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Department of the Treasury
Internal Revenue Service
Instructions for Form 8994

(Rev. December 2021)
Employer Credit for Paid Family and Medical Leave
(For use with the January 2021 revision of Form 8994)

Section references are to the Internal Revenue Code issued. Use prior revisions of the form and instructions for
unless otherwise noted. earlier tax years. All revisions are available at IRS.gov/
Form8994.
Future Developments
For the latest information about developments related to Eligible Employer
Form 8994 and its instructions, such as legislation An eligible employer is an employer with a written policy in
enacted after they were published, go to IRS.gov/ place that provides paid family and medical leave and
Form8994. satisfies minimum paid leave requirements (see Minimum
Paid Leave Requirements, later). In addition, if the
What’s New employer employs any qualifying employees who aren’t
New employment tax credits. You may have claimed covered by title I of the Family and Medical Leave Act
coronavirus (COVID-19)-related employment credits on (FMLA), the employer’s written policy must include
an employment tax return such as Form 941, Employer’s “non-interference” language.
QUARTERLY Federal Tax Return. Certain wages used to Non-interference language. If an employer employs at
figure these employment credits can’t also be used to least one qualifying employee who isn’t covered by title I
figure a credit on Form 8994. For more information, see of the FMLA (including any employee who isn’t covered
Wages defined under How To Figure the Credit. by title I of the FMLA because he or she works less than
Employee retention credit. Wages paid after June 30, 1,250 hours per year), the employer must include
2021, and before January 1, 2022, and used to figure the “non-interference” language in its written policy and
employer credit for paid family and medical leave can’t comply with this language to be an eligible employer. This
also be used to figure a coronavirus-related employee requirement applies to:
retention credit. • An employer subject to title I of the FMLA that has at
least one qualifying employee who isn’t covered by title I
Reminder of the FMLA, and
• An employer not subject to title I of the FMLA (that has
Credit extension. The Taxpayer Certainty and Disaster no employees covered by title I of the FMLA).
Tax Relief Act of 2020 extended the credit to cover tax
The “non-interference” language must ensure that the
years beginning in 2021 through 2025.
employer will not interfere with, restrain, or deny the
exercise of, or the attempt to exercise, any right provided
General Instructions under the policy, and will not discharge, or in any other
manner discriminate against any individual for opposing
Purpose of Form any practice prohibited by the policy. The following
An eligible employer (defined later) uses Form 8994 to “non-interference” language is an example of a written
figure the employer credit for paid family and medical provision that would satisfy this requirement: [Employer]
leave. The credit ranges from 12.5% to 25% of certain will not interfere with, restrain, or deny the exercise of, or
wages paid to a qualifying employee while the employee the attempt to exercise, any right provided under this
is on family and medical leave. policy. [Employer] will not discharge, or in any other
manner discriminate against, any individual for opposing
You can claim or elect not to claim the employer credit any practice prohibited by this policy.
for paid family and medical leave any time within 3 years
Written policy documentary requirements. An eligible
from the due date of your return on either your original
employer’s written policy may be set forth in a single
return or an amended return.
document or in multiple documents. For example, an
Partnerships and S corporations must file this employer may maintain different documents to cover
TIP form to claim the credit. All other taxpayers must different classifications of employees or different types of
not complete or file this form if their only source for leave, and those documents will collectively constitute the
this credit is a partnership or S corporation. Instead, they employer’s written policy. An eligible employer’s written
must report this credit directly on line 4j in Part III of Form policy may also be included in the same document that
3800, General Business Credit. governs the employer’s other leave policies.
Written policy in place. The employer’s written policy
Which Revision To Use must be in place before the paid family and medical leave
Use the January 2021 revision of Form 8994 for tax years for which the employer claims the credit is taken. The
beginning in 2020 or later, until a later revision is issued. written policy is considered to be in place on the later of
Use this December 2021 revision of the instructions for the following dates.
tax years beginning in 2021 or later, until a later revision is • The policy’s adoption date.

