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Coronavirus Relief Act Provides Payroll Tax Credits for Employers

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On March 18, 2020, President Trump signed the Families First Coronavirus Response Act. The new law contains expanded benefits under FMLA, expansion of required paid sick days and expanded unemployment benefits.  Additionally, several tax credit provisions will assist employers who provide paid leave for their employees who miss work for various coronavirus related reasons. The Act will take effect on April 2, 2020.

 Expansion of FMLA and related payroll tax credits

The Act expands the Family and Medical Leave Act (FMLA) to cover public health emergencies related to the coronavirus.  FMLA is expanded to include employees unable to work or telework due to a need to care for a child under age 18 because of a school or day care closure or childcare is unavailable due to the current public health emergency.

The Act applies to employers with fewer than 500 employees and public agencies, although exemptions may be provided for employers with less than 50 employees. Regulations will be issued regarding the exemption of companies with fewer than 50 employees, and we will share those details when they are made known. 

  • Shortens the eligibility requirement from 12 months to 30 days; and
  • Permits eligible employees to take up to 12 weeks of job-protected leave under the FMLA if the employee is not able to work due to the need to care for a dependent under age 18 due to school or day care closure.
  • Employees may elect to take the first 10 days of leave as unpaid or use accrued vacation, personal, medical or sick leave.
  • After 10 days, employees must be paid a benefit in the amount of not less than two-thirds of the regular pay. The benefit is capped at $200 per day and a maximum of $10,000 per employee.

Employer tax credits for providing FMLA benefits

  • An employer that pays qualified family leave wages will get a payroll tax credit of 100% of the eligible wages paid during the period beginning April 2, 2020, through December 31, 2020.
  • Applied against the employer portion of the payroll taxes.
  • Credit available for up to $200 in wages per day up to a maximum of $10,000 in wages per employee.
  • No tax deduction will be allowed for payroll taxes offset by this credit.
  • Self-employed individuals would be eligible for a refundable income tax credit for equivalent leave amounts.

Expansion of paid sick leave

The Act requires employers with fewer than 500 employees to provide up to 80 hours of paid sick time through the end of 2020 if the employee is unable to work due to being quarantined, self-quarantined, has contracted the coronavirus, or is caring for a person that is quarantined or has the coronavirus, or caring for a child whose school or daycare is closed. This is regardless of how long the employee has been employed by the employer.

  • There may be an exemption for employers with fewer than 50 employees. Regulations will be issued regarding the exemption of companies with fewer than 50 employees, and we will share those details when they are made known. 
  • Employers paying benefits under this provision will be allowed a payroll tax credit as follows:
    • Up to $511 per day in wages for a worker that is quarantined or self-quarantined or has contracted the coronavirus;
    • Up to $200 per day in wages for an employee caring for a child or another individual that is quarantined or contracted the virus;
    • The credit is available for up to 10 days per calendar quarter.

Self-employed individuals: The bill also provides eligible self-employed taxpayers with a refundable credit against income tax for qualified sick leave equivalent amounts.

Notices

Employers must post a notice of the requirements described in this Act in conspicuous places where notices to employees are customarily posted. The Department of Labor is to publish a model notice within seven days of enactment.

If you have questions, please contact your Yeo & Yeo professional.

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