Payroll Tax Credits for Employee Paid Time Off

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Payroll Tax Credits for Employee Paid Time Off

In the wake of COVID-19, Congress enacted The Family First Coronavirus Response Act, a new way to assist businesses who need to offer paid leave time to employees affected by the Coronavirus. This help comes in the form of payroll tax credits. This paid leave can be used for individuals personally affected by COVID-19, those caring for someone who is, or those who have no options for childcare. This act allows employers to keep employees on their payroll, while also taking into consideration their individual health.

Who can use the payroll tax credits?

Small to mid-sized businesses with 500 or fewer employees may use the payroll tax credits. As an exception, the IRS Publication IR-2020-57 states:

“Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue.”

There will likely be other exceptions to come. We will update this post as we learn more about them.

How the tax credits will work

Employees of qualifying companies can take up to 80 hours of paid sick leave if they fall into the following categories:

  1. The employee is unable to work due to quarantine
  2. The employee is experiencing symptoms of COVID-19 (see list of symptoms here).
  3. They need to take care of an individual who is quarantined
  4. The employee must care for a child/student whose school and/or childcare is unavailable due to COVID-19 related circumstances.

How much the credit actually offers

For employees falling under reasons one or two (paid sick leave credit), employers can receive the payroll tax credit 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 employees falling under reasons three or four (child care leave credit), 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.

The tax credits include complete coverage. Employers can receive an additional tax credit to offset the cost of maintaining health insurance during the employees’ leave time. Employers will not face any tax liability.

We are still unsure about how exactly reimbursement will work, but employers are able to claim credits for COVID-19 related leave from April 1, 2020 to December 31, 2020.

If you have questions about how you can use payroll tax credits to your benefit, please contact us. We would be happy to help in any way we can to keep your business on track.

We have many additional resources we have been sharing recently, they can be found here:

IRS People First Initiative: What You Need to Know – Blog post

How Your Business Can Survive COVID-19 – Podcast 

Disaster Loans for Businesses during COVID-19 – Blog post

How to Navigate Financial Hardship in Business – Blog post

How to Make the Best of a Slow Season – Blog post

 

Please contact your employment law attorney for more information and guidance.

By | 2020-03-28T18:41:32-07:00 March 27th, 2020|COVID-19 News, payroll|Comments Off on Payroll Tax Credits for Employee Paid Time Off

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