Dec 21, 2021 Cat. No. 69663D

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• The policy’s effective date. hours per year to be a qualifying employee. Until further
Example. You adopt a written policy that satisfies all of guidance is issued, any requirement that an employee
the requirements discussed in these instructions on June work a minimum number of hours to be a qualifying
15, 2021, with an effective date of July 1, 2021. Assuming employee would not be viewed as a reasonable method
all other requirements for the credit are met, you can claim for determining whether an employee has been employed
the credit with respect to family and medical leave paid in for 1 year. The rules under section 101(2)(A)(ii) of title I of
accordance with that policy to qualifying employees for the FMLA, which require an employee to work a minimum
leave taken on or after July 1, 2021. of 1,250 hours of service to be an eligible employee under
the FMLA, don’t apply.
Providing notice of written policy to employees.
Employers aren’t required to provide notice of the written Written policy may not exclude any classification of
policy to qualifying employees to claim the credit. employees. An employer’s written policy may not
However, if an employer chooses to provide notice of the exclude any classification of employees (for example,
written policy to qualifying employees, the policy will not collectively bargained employees) if they are qualifying
be considered to provide for paid leave to all qualifying employees.
employees (see Minimum Paid Leave Requirements, Example 1. You have an insured short-term disability
later), unless the availability of paid leave is plan that provides disability benefits to any employee who
communicated to employees in a manner reasonably becomes disabled after having completed 6 months of
designed to reach each qualifying employee. This may continuous service. Under the plan, a disability caused by
include, for example, email communications, use of or resulting from a pre-existing condition isn’t covered if
Internet websites, employee handbooks, or posted the disability begins in the first 12 months after the
displays in employee work areas. effective date of coverage. For purposes of the plan, a
pre-existing condition is one for which an employee
Qualifying Employee consulted a physician, received medical treatment, or took
A qualifying employee is an employee (as defined in prescribed drugs in the 3 months immediately prior to the
section 3(e) of the Fair Labor Standards Act of 1938 effective date of coverage. The exclusion from coverage
(FLSA), as amended) who has been employed by the for pre-existing conditions applies to all your employees
employer for 1 year or more, and whose compensation for during the applicable 12-month period. Employees
the preceding year doesn’t exceed an amount equal to subject to the pre-existing condition exclusion are
60% of the amount applicable for that year under section effectively not covered under the plan when they first
414(q)(1)(B)(i). become qualifying employees. In addition, in some cases,
For 2020 and 2021, the applicable amount of the requirement that the employee complete 6 months of
compensation under section 414(q)(1)(B)(i) is $130,000. continuous service might exclude some qualifying
Accordingly, to be a qualifying employee in 2021 or 2022, employees. Therefore, the plan will not in all cases cover
an employee must have earned no more than $78,000 all qualifying employees. You can’t claim the credit for
(60% of $130,000) in compensation in the preceding year. paid family and medical leave provided under the written
policy with respect to any of your employees.
For 2022, the applicable amount of compensation Example 2. The facts are the same as in Example 1,
under section 414(q)(1)(B)(i) is $135,000. Accordingly, to except that you adopt a written policy that provides for
be a qualifying employee in 2023, an employee must have paid leave to any qualifying employee who isn’t covered
earned no more than $81,000 (60% of $135,000) in under the short-term disability plan as a result of the 6
compensation in the preceding year. months of service requirement or the pre-existing
For this purpose, an employer whose tax year isn’t the condition exclusion. This leave is paid from your general
calendar year can choose to use as the preceding year assets and the length of the paid leave is the same as the
either: leave that would have been available under the short-term
• The employer’s immediately preceding fiscal year, or disability plan if neither the 6 months of service
• The calendar year ending in the employer’s requirement nor the pre-existing condition exclusion
immediately preceding fiscal year. applied to a qualifying employee. Taking into account the
An employee’s compensation is determined under leave available under your insured short-term disability
section 415(c)(3). plan and your supplemental self-insured paid leave
arrangement, your written policy doesn’t exclude any
Employed for 1 year or more. Until further guidance is classification of qualifying employees and, assuming all
issued, an employer may use any reasonable method to other requirements for the credit are met, you can claim
determine whether an employee has been employed for 1 the credit for paid family and medical leave provided
year or more. Treating employees as employed for 1 year under the written policy.
or more if they have been employed for 12 months, as set
forth in section 825.110(b) of the FMLA regulations, 29 Family and Medical Leave
CFR 825.110(b), is an example of a reasonable method. Family and medical leave generally means leave for any
However, any requirement that an employee work 12 one or more FMLA purposes (as defined below).
consecutive months to be a qualifying employee would However, if an employer provides paid leave as vacation
not be viewed as a reasonable method for determining leave, personal leave, or medical or sick leave (other than
whether an employee has been employed for 1 year. leave specifically for one or more of the FMLA purposes),
Minimum number of hours per year not required. An that paid leave isn’t considered family and medical leave.
employee isn’t required to work a minimum number of

