Payroll Tax Credits Surrounding the Paid Leave related to Coronavirus

Melissa Clary Business, News, Payroll, Tax 0 Comments

Coronavirus-related paid leave for workers and payroll tax credits for small and midsize businesses

Under the Families First Act, small and midsize employers will be able to take advantage of refundable payroll tax credits. This credit will enable employers to fully reimburse the cost, dollar-for-dollar, for the leave pay regarding Coronavirus.

Businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will soon be released.

Paid sick leave for workers
• For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees’ children’s schools are closed, or child care providers are unavailable.

Paid Leave

The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee’s pay.

Paid Sick Leave Credit

For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.

For an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Child Care Leave Credit

In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Complete coverage
• Employers receive 100% reimbursement for paid leave under the FFCR.
o Health insurance costs are also included in the credit.
o Employers face no payroll tax liability.
o Self-employed individuals receive an equivalent credit.

Fast funds
• Reimbursement will be quick and easy to obtain.
• An immediate dollar-for-dollar tax offset against payroll taxes will be provided.
• Where a refund is owed, the IRS will send the refund as quickly as possible.

Small business protection
• Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.

Easing compliance
• Requirements subject to 30-day non-enforcement period for good faith compliance efforts.

 

Call Key2 Accounting if you have any questions regarding Payroll Tax Credits.

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