COVID 19 - Family First Coronavirus Response Act

You will find below a relevant summary of the “The Families First Coronavirus Response Act”.

Since this was enacted on March 18, the tax credits can be claimed starting on April 2nd.

FFCRA Summary:

The Families First Coronavirus Response Act (FFCRA) requires private employers with fewer than 500 employees, and all government employers, to provide:

-    Employees with two workweeks of paid sick leave for certain coronavirus-related leave purposes
-    Expanded job-protected Family and Medical Leave Act (FMLA) leave for certain caregiving responsibilities. Under certain conditions, this expanded family leave must be partially compensated by employers. For both sick and family leave, the bill includes provisions that may exclude health care providers, emergency responders, and employees in certain small businesses from leave requirements.
-    The legislation expands access to paid sick and family leave for employees at many small- and mid-sized businesses. Employees of large businesses (> 500), however, would not have guaranteed access to paid sick or family leave

Employer Payroll Tax Credit in General

Employers that claim this credit are required to include the amount claimed in gross income, for income tax purposes, offsetting the reduction in gross income from deducting wages paid (preventing a double benefit). Additionally, employers cannot claim this credit for any wages taken into account for the purposes of calculating the employer tax credit for paid family and medical leave. Employers may also elect not to have the credit apply. The credit does not apply to state or local governments. The tax credits can be claimed for a period to begin within 15 days following enactment, and ending December 31, 2020. 

Sick Leave 

-    Credit for 100% of