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FMLA purposes. The following are FMLA purposes for the fact that the leave is available to care for additional
which paid family and medical leave may be provided to a individuals not specified in the FMLA (for example, a
qualifying employee. grandchild or grandparent who has a serious medical
• The birth of a son or daughter of the employee and in condition). In this limited circumstance, the fact that the
order to care for the son or daughter. leave could also be used to care for additional individuals
• The placement of a son or daughter with the employee for whom care under the FMLA purpose isn’t required
for adoption or foster care. doesn’t prevent the leave from being considered
• Caring for the spouse, or a son, daughter, or parent of specifically designated for an FMLA purpose. However,
the employee, if the spouse, son, daughter, or parent has the employer can’t claim the credit for any leave taken to
a serious health condition. care for an individual other than a qualifying employee’s
• A serious health condition that makes the employee spouse, parent, or child.
unable to perform the functions of the employee’s Example. Your written policy provides 4 weeks of
position. annual paid leave to care for family members with a
• Any qualifying exigency (as the Secretary of Labor serious health condition. The policy’s definition of “family
shall, by regulation, determine) arising out of the fact that members” includes the individuals specified in the FMLA
the spouse, or a son, daughter, or parent of the employee (spouse, children, and parents), and also includes
is a member of the U.S. Armed Forces (including the grandparents, grandchildren, and domestic partners. Your
National Guard and Reserves) who is on covered active employee uses 1 week of annual paid leave to care for her
duty (or has been notified of an impending call or order to grandmother, and, at a later time, uses 1 week of annual
covered active duty). paid leave to care for her son. Your policy provides paid
• Caring for a service member with a serious injury or leave specifically designated for an FMLA purpose.
illness if the employee is the spouse, son, daughter, Although the paid leave taken by the employee to care for
parent, or next of kin of the service member. her grandmother isn’t family and medical leave, the paid
leave taken by the employee to care for her son is family
The FMLA purposes are the purposes for which an and medical leave for which you can claim the credit
employee may take leave under the FMLA. These terms assuming all other requirements for the credit are met.
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
Leave specifically designated for FMLA purposes. short-term disability program, whether self-insured by an
Other than paid leave to care for additional individuals, employer or provided through a short-term disability
paid leave made available to an employee is considered insurance policy, may be characterized as family and
family and medical leave only if the leave is specifically medical leave if it otherwise meets the requirements to be
designated for one or more FMLA purposes, may not be family and medical leave.
used for any other reason, and is not paid by a state or
local government or required by state or local law. Minimum Paid Leave Requirements
Example 1. Your written policy provides 6 weeks of For an employer to be eligible to claim the credit, the
annual paid leave for the birth of an employee’s child, and employer’s written policy must meet certain minimum
to care for that child (an FMLA purpose). The leave may requirements with respect to paid family and medical
not be used for any other reason. No paid leave is leave. These requirements are:
provided by a state or local government or required by • The policy must provide at least 2 weeks of annual paid
state or local law. Your policy provides 6 weeks of family family and medical leave to all qualifying employees who
and medical leave. aren’t part-time employees, and at least a proportionate
Example 2. Your written policy provides 3 weeks of amount of paid family and medical leave to qualifying
annual paid leave that is specifically designated for any employees who are part-time employees;
FMLA purpose and may not be used for any other reason. • The policy must require a rate of payment that isn’t less
No paid leave is provided by a state or local government than 50% of the wages normally paid to the qualifying
or required by state or local law. Your policy provides 3 employee for services performed for the employer; and
weeks of family and medical leave. • If the employer employs one or more qualifying
Example 3. Your written policy provides 3 weeks of employees who aren’t covered by title I of the FMLA, the
annual paid leave for any of the following reasons: FMLA employer’s written policy must also include the “non-
purposes, minor illness, vacation, or specified personal interference” language discussed earlier.
reasons. No paid leave is provided by a state or local Any leave that is paid by a state or local government or
government or required by state or local law. Your policy required by state or local law isn’t taken into account for
doesn’t provide family and medical leave because the any purpose in determining the amount of paid family and
leave isn’t specifically designated for one or more FMLA medical leave provided by the employer.
purposes and can be used for reasons other than FMLA
purposes. This is true even if an employee uses the leave Minimum Period of Leave Requirement
for an FMLA purpose. An employer’s written policy must provide qualifying
Leave to care for additional individuals. An employees who aren’t part-time employees with at least 2
employer’s written policy may provide paid leave that weeks of annual paid family and medical leave and must
otherwise would be specifically designated for an FMLA provide at least a proportionate amount of annual paid
purpose (for example, to care for a spouse, child, or family and medical leave to qualifying employees who are
parent who has a serious medical condition), except for part-time employees. For part-time employees, the paid

