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On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act, after overwhelming approval by the Senate, to help aid Americans impacted by the Coronavirus (COVID-19) virus sweeping the United States. The act increases funding for testing, extends paid sick leave to employees and offers employer tax credits.
Doeren Mayhew’s CPAs and advisors have outlined the highlights of the new law below.
Employers with fewer than 500 employees are required to provide paid sick leave to employees, both full-time and part-time, who are forced to stay home due to quarantining, or caring for a sick/quarantined family member or child if the school or place of care is closed. Outlined below are qualifying guidelines related to paid sick leave and family leave.
The total hours of paid sick leave is limited to 10 days of wages.
The law creates an emergency extended paid leave program to directly respond to COVID-19. Private sector employers with fewer than 500 workers and government entities would have to provide as many as 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA) for employees who:
The FMLA has also been amended to apply to companies of all sizes, requiring those businesses with less than 50 employees previously not subject to the act, to now provide job-protected leave if it is related to the COVID-19 virus. However, there is a provision that may allow the Secretary of Labor to exempt some businesses with fewer than 50 employees from the requirements.
The first two weeks of leave can be unpaid, though a worker could choose to use accrued vacation days, personal leave or other available paid leave for unpaid time off, but an employer may not require an employee to do so. Following the first two-week period, workers are required to receive a benefit from their employer that is equal to at least two-thirds of their normal pay rate.
Employers are eligible for tax credits to cover wages paid to employees while they are taking time off under the law’s sick leave and family leave provisions through the end of 2020. The tax credits equal 100% of qualified wages paid, subject to the caps noted below.
Wages paid due to sick leave and family leave provisions are not subject to the employer’s share of the Federal Insurance Contributions Act (FICA) tax (i.e., these payments are not considered to be wages for this purpose).
The credit is refundable if it exceeds the amount the employer owes in FICA tax on a quarterly payroll tax filing. The U.S. Department of the Treasury and Internal Revenue Service are in the process of preparing guidance for how to claim this refund as quickly as possible. Any credit claimed on a quarterly or refundable filing will increase the taxable income of the employer.
The law provides a similar refundable credit against self-employment tax. It covers 100% of self-employed individuals’ sick-leave equivalent or 67% to take care of a sick family member or child if school was closed.
The sick-leave equivalent amount would be the lesser of the average daily self-employment income, or $511 per day if caring for themselves or $200 if caring for a family member for 10 days. Self-employed individuals can receive a family leave credit for as many as 50 days for the lesser of $200 or their average daily self-employment income.
Congress is already far along in considering a third, and significantly larger, stimulus and relief bill, that may provide amendments to the Families First Coronavirus Response Act. Stay tuned as Doeren Mayhew will continue to keep you up-to-date as things progress amongst the COVID-19 outbreak via our Coronavirus Resource Center. Doeren Mayhew recommends you consult with your legal counsel on paid leave elements of the new law. If you have any questions regarding tax impact on your business, contact our team of CPAs and advisors.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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