Congress passed and President Trump signed the Families First Coronavirus Response Act on March 18, 2020. Several provisions of the Act significantly impact employers. Below is a recap of the provisions in the Act.
The new law requires employers with fewer than 500 employees to provide paid sick leave to employees who are forced to stay home due to quarantining or to care for a family member or to care for a child if the school or place of care is closed. The bill compensates employers and the self-employed for this paid leave in the form of a tax credit.
In the case of sick leave, wages paid by an employer to an employee, the employer receives a refundable credit against its share of the social security taxes. The credit can be claimed on a quarterly basis, equal to 100% of the amount of sick leave wages paid under the new law. The amount of the credit is limited to $511 per day for a maximum of 10 days. This is only applicable if the employee’s leave is because of the following:
Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
Is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
For self-employed persons, the credit is allowed against regular income tax and is subjected to the same limitations. This calculation is very complicated and has a lot of moving parts so please contact your CPA for help with the calculation.
Extended due date of the return and taxes owed
See IRS Extends Tax Deadline for further information.
The Act also permits the Secretary of Labor to provide emergency funds to states meeting certain requirements to provide additional funds related to employment benefits and processing.
Phase Three of the Act is Underway
Phase Three of the Act is currently being finalized by the Senate; this consists of four key components. Below recaps the highlights of Phase Three:
- New federally guaranteed loans for small businesses
- Direct financial help/emergency tax relief
- Targeted lending to industries of national importance
- Health resources for those working on the front lines of combating COVID-19
All these provisions are designed to help employers maintain cash flow and keep making payroll.
We are continuing to monitor this and will provide updates as this situation develops, and when further guidance is available.
Contact us if you have questions about the Families First Coronavirus Response Act.