The Families First Coronavirus Response Act, effective April 2nd, gives businesses with fewer than 500 employees the ability to claim refundable payroll credits based on qualifying paid leave—family and medical leave or sick leave—that they provide through December 31, 2020. Equivalent credits are also available to the self-employed.
- Paid Sick Leave Credit under the Emergency Paid Sick Leave Act (EPSLA)
- Based on the sick leave paid to an employee at 100% of their regular pay rate up to $511 per day, for a total of ten (10) days ($5,110 in the aggregate). The qualifying employee:
- Is subject to a quarantine or isolation order
- Is advised by a health provider to self-quarantine
- Is experiencing coronavirus symptoms and is seeking a medical diagnosis
- Based on the sick leave paid to an employee at 2/3 of their regular pay rate up to $200 per day for a total of 10 days ($2,000 in the aggregate). The qualifying employee:
- Is caring for someone with coronavirus
- Is caring for a child because the child’s school or childcare facility is closed, or the childcare provider is unavailable due to the coronavirus
- Eligible employers are entitled to an additional tax credit determined by costs to maintain health insurance coverage for the eligible employees during the leave period.
- Family and Medical Leave Credit under the Emergency Family and Medical Leave Expansion Act (EFMLEA)
- Based on the leave paid to an employee at 2/3 of their regular pay rate up to $200 per day for a total of 10 weeks ($10,000 in the aggregate). The qualifying employee:
- Is an employee who has been employed for at least thirty (30) days and is unable to work or telework due to a need for leave to care for a son or daughter under age 18 because a school or place of care has been closed, or a childcare provider is unavailable due to COVID-19.
- The first 10 days of leave may be unpaid and then paid leave is required.
- Administration of the Tax Credit for Employers
- Under IRS guidance that is expected be released this or next week, eligible employers who pay qualifying sick or child care leave will receive the above referenced credits by retaining the payroll taxes equal to the amount of qualifying sick and child care leave that they expect to pay. This includes federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees. According the IRS Information Release (IR 2020-57), if the payroll taxes are insufficient to cover the cost of qualified sick and childcare leave paid, employers will be able file a request for an accelerated payment from the IRS. Processing times are expected to be two (2) weeks or less.
- Examples of Tax Credit Situations from the IRS
- If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
- If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.