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leave ratio must be at least equal to the ratio of the Leave paid by a state or local government or re-
expected weekly hours worked by a qualifying employee quired by state or local law. Leave paid by a state or
who is a part-time employee to the expected weekly hours local government or required by state or local law isn’t
worked by an equivalent qualifying employee who isn’t a taken into account in determining whether an employer’s
part-time employee. In determining the amount of paid written policy provides a rate of payment of at least 50% of
family and medical leave provided by the employer, any the wages normally paid to an employee for services
leave paid by a state or local government or required by performed for the employer. To be eligible to claim the
state or local law isn’t taken into account. credit, an employer must independently satisfy the
Example. Your written policy provides 4 weeks of minimum paid leave requirements, including providing a
annual paid family and medical leave to a qualifying rate of payment of at least 50% of wages normally paid to
employee expected to work 40 hours per week, and 2 an employee.
weeks of paid family and medical leave to an equivalent Example 1. Under state law, an employee on family
qualifying employee who is a part-time employee and is and medical leave is eligible to receive 6 weeks of
expected to work 20 hours per week. All of your benefits paid by a state insurance fund at a rate of 50% of
employees work either 20 or 40 hours per week. Your the employee’s normal wages. Additionally, your written
policy meets the minimum paid leave requirements policy concurrently provides each qualifying employee
because each employee who isn’t a part-time employee with 6 weeks of annual paid family and medical leave at a
may take at least the minimum 2 weeks of annual paid rate of payment of 30% of the wages normally paid to the
leave and each part-time employee may take at least a employee for services performed for the employer.
proportionate number of weeks of leave. Specifically, with Consequently, in the aggregate, a qualifying employee
respect to the proportionate amount, the ratio of expected can receive 6 weeks of annual paid family and medical
weekly hours worked by a qualifying employee who is a leave at a rate of payment of 80% of the wages normally
part-time employee (20 hours) to the expected weekly paid to the employee. Your policy doesn’t independently
hours worked by an equivalent qualifying employee who satisfy the requirement that the rate of payment be at least
isn’t a part-time employee (40 hours) is 1:2, and the policy 50% of the wages normally paid to an employee.
provides 2 weeks of paid leave to qualifying employees Example 2. The facts are the same as in Example 1,
who are part-time employees and 4 weeks of paid leave to except that your written policy provides each qualifying
equivalent qualifying employees who aren’t part-time employee with 6 weeks of annual paid family and medical
employees, satisfying the 1:2 ratio. leave at a rate of payment of 50% of the wages normally
Part-time employees. A part-time employee is an paid to the employee that runs concurrently with the state
employee who is customarily employed for fewer than 30 leave. Consequently, in the aggregate, a qualifying
hours per week. Until further guidance is issued, an employee can receive 6 weeks of annual paid family and
employer may use any reasonable method to determine medical leave at a rate of payment of 100% of the wages
how many hours an employee customarily works per normally paid to the employee. Your policy independently
week for the employer. Reasonable methods include the satisfies the requirement that the rate of payment be at
methods set forth in 29 CFR section 2530.200b-2 for least 50% of the wages normally paid to an employee.
calculating hours of service in connection with certain Only wages paid under your written policy (50% of wages
plans, such as qualified pension plans, subject to the normally paid to the employee) can be used to figure the
Employee Retirement Income Security Act of 1974, as credit. Wages paid pursuant to state law aren’t used to
amended. figure the credit.
Example 3. Under state law, employers are required to
Minimum Rate of Payment Requirement provide employees 6 weeks of family and medical leave,
The employer’s written policy must provide that each and the state law permits this leave to be either paid or
qualifying employee who is on paid family and medical unpaid. Your written policy provides each qualifying
leave will be paid at least 50% of the wages normally paid employee with 6 weeks of annual paid family and medical
to the employee for services performed for the employer. leave at a rate of payment of 50% of the wages normally
In determining the rate of payment under the policy, leave paid to the employee. Your policy independently satisfies
paid by a state or local government or required under the requirement that the rate of payment be at least 50%
state or local law isn’t taken into account. of the wages normally paid to an employee.

