On August 5, 2026, the Department of the Treasury and the Internal Revenue Service (IRS) issued Notice 2026-28 providing guidance on the permanent expansion of the paid family and medical leave credit under the Working Families Tax Cuts (WFTC). The notice explains that eligible employers may claim a credit equal to a percentage of wages paid for qualifying leave periods, subject to statutory caps and documentation requirements. It details which categories of leave qualify, outlines the calculation methodology for the credit, and describes the filing procedures, emphasizing that the credit is refundable and reported on Form 5113. The guidance also clarifies the interaction between the federal credit and state leave programs, and specifies that the credit applies to remuneration paid after March 15, 2026. Employers are advised to maintain comprehensive records of leave taken, payment amounts, and supporting documentation for at least four years. The Treasury and IRS encourage businesses to review the notice to understand how the permanent expansion affects their tax planning and to consult qualified tax professionals for implementation. The guidance becomes effective upon publication in the Federal Register and applies to wages paid in tax years beginning after December 31, 2025.
Key Takeaways
- Credit Eligibility: Applies to wages paid for qualifying leave periods after March 15, 2026.
- Credit Calculation: Percentage of qualified wages up to statutory caps, claimed on Form 5113.
- Documentation Requirement: Maintain records of leave periods, payment amounts, and supporting evidence for four years.
- Interaction with State Laws: Coordination with state leave credit programs is required.
Source: Read Original Announcement