Posted by UNIVERSAL ACCOUNTING & FINANCIAL SERVICES INC.

Tax Credit Included in the Coronavirus Paid Leave

Tax Credit Included in the Coronavirus Paid Leave

The Coronavirus has hit the world big time, and nations around the world are scrambling to make sense of the situation. With the high infection rate of this pandemic, an effective mitigation strategy is for everyone to stay at home. Some workers, despite the epidemic, do not consider staying off work in a bid to avoid missing a paycheck. 

In response to this, the president signed the Families First Coronavirus Act. With this, employers will have to give paid sick leave to workers affected by the pandemic. In a bid to, however, lessen the financial burden on the employers, the government offers a tax credit to reimburse employers. This also applies to self-employed people that have been restricted.  

With the new law, there are no stimulus checks, payroll tax cuts, and other provisions for tax relief. The United States government is already working on another Coronavirus stimulus bill that might come with tax changes. In the new law, we have some of the paid leave benefits and related tax credits

Paid leave benefits 

According to the Families First Coronavirus Response Act, all private employers with less than 500 workers must offer sick leave to workers affected by the pandemic. This includes public employers as well but excludes emergency responders and health care workers. An employee only qualifies for sick leave provided he or she is:

  • Under a quarantine order by the government

  • Has to self-quarantine based on an order or advice from a health worker.

  • In need of a medical diagnosis due to coronavirus symptoms

  • Taking care of someone, usually a relative that has been subjected to coronavirus isolation order

  • Taking care of a child that is out of school or daycare due to coronavirus issue

Based on the new law, workers that are absent from work and cannot work remotely are covered if they have to care for their children or a minor. This is valid based on the assumption that the daycare or school of the child has been closed.

Workers will be eligible for 67% of their regular salary while on leave due to Coronavirus. The compensation is, however, capped at $200 per day and $10,000 in all.

Tax Credit for Employers 

Although the cost of the sick leave and other family leave benefits will be borne by the employer, the refundable tax credit lessens the impact of some of these costs. These credits, however, are subjected to some restrictions.

Workers taking time off due to quarantine under the new sick leave will have their credit limited to $599 a day per worker. If the worker will be taking care of another person, the limit is $200 a day. Furthermore, this credit is limited by a 10-sick-days-per-worker limit.

The credit, however, is limited to $200 per day for each employee for the expanded FMLA benefits. The maximum amount of credit for all workers is $10,000. There are also extra payroll tax credits for group health plan costs. 

Tax Credits for the Self-Employed 

There is a provision as well for self-employed people. There are refundable tax credits provided for the self-employment tax, which looks like the ones for employers.  

The sick leave credit is a factor of the self-employed qualified sick leave equivalent amount. This self-employment tax credit is also available for the whole of a person's qualified family to leave an equivalent amount.



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