The Families First Coronavirus Response Act (FFCRA), the initial package of a coronavirus relief legislation, was signed into law Wednesday, March 18th. The legislation includes provisions for paid sick leave, family leave and medical leave, along with tax credits to help employers with less than 500 employees, and the self-employed pay for them. This outline provides an overview of eligibility and employer situations.
Paid Sick Leave | Employers with Less Than 500* Employees:
Requires employers with fewer than 500 Eligible Employees to provide paid sick time to the extent that the employee is unable to work or telework due to (Eligible Employees are employees employed for at least 30 days):
Family Leave | Employers with Fewer Than 500 Employees:
Employer Tax Credit:
Employers are eligible for a credit of payroll taxes for any paid sick leave or family leave, along with any additional qualified health plan expenses incurred as a result of the leave. To the extent the wages plus any additional qualified health plan expenses incurred exceed the payroll taxes, the employer may be eligible for a refundable overpayment. The exact timing of when this is effective is not yet published, so it is unclear if the benefit can be claimed on 2020 first quarter filings.
According to an announcement* from the Treasury Department, Labor Department, and the IRS, “[u]nder guidance that will be released next week, eligible employers who pay qualifying sick or child-care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld 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.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less.”
This notice provides that the tax credits for qualified sick leave wages and qualified family leave wages required to be paid by the Families First Coronavirus Response Act will apply to wages paid for the period beginning on April 1, 2020, and ending on December 31, 2020. This notice also provides that days occurring during the period beginning on April 1, 2020, and ending on December 31, 2020, will be taken into account for credits for qualified sick leave equivalent amounts and qualified family leave equivalent amounts for certain self-employed individuals.
Click here for frequently asked questions related to the FFCRA tax credits. The FAQs will be updated to address changes in the law or additional questions as they are raised.
Self-employed individuals are also eligible for the provisions discussed above. Instead of a social security tax credit, they will receive an income tax credit. The amount of pay eligible for self-employed individuals is equal to the net earnings from self-employment for the taxable year divided by 260. This amount is then subject to the daily limitations of $511 or $200 identified above, depending upon the reason for the leave.
For More Information
We will keep you up-to-date with the latest information via our COVID-19 resources webpage.
Please contact your Lurie advisor with any questions regarding this legislation.
Date of last update: March 24, 2020.