee is on family and medical leave.
Example 1. Your written policy provides each
qualifying employee with 4 weeks of annual paid family
and medical leave at a rate of payment of 75% of wages
normally paid to the employee. During 2019, your
employee takes 4 weeks of leave under the policy. The
employee is normally paid $1,000 per week. You pay the
employee a total of $3,000 ($750 per week for 4 weeks)
for family and medical leave. Assuming all other
requirements for the credit are met, you can claim a credit
of $562.50 with respect to the employee (18.75% of
$3,000).
Example 2. Same facts as Example 1, except that your
written policy provides each qualifying employee who has
at least 10 years of service with a rate of payment of 100%
of the wages normally paid to the employee. During 2019,
Employee A, who has been employed for 12 years, takes
leave under the policy for 4 weeks, and Employee B, who
has been employed for 5 years, takes leave under the
policy for 2 weeks. Both Employee A and Employee B are
normally paid $1,000 per week. You pay Employee A a
total of $4,000 and Employee B a total of $1,500 for family
and medical leave. Assuming all other requirements for
the credit are met, you can claim a total credit of
$1,281.25 with respect to Employee A and Employee B.
The credit for Employee A is $1,000 (25% of $4,000), and
the credit for Employee B is $281.25 (18.75% of $1,500).

Applicable Percentage

The applicable percentage is based on the rate of
payment for the leave under the employer’s policy. The
base applicable percentage of 12.5% applies if the rate of
payment is 50%. If the rate of payment under the policy is
greater than 50%, the applicable percentage is increased
by 0.25 percentage points for each percentage point by
which the rate of payment exceeds 50%, up to a
maximum applicable percentage of 25%.
Example 1. Your written policy provides each
qualifying employee with 4 weeks of annual paid family
and medical leave at a rate of payment of 75% of the
wages normally paid to the employee. Because the rate of
payment under the policy exceeds 50% by 25 percentage
points, the base applicable percentage of 12.5% is
increased by 6.25% (0.25% × 25), for an applicable
percentage of 18.75% (12.5% + 6.25%).
Example 2. Same facts as Example 1, except that your
written policy provides each qualifying employee who has
at least 10 years of service a rate of payment of 100% of
the wages normally paid to the employee for services
performed by the employee, rather than 75%. Because
the rate of payment for a qualifying employee who has at
least 10 years of service is 100% (which is 50 percentage
points greater than 50%), the base applicable percentage
for these employees is increased by 12.5% (0.25% × 50),
for an applicable percentage of 25% (12.5% + 12.5%).
For a qualifying employee who has less than 10 years of
service, the applicable percentage is the same as
determined in Example 1.

Instructions for Form 8994 (2019)

Wages defined. The term “wages” has the same
meaning given to that term by section 3306(b) (regarding
FUTA wages), determined without regard to the $7,000
FUTA wage limitation. Section 3306(b) generally defines
wages as all remuneration for employment, as defined by
section 3306(c), subject to certain limitations. However,
for this purpose, the term “wages” doesn’t include any
amount taken into account for purposes of determining
any other credit allowed under section 38, which provides
for several separate business-related credits.
Example 1. You pay wages to your employee that
qualify as a research expense for purposes of determining
the amount of your research credit under section 41(a).
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after an employee becomes a qualifying employee, the
leave will not fail to (a) be specifically designated for an
FMLA purpose, or (b) meet the minimum paid leave
requirements, solely because an employee may take paid
leave before becoming a qualifying employee.
Example. Your written policy provides all employees
who have completed at least 6 months of employment
with 4 weeks of annual paid family and medical leave at a
rate of payment of 100% of wages normally paid to the
employee for services performed by the employee. Your
employee completes 6 months of employment with you as
of January 1, 2019, and 1 year of employment (becoming
a qualifying employee) as of July 1, 2019. On June 15,
2019, your employee begins a 4-week period of paid
family and medical leave under the policy. Assuming all
other requirements for the credit are met, you can use
wages paid to the employee for family and medical leave
on or after July 1, 2019, the date that employee becomes
a qualifying employee, to figure the credit. Wages paid for
family and medical leave taken before the employee
becomes a qualifying employee aren’t eligible for the
credit.