Wages normally paid to an employee. Wages Rate of Payment or Period Not Required To Be
normally paid to an employee means the wages normally
Uniform
paid to the employee for services performed for the
employer. Overtime (other than regularly scheduled An employer’s rate of payment or period of paid family
overtime) and discretionary bonuses are excluded from and medical leave isn’t required to be uniform with respect
wages normally paid. Until further guidance is issued, for to all qualifying employees and for all FMLA purposes.
employees who are paid (in whole or in part) on a basis However, to the extent an employer’s policy provides
other than a salaried or hourly rate, an employer must different rates of payment or periods of paid family and
determine wages normally paid to the employee using the medical leave for different FMLA purposes, the minimum
rules for determining regular rate of pay set forth in paid leave requirements must be satisfied with respect to
regulations issued under the FLSA. See 29 CFR section each FMLA purpose for which the employer intends to
778.109. 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

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for all FMLA purposes (or a uniform rate of payment and increased by 6.25% (0.25% × 25), for an applicable
period for several specified FMLA purposes), the policy as percentage of 18.75% (12.5% + 6.25%).
a whole must satisfy the minimum paid leave Example 2. The facts are the same as in Example 1,
requirements, and it isn’t necessary for the minimum paid except that your written policy provides each qualifying
leave requirements to be satisfied separately with respect employee who has at least 10 years of service a rate of
to each FMLA purpose. payment of 100% of the wages normally paid to the
Example 1. Your written policy provides each employee for services performed by the employee, rather
qualifying employee with 6 weeks of annual paid leave for than 75%. Because the rate of payment for a qualifying
the birth or adoption of the employer’s child, or to care for employee who has at least 10 years of service is 100%
that child (an FMLA purpose) at a rate of payment of (which is 50 percentage points greater than 50%), the
100% of wages normally paid to the employee for base applicable percentage for these employees is
services performed for you. For all other FMLA purposes, increased by 12.5% (0.25% × 50), for an applicable
the policy provides each qualifying employee with 2 percentage of 25% (12.5% + 12.5%). For a qualifying
weeks of annual paid leave at a rate of payment of 75% of employee who has less than 10 years of service, the
wages normally paid to the employee. Your written policy applicable percentage is the same as determined in
satisfies the minimum paid leave requirements. Example 1.
Example 2. Your written policy provides each
qualifying employee with 2 weeks of annual paid leave for How To Figure the Credit
the birth or adoption of the employee’s child, or to care for In the case of an eligible employer, the credit is an amount
that child (an FMLA purpose) at a rate of payment of equal to the applicable percentage of the amount of
100% of wages normally paid to the employee, and also wages paid to qualifying employees during any period in
provides each qualifying employee who isn’t covered by a which such employees are on family and medical leave.
collective bargaining agreement with 2 weeks of annual The term “applicable percentage” means 12.5%
paid leave for a serious health condition that makes the increased (but not above 25%) by 0.25 percentage points
employee unable to perform the duties of his or her for each percentage point by which the rate of payment
position (also an FMLA purpose) at a rate of payment of exceeds 50%. See Applicable Percentage, earlier.
100% of wages normally paid to the employee. The The amount of family and medical leave that may be
portion of your policy that provides paid leave to each taken into account with respect to any qualifying
qualifying employee for the birth or adoption of the employee for any tax year may not exceed 12 weeks. The
employee’s child, or to care for that child, satisfies the credit with respect to any qualifying employee for any tax
minimum paid leave requirements. However, the portion year can’t exceed an amount equal to the product of the
of the policy providing only certain qualifying employees employee’s normal hourly wage rate for each hour (or
(those who aren’t covered by a collective bargaining fraction thereof) of actual services performed for the
agreement) with paid leave for a serious health condition employer and the number of hours (or fraction thereof) for
that makes the employee unable to perform the duties of which family and medical leave is taken.
his or her position doesn’t satisfy the minimum paid leave
requirements, and you can’t claim the credit for any leave Figuring the credit. The credit is equal to the applicable
taken under that portion of the policy. percentage of the amount of wages paid to a qualifying
Example 3. Your written policy provides each employee during any period (up to 12 weeks) that the
qualifying employee with 2 weeks of annual paid leave for employee is on family and medical leave.
any FMLA purpose at a rate of payment of 100% of the Example 1. Your written policy provides each
wages normally paid to the employee, and each qualifying qualifying employee with 4 weeks of annual paid family
employee who has 10 years of service with an additional 2 and medical leave at a rate of payment of 75% of wages
weeks of annual paid leave for any FMLA purpose at a normally paid to the employee. During 2021, your
rate of payment of 100% of wages normally paid to the employee takes 4 weeks of leave under the policy. The
employee. Your policy satisfies the minimum paid leave employee is normally paid $1,000 per week. You pay the
requirements. employee a total of $3,000 ($750 per week for 4 weeks)
for family and medical leave. Assuming all other
Applicable Percentage requirements for the credit are met, you can claim a credit
The applicable percentage is based on the rate of of $562.50 with respect to the employee (18.75% of
payment for the leave under the employer’s policy. The $3,000).
base applicable percentage of 12.5% applies if the rate of Example 2. The facts are the same as in Example 1,
payment is 50%. If the rate of payment under the policy is except that your written policy provides each qualifying
greater than 50%, the applicable percentage is increased employee who has at least 10 years of service with a rate
by 0.25 percentage points for each percentage point by of payment of 100% of the wages normally paid to the
which the rate of payment exceeds 50%, up to a employee. During 2021, Employee A, who has been
maximum applicable percentage of 25%. employed for 12 years, takes leave under the policy for 4
Example 1. Your written policy provides each weeks, and Employee B, who has been employed for 5
qualifying employee with 4 weeks of annual paid family years, takes leave under the policy for 2 weeks. Both
and medical leave at a rate of payment of 75% of the Employee A and Employee B are normally paid $1,000
wages normally paid to the employee. Because the rate of per week. You pay Employee A a total of $4,000 and
payment under the policy exceeds 50% by 25 percentage Employee B a total of $1,500 for family and medical leave.
points, the base applicable percentage of 12.5% is Assuming all other requirements for the credit are met,

