Posted by Fred Lake

Coronavirus-related Paid Leave for Workers and Tax Credits for Small and Midsize Businesses

Coronavirus-related Paid Leave for Workers and Tax Credits for Small and Midsize Businesses

President Trump on March 18, 2020, signed the Families First Coronavirus Response Act (FFCRA) into law on March 18, 2020. It was designed to help employers provide sick leave benefits to their employees. Small and midsize employers (those with 500 employees and fewer) under the law are given tax credits for their costs for:

    •    Providing employees who are on sick leave with coronavirus-related paid leave and to care for family members, and

    •    Providing employees leave to care for their children or other family members.

The effectiveness of the program will remain until December 31, 2020.

Tax Credits Available for Employers

Any business or tax-exempt organization with fewer than 500 employees required to provide emergency paid sick leave and emergency paid family and medical leave are eligible under this new law.

Employee Sick Leave and Child Care Leave Benefits

Employers must provide the following benefits to their employees:

    •    Paid Sick Leave - A paid sick leave of up to 80 hours (two weeks) at 100% must be provided to employees of eligible employers if the employee can’t work due to one or more of these situations:

    •    Quarantine

    •    COVID-19 symptoms

    •    Seeking a Medical Diagnosis

    •    Paid Sick Leave for Caregivers - Aside from the paid sick leave, up to 80 hours (two weeks) of paid sick leave must be provided to employees at two-thirds of their pay for one or more of these situations:

    •    Caring for another person in quarantine

    •    Caring for a child whose school has been shut down or child care is not available.

    •    The employee is going through “substantially similar conditions” as the sick person.

    •    An amount equal to their average number of hours over a two-week period may be provided to part-time employees.                                                        

Expanded Child Care Leave

Employers may not just give sick leave credit but also give employees leave to care for a child whose school has been shut down or when child care is not available. Employee’s benefits are two-thirds of the regular pay of the employee for up to 10 weeks, up to $200 a day or $10,000 aggregated.

Tax Credits for Employers

    •    Tax Credits for Employers - You may get a refundable sick leave credit for the amounts you paid employees for the paid sick leave above if you are an eligible employer. The credit is for the regular pay of the employee, up to $511 per day and up to $5, 110 for 10 days total.

    •    Caregiver Leave Credit - You can claim a credit for the caregiver leave pay you gave employees if you are an eligible employer as described above. The credit is for the employer’s two-thirds regular pay, up to $200 a day and $2,000 for up to 10 days total.

Additional Child Care Leave Credit

Your business may not just get the sick leave credits mentioned above but also get an additional tax credit for giving employees paid leave who need to stay home to care for a child whose school or child care has been shut down or whose child care provider is not available because of the coronavirus.

The credit is for up to 10 weeks of the employee’s two-thirds regular pay, up to $200 per day or a total of $10,000.

Health Insurance Credit

An additional tax credit may also be provided for your business for costs maintaining health insurance benefits for eligible employees within their leave period.

How the Tax Credits Work for Employers

Employers are required by the IRS to withhold federal income taxes and FICA taxes (Social Security/Medicare tax) from the paychecks of the employee and to pay these taxes to the IRS including an amount for the employer portion of FICA taxes. The employee’s W-4 form is the basis of the withheld federal income tax. The FIC tax put together for employees and employers equates to 15.3% of the gross pay of the employee for both Social Security and Medicare.

These employer credits can be taken from payroll taxes withheld from all employee paychecks for:

    •    Amounts you withhold from the pay of the employee for federal income taxes.

    •    Amounts you pay as an employer for FICA taxes

    •    Employee shares of FICA taxes

Therefore, if employees are paid for qualifying sick leave or child care leave during a pay period, the amount of the payroll tax payments you would have made to the IRS for all employees for the payments to be covered can be kept. 

Fred Lake
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