Treasury, IRS and Labor Announce Plan for Coronavirus-Related Paid Leave and Tax Credits
The U.S. Treasury Department, the IRS and the U.S. Department of Labor recently announced small and midsize employers can begin taking advantage of two new refundable payroll tax credits designed to immediately and fully reimburse them for the cost of providing coronavirus-related leave to their employees. The relief is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
The Act will give all businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. The legislation will enable employers to keep workers on their payrolls while ensuring workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.
Key takeaways of the Act include:
- 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.
- Complete Coverage
- Health insurance costs are included in the credit.
- Employers face no payroll tax liability.
- Self-employed individuals receive an equivalent credit.
- Employers receive 100 percent reimbursement for paid leave pursuant to the Act.
- Fast Funds
- 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.
- Reimbursement will be quick and easy to obtain.
- 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.
To take immediate advantage of the paid leave credits, businesses can retain and access funds they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released this week.
For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted there this week.