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you can claim a total credit of $1,281.25 with respect to wages paid by the employer aren’t wages for purposes of
Employee A and Employee B. The credit for Employee A the credit. Consequently, amounts paid by the employer
is $1,000 (25% of $4,000), and the credit for Employee B to its employees while on paid family and medical leave
is $281.25 (18.75% of $1,500). aren’t eligible for the credit.
Wages defined. The term “wages” has the same Wages paid by third-party payer. Wages paid by a
meaning given to that term by section 3306(b) (regarding third-party payer (including an insurance company, a
FUTA wages), determined without regard to the $7,000 professional employer organization, or a Certified
FUTA wage limitation. Section 3306(b) generally defines Professional Employer Organization) to qualifying
wages as all remuneration for employment, as defined by employees for services performed for an eligible employer
section 3306(c), subject to certain limitations. However, are considered wages for purposes of the credit.
for this purpose, the term “wages” doesn’t include any However, only the eligible employer, and not the
amount taken into account for purposes of determining: third-party payer, can take these wages into account
• Any other general business credit; when figuring the credit.
• For wages paid before July 1, 2021, any employee
Leave paid by a state or local government or re-
retention credit claimed on an employment tax return; or
quired by a state or local law. Leave paid by a state or
• For wages paid before October 1, 2021, any credit for local government or required by a state or local law isn’t
qualified sick and family leave wages claimed on an taken into account when figuring the credit.
employment tax return.
An employment tax return includes the following. Wages paid through a short-term disability program.
• Form 941, Employer’s QUARTERLY Federal Tax Wages paid through an employer’s short-term disability
Return, and related Forms 941-PR, 941-SS, and 941-X. program for family and medical leave are taken into
• Form 943, Employer’s Annual Federal Tax Return for account in figuring the credit provided that the program (in
Agricultural Employees, and related Forms 943-PR and combination with any other employer-paid leave
943-X. arrangement) meets the minimum paid leave
• Form 944, Employer’s ANNUAL Federal Tax Return, requirements.
and related Forms 944(SP) and 944-X. Employee becomes a qualifying employee after
• Form CT-1, Employer’s Annual Railroad Retirement leave is taken. An eligible employer may claim the credit
Tax Return, and related Form CT-1X. only with respect to wages paid to an employee who is a
• Schedule H (Form 1040), Household Employment qualifying employee at the time family and medical leave
Taxes, and related Schedule H-PR (Form 1040-PR). is taken. Wages paid to an employee for family and
For more information about general business credits, medical leave before an employee becomes a qualifying
see the Instructions for Form 3800. For more information employee are excluded in determining the employer’s
about coronavirus-related employment credits, see the credit. However, if an employer’s written policy provides
instructions for your employment tax return. that employees may take paid family and medical leave
Example 1. You pay wages to your employee that before they become qualifying employees and doesn’t
qualify as a research expense for purposes of determining provide a dedicated amount of leave meeting the
the amount of your research credit under section 41(a). minimum paid leave requirements that may only be taken
The research credit under section 41(a) is a general after an employee becomes a qualifying employee, the
business credit allowed under section 38. Some of the leave will not fail to (a) be specifically designated for an
wages paid to your employee for the performance of FMLA purpose, or (b) meet the minimum paid leave
qualified services under section 41(b) were paid while the requirements, solely because an employee may take paid
employee was on family and medical leave. To figure your leave before becoming a qualifying employee.
credit, you must exclude from the wages paid while your Example. Your written policy provides all employees
employee was on family and medical leave any wages who have completed at least 6 months of employment
treated as a qualified research expense for purposes of with 4 weeks of annual paid family and medical leave at a
determining the amount of your research credit under rate of payment of 100% of wages normally paid to the
section 41(a). employee for services performed by the employee. Your
Example 2. The employer is tax-exempt under section employee completes 6 months of employment with you as
501(a) as an educational organization described in of January 1, 2021, and 1 year of employment (becoming
section 501(c)(3). Because employment with the a qualifying employee) as of July 1, 2021. On June 15,
employer isn’t employment for purposes of FUTA tax, 2021, your employee begins a 4-week period of paid
wages paid by the employer aren’t FUTA wages. Although family and medical leave under the policy. Assuming all
the employer is exempt from federal income tax, it earns other requirements for the credit are met, you can use
unrelated business taxable income from a trade or wages paid to the employee for family and medical leave
business that isn’t substantially related to the performance on or after July 1, 2021, the date that employee becomes
of the employer’s exempt purpose. The employer a qualifying employee, to figure the credit. Wages paid for
maintains a written paid leave policy that provides at least family and medical leave taken before the employee
2 weeks of paid family and medical leave to all qualifying becomes a qualifying employee aren’t eligible for the
employees, including those performing services for the credit.
unrelated trade or business. The employer would like to Eligible employer for whom qualifying employees
claim the credit against its unrelated business income tax perform services. Only an eligible employer for whom
liability. Because the employer doesn’t pay FUTA wages,

