IRS Issues Guidance on Claiming Expanded Paid Family and Medical Leave Credit Using Premium-Based Method

Per the Journal of of Accountancy description, the IRS issued guidance explaining how employers may claim the expanded paid family and medical leave credit beginning in 2026 using a premium-based method. The description identifies the starting year (2026) and the calculation approach (premium-based method) but does not provide detailed computational steps in the summary provided.

For CPA firms that prepare payroll tax credits and advise employers on employee benefits, this guidance will require immediate attention to update payroll tax workflows and systems. Firms must map the premium-based calculation into client payroll processes, update templates, and adjust tax credit projections used in cash-flow planning. Staff who handle payroll tax returns and quarterly filings will need training on the new computation method and documentation requirements.

The guidance increases reliance on professional judgment around eligibility determinations, the appropriate application of the premium-based method, and reconciliation between payroll systems and tax filings. Firms should anticipate additional documentation and recordkeeping to support credit claims in the event of IRS inquiries or audits. Differences in interpretation or implementation across payroll providers could create client-specific variance that requires careful reconciliation.

Economically, the change creates advisory and implementation opportunities: firms can bill for compliance updates, payroll-system configuration, and benefit-plan analysis. To limit implementation risk, firms should develop standard procedures for computing the premium-based credit, update engagement letters to cover the additional scope, and communicate timing and documentation expectations to clients-without asserting any outcomes beyond what the IRS guidance states.