The research credit under section 41(a) is a general
business credit allowed under section 38. Some of the
wages paid to your employee for the performance of
qualified services under section 41(b) were paid while the
employee was on family and medical leave. To figure your
credit, you must exclude from the wages paid while your
employee was on family and medical leave any wages
treated as a qualified research expense for purposes of
determining the amount of your research credit under
section 41(a).
Example 2. The employer is tax-exempt under section
501(a) as an educational organization described in
section 501(c)(3). Because employment with the
employer isn’t employment for purposes of FUTA tax,
wages paid by the employer aren’t FUTA wages. Although
the employer is exempt from federal income tax, it earns
unrelated business taxable income from a trade or
business that isn’t substantially related to the performance
of the employer’s exempt purpose. The employer
maintains a written paid leave policy that provides at least
2 weeks of paid family and medical leave to all qualifying
employees, including those performing services for the
unrelated trade or business. The employer would like to
claim the credit against its unrelated business income tax
liability. Because the employer doesn’t pay FUTA wages,
wages paid by the employer aren’t wages for purposes of
the credit. Consequently, amounts paid the employer to its
employees while on paid family and medical leave aren’t
eligible for the credit.

Eligible employer for whom qualifying employees
perform services. Only an eligible employer for whom
qualifying employees perform services can claim the
credit with respect to wages paid.
Normal hourly wage rate of an employee not paid an
hourly wage rate. Until further guidance is issued, an
employer may use any reasonable method to convert the
normal wages paid to an employee who isn’t paid an
hourly wage rate to an hourly rate.

Wages paid by third-party payer. Wages paid by a
third-party payer (including an insurance company, a
professional employer organization, or a Certified
Professional Employer Organization) to qualifying
employees for services performed for an eligible employer
are considered wages for purposes of the credit.
However, only the eligible employer, and not the
third-party payer, can take these wages into account
when figuring the credit.

Aggregation Rules

Section 45S(c)(3) provides that all persons who are
treated as a single employer under section 52(a) and (b)
are treated as a single taxpayer. In accordance with this
aggregation rule, employers are aggregated for purposes
of section 45S(h)(1), which provides that a taxpayer may
elect to have section 45S not apply for any tax year.
Consequently, employers aren’t aggregated for any other
purpose, including figuring the credit.

Leave paid by a state or local government or required by a state or local law. Leave paid by a state or
local government or required by a state or local law isn’t
taken into account when figuring the credit.

Members of Controlled Groups or
Businesses Under Common Control

Wages paid through a short-term disability program.
Wages paid through an employer’s short-term disability
program for family and medical leave are taken into
account in figuring the credit provided that the program (in
combination with any other employer-paid leave
arrangement) meets the minimum paid leave
requirements.

Each member of a controlled group of corporations and
each member of a group of businesses under common
control generally makes a separate election to claim or not
to claim the credit in accordance with rules set forth under
section 51(j)(2) and (3). However, in the case of a
consolidated group (as defined in Regulations section
1.1502-1(h)), the election is made by the agent (as
defined in Regulations section 1.1502-77) of the group.
An election to claim or not to claim the credit is made for
the tax year in which the credit is available by claiming or
not claiming the credit on either an original return or an
amended return filed for that tax year.

Employee becomes a qualifying employee after
leave is taken. An eligible employer may claim the credit
only with respect to wages paid to an employee who is a
qualifying employee at the time family and medical leave
is taken. Wages paid to an employee for family and
medical leave before an employee becomes a qualifying
employee are excluded in determining the employer’s
credit. However, if an employer’s written policy provides
that employees may take paid family and medical leave
before they become qualifying employees and doesn’t
provide a dedicated amount of leave meeting the
minimum paid leave requirements that may only be taken

More Information

For more information about this credit, see the following.

• Section 45S.
• Notice 2018-71, 2018-41 I.R.B. 548, available at

IRS.gov/irb/2018-41_IRB#NOT-2018-71.
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Instructions for Form 8994 (2019)

• Schedule K-1 (Form 1120-S), Shareholder’s Share of
Income, Deductions, Credits, etc., box 13 (code P).
Partnerships and S corporations report the above
credits on line 2. All other filers figuring a separate credit
on line 1 also report the above credits on line 2. All others
not using line 1 to figure a separate credit must report the
above credits directly on Form 3800, Part III, line 4j.