-6- Instructions for Form 8994 (December 2021)

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qualifying employees perform services can claim the on line 2. For more information, see the instructions for
credit with respect to wages paid. line 2.

Normal hourly wage rate of an employee not paid an Line C
hourly wage rate. Until further guidance is issued, an
Answer “Yes” if you paid family and medical leave to at
employer may use any reasonable method to convert the
least one qualifying employee during the tax year. See
normal wages paid to an employee who isn’t paid an
Family and Medical Leave and Qualifying Employee,
hourly wage rate to an hourly rate.
earlier. If you answer “No,” don’t file Form 8994 unless
Aggregation Rules you are filing it for a partnership or S corporation that
received from another entity a credit that must be reported
Section 45S(c)(3) provides that all persons who are
on line 2. For more information, see the instructions for
treated as a single employer under section 52(a) and (b)
line 2.
are treated as a single taxpayer. In accordance with this
aggregation rule, employers are aggregated for purposes Line D
of section 45S(h)(1), which provides that a taxpayer may
Answer “Yes” if you either (1) did not employ any
elect to have section 45S not apply for any tax year.
employees who weren’t covered by the FMLA, or (2)
Consequently, employers aren’t aggregated for any other
employed at least one employee who wasn't covered by
purpose, including figuring the credit.
the FMLA and you included in your written policy and
Members of Controlled Groups or otherwise complied with “non-interference” language. See
Non-interference language under Eligible Employer,
Businesses Under Common Control earlier. If you answer “No,” don’t file Form 8994 unless
Each member of a controlled group of corporations and you are filing it for a partnership or S corporation that
each member of a group of businesses under common received from another entity a credit that must be reported
control generally makes a separate election to claim or not on line 2. For more information, see the instructions for
to claim the credit in accordance with rules set forth under line 2.
section 51(j)(2) and (3). However, in the case of a
consolidated group (as defined in Regulations section Line 1
1.1502-1(h)), the election is made by the agent (as Use the Paid Family and Medical Leave Credit Worksheet
defined in Regulations section 1.1502-77) of the group. to figure any credit amount to enter on line 1.
An election to claim or not to claim the credit is made for
In general, you must reduce your deduction for salaries
the tax year in which the credit is available by claiming or
and wages by the amount on line 1. You must make this
not claiming the credit on either an original return or an
reduction even if you can’t take the full credit this year and
amended return filed for that tax year.
must carry it back or forward. If you capitalized any costs
More Information on which you figured the credit, reduce the amount
For more information about this credit, see the following. capitalized by the credit attributable to these costs.

