Tax Credits for Coronavirus-Related Leave: What You Need to Know

coronavirus-related leave
   

As part of the Families First Coronavirus Response Act, businesses with fewer than 500 employees can provide workers with paid coronavirus-related leave and take advantage of two new refundable payroll tax credits. These tax credits will fully reimburse small and midsize businesses the cost of providing this leave to their team members who qualify.

There is still some ambiguity around the law, and there will be additional details surfacing soon. For now, as of March 24, 2020, at 10:00 am CST, here are the requirements and key takeaways you should know.

What Employers Need to Know about the Coronavirus-Related Paid Leave

Paid Sick Leave for Workers

The new law requires employers with more than one employee and less than 500 employees to provide paid sick leave for workers, either for the employee’s own health needs or to care for family members.

Both full-time and part-time employees are entitled to 80 hours of paid sick leave for COVID-19 related reasons, as long as they have thirty or more days of tenure. If the employee is infected with the coronavirus or is required to quarantine at the recommendation of public health officials, they must receive paid sick leave at their regular rate of pay. If the worker is caring for a family member, either someone who becomes infected with the virus or children whose school or daycare is closed due to the pandemic, their paid sick leave is two-thirds of their regular compensation.

Application of FMLA to COVID-19

The Family Medical Leave Act will now include a Public Health Emergency Leave, which must arise from the same reasons as the paid sick leave mentioned above.

This leave differs from traditional FMLA, as it even applies to employers who are exempt from traditional FMLA. Also, this new emergency leave applies to businesses with more than one employee, instead of the conventional 50 or more employees rule.

After an employee has taken the two weeks paid sick leave outlined above, they may take up to twelve weeks of paid FMLA at two-thirds of their compensation. The mandated pay is capped at $200 per day, per employee, with an overall cap of $10,000 per employee.

Fast Funds: How to Recover the Cost of Providing Coronavirus-Related Leave

Employers can be fully reimbursed, dollar-for-dollar, for the cost of providing coronavirus-related leave (either the fourteen days of paid sick leave or the paid FMLA) through a credit against the employer portion of the FICA taxes.

The employer may take a credit against their federal payroll tax deposit for 100% of the qualifying paid sick leave, with a limit to ten days per affected employee (at $511 per day for reasons related to the worker’s own health or $200 per day if caring for a family member who becomes infected with the virus). If the credit exceeds the employer’s FICA tax obligation, it is refundable.

We Will Continue to Update You as More Guidance Is Available

While this is not as much as everyone would like to see, it is still some relief from the cost. We will continue to follow up as more guidance becomes available on this topic.

There is more to come on the legislative response to the coronavirus outbreak, with a lot of moving pieces. We are monitoring the bill’s progress and will be providing additional, reliable information as it becomes available. As always, we are here to make the complex simple.

Click here to visit our COVID-19 Resource Center, where you can find timely updates and valuable resources for you and your business.

March 24, 2020