Specific Instructions
Line A

Answer “Yes” if you have a written policy providing at least
2 weeks of annual paid family and medical leave for all of
your qualifying employee(s) to whom wages are paid
(prorated for any part-time employees). See Minimum
Period of Leave Requirement 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.

Line B

Answer “Yes” if the written policy provides paid family and
medical leave of at least 50% of the wages normally paid
to each qualifying employee. See Family and Medical
Leave and Minimum Rate of Payment Requirement,
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.

Line C

Answer “Yes” if you paid family and medical leave to at
least one qualifying employee during the tax year. See
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.

Line D

Answer “Yes” if you either (1) did not employ any
employees who weren’t covered by the FMLA or (2)
employed at least one employee who wasn't covered by
the FMLA and you included in your written policy and
otherwise complied with “non-interference” language. See
Non-interference language under Eligible Employer,
earlier. If you answer “No,” don’t file Form 8994 unless
you’re 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.

Line 1

Use the Paid Family and Medical Leave Credit 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.

Line 2

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
Instructions for Form 8994 (2019)

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Keep for Your Records

Paid Family and Medical Leave Credit Worksheet

You may use this worksheet to figure your credit for certain wages paid during your tax year to any qualifying
employee(s) while the employee is on family and medical leave. 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))

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Total amount shown in column (d) from all sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Instructions for Form 8994 (2019)

Instructions for Paid Family and
Medical Leave Credit Worksheet

which the rate of payment exceeds 50%, up to a
maximum applicable percentage of 25%. See Applicable
Percentage, earlier, for examples. You can use the
following Applicable Percentage Worksheet to figure the
applicable percentage(s) to enter in column (c).

Although you only need to provide summary

TIP information to claim the credit, keep separate

records that include the necessary information to
support the amount of credit you are claiming. The Paid
Family and Medical Leave Credit Worksheet is one
method of reflecting the necessary information and is
provided to assist you in this process. You should retain
this Worksheet (or any other document you use for
capturing this information) in your records. The
information needed to support the amount of credit you
are claiming includes the:

Applicable Percentage Worksheet
1. Enter the percentage required
under your written policy for the
payment of family and medical
leave* . . . . . . . . . . . . . . . .
1.
2. Minimum percentage required
to claim the credit . . . . . . . .

• Name and social security number of each qualifying
employee,
• Wages paid to each qualifying employee,
• Name and employer identification number of each
qualifying employer,
• Applicable percentage, and
• Family and medical leave policy.
Column (a), Qualifying Employees

Enter the name or other identifying information for each
qualifying employee to whom wages were paid while on
family and medical leave. See Qualifying Employee and
Family and Medical Leave, earlier.

Column (c), Applicable Percentage

The applicable percentage is based on the rate of
payment for the leave under the employer’s policy. The
base applicable percentage of 12.5% applies if the rate of
payment is 50%. If the rate of payment under the policy is
greater than 50%, the applicable percentage is increased
by 0.25 percentage points for each percentage point by

%

%

4. Multiply the number (percentage
points) on line 3 by 0.25
percentage points. For example,
if line 3 is 25%, then 25 × 0.25 =
6.25 percentage points or
6.25% . . . . . . . . . . . . . . . .
4.

%

5.

6. Add lines 4 and 5. Enter this
applicable percentage shown as
a decimal (for example, 18.75%
would be shown as 0.1875) in
column (c) of the Paid Family
and Medical Leave Credit
Worksheet for all qualified
employees to whom the rate of
payment shown on line 1
6.
applies . . . . . . . . . . . . . . . .

Column (b), Paid Family and Medical Leave

50

3. Subtract line 2 from line 1. If the
result is less than zero, stop
here, skip lines 4 and 5, and
enter -0- one line 6 . . . . . . .
3.

5. Base applicable
percentage . . . . . . . . . . . . .

Enter the total family and medical leave wages paid during
the tax year for each employee listed in column (a). See
Family and Medical Leave and Minimum Rate of Payment
Requirement, earlier.

Instructions for Form 8994 (2019)

2.

%

12.5

%

%

*Complete a separate worksheet for each separate
percentage required and used under your written policy for
the payment of family and medical leave.

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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.
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.
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 hr., 54 min.
1 min.

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 (2019)