• Section 45S. Line 2
• Notice 2018-71, 2018-41 I.R.B. 548, available at Enter total paid family and medical leave credits from:
IRS.gov/irb/2018-41_IRB#NOT-2018-71. • Schedule K-1 (Form 1065), Partner’s Share of Income,
Deductions, Credits, etc., box 15 (code P); or
• Schedule K-1 (Form 1120-S), Shareholder’s Share of
Specific Instructions Income, Deductions, Credits, etc., box 13 (code P).
Line A Partnerships and S corporations report the above
credits on line 2. All other filers figuring a separate credit
Answer “Yes” if you have a written policy providing at least
on line 1 also report the above credits on line 2. All others
2 weeks of annual paid family and medical leave for all of
not using line 1 to figure a separate credit must report the
your qualifying employee(s) to whom wages are paid
above credits directly on Form 3800, Part III, line 4j.
(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

Instructions for Form 8994 (December 2021) -7-

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Paid Family and Medical Leave Credit Worksheet                                                                                  Keep for Your Records
  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)       (b)                                            (c)                                                                (d)
   Qualifying Paid Family and                          Applicable Percentage                                                    Credit Amount
   Employee   Medical Leave                        (shown as a decimal (25% = 0.25))                                             (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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                                                   -8-       Instructions for Form 8994 (December 2021)

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Instructions for Paid Family and which the rate of payment exceeds 50%, up to a
maximum applicable percentage of 25%. See Applicable
Medical Leave Credit Worksheet Percentage, earlier, for examples. You can use the
following Applicable Percentage Worksheet to figure the
Although you only need to provide summary
applicable percentage(s) to enter in column (c).
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 Applicable Percentage Worksheet
Family and Medical Leave Credit Worksheet is one
method of reflecting the necessary information and is 1. Enter the percentage required
provided to assist you in this process. You should retain under your written policy for the
this worksheet (or any other document you use for payment of family and medical
capturing this information) in your records. The leave* . . . . . . . . . . . . . . . . 1. %
information needed to support the amount of credit you 2. Minimum percentage required
are claiming includes the: to claim the credit . . . . . . . . 2. 50 %
• Name and social security number of each qualifying 3. Subtract line 2 from line 1. If the
employee, result is less than zero, stop
• Wages paid to each qualifying employee, here, skip lines 4 and 5, and
• Name and employer identification number of each enter -0- on line 6 . . . . . . . . 3. %
qualifying employer, 4. Multiply the number (percentage
• Applicable percentage, and points) on line 3 by 0.25
• Family and medical leave policy. percentage points. For example,
if line 3 is 25%, then 25 × 0.25 =
Column (a), Qualifying Employees 6.25 percentage points or
6.25% . . . . . . . . . . . . . . . . 4. %
Enter the name or other identifying information for each
qualifying employee to whom wages were paid while on 5. Base applicable
family and medical leave. See Qualifying Employee and percentage . . . . . . . . . . . . . 5. 12.5 %
Family and Medical Leave, earlier. 6. Add lines 4 and 5. Enter this
applicable percentage shown as
Column (b), Paid Family and Medical Leave a decimal (for example, 18.75%
Enter the total family and medical leave wages paid during would be shown as 0.1875) in
the tax year for each employee listed in column (a). See column (c) of the Paid Family
Family and Medical Leave and Minimum Rate of Payment and Medical Leave Credit
Requirement, earlier. Worksheet for all qualified
employees to whom the rate of
Column (c), Applicable Percentage payment shown on line 1
The applicable percentage is based on the rate of applies. . . . . . . . . . . . . . . . 6. %
payment for the leave under the employer’s policy. The
base applicable percentage of 12.5% applies if the rate of *Complete a separate worksheet for each separate
payment is 50%. If the rate of payment under the policy is percentage required and used under your written policy for
greater than 50%, the applicable percentage is increased the payment of family and medical leave.
by 0.25 percentage points for each percentage point by

Instructions for Form 8994 (December 2021) -9-

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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 hr., 54 min.
Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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.

-10- Instructions for Form 8994 (December 2021)

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