Late Wednesday, March 18, 2020, President Trump signed the Families First Coronavirus Response Act (H.R. 6201), which, in addition to providing immediate relief to individuals impacted by the crisis, includes tax credits for employer paid sick, medical, or family leave related to the coronavirus. You can read the Families First Coronavirus Response Act in full HERE. Below is an overview of the benefits and tax credits for employer-paid sick and family leave:
Employer Payroll Tax Credit for Required Paid Sick Leave
The Emergency Paid Sick Leave Act, which is Sec. 5101 of the Families First Coronavirus Act, requires employers with fewer than 500 employees to provide up to 80 hours of paid sick time through the end of this year if the employee is unable to work due to one of the following conditions:
- The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.
- The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
- The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
Employers are eligible to receive a 100% tax credit on qualified sick leave wages paid beginning on or around April 3, 2020 through December 31, 2020. The credit is generally available for up to $511 in wages for employees that are quarantined or self-quarantined or who have COVID-19, and wages of up to $200 for other workers, for each day an employee receives qualified sick leave pay, and available for up to 10 days per calendar quarter.
To prevent double benefits, employers’ gross income will be increased by the amount of the credit and any wages taken into account in determining the credit allowed under this section shall not be taken into account for purposes of determining the credit allowed under section 45S of such Code. The credit would not apply to the federal government, the government of any state or any subdivision of a state, or any agencies or instrumentalities of these entities. The credit can be increased by certain qualified health plan expenses of the employer that are allocable to qualified sick leave wages for which the credit is allowed.
Sick Leave Tax Credits for the Self-Employed
The Act allows eligible self-employed taxpayers a refundable credit against income tax for qualified sick leave equivalent amounts. An eligible self-employed individual is an individual who regularly carries on any trade or business, as defined in Sec. 1402 of the Act, and would be entitled to receive paid leave under the Emergency Paid Sick Leave Act if the individual were an employee.
Employer Payroll Tax Credit for Paid Family Leave
The Emergency Family and Medical Leave Expansion Act, Sec. 3101 of the Families First Coronavirus Response Act, requires employers with fewer than 500 employees to provide up to 12 weeks of employer-paid family leave to employees for reasons of a “qualifying need related to a public health emergency,” which is defined in the Act as “the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.” Employers with fewer than 50 employees can be exempt from this requirement.
Employers are eligible to receive a 100% tax credit on qualified family leave wages paid beginning April 3, 2020 through December 31, 2020, not to exceed $200 in wages for each day an employee receives qualified family leave wage. A maximum of $10,000 in wages per employee is eligible for the credit.
The employer’s gross income will be increased by the amount of the credit, and no credit will be allowed for wages for which a Sec. 45S family and medical leave credit is claimed. The credit does not apply to the federal government, the government of any state or any subdivision of a state, or any agencies or instrumentalities of these entities. Employers can elect not to apply the new provision for any calendar quarter.
Employers paying paid sick or paid family leave benefits may claim a refundable credit against their FICA taxes for the gross amount of paid sick and paid family leave benefits. A similar credit is also available for self-employed individuals against their self-employment tax.
We recognize that things are changing daily as this crisis evolves. We will continue to provide updates as we receive them. In the meantime, please contact us at 602.776.6300 if you have questions about this new Act, or any of the other recent tax changes.
Click HERE for more information on the FFCRA and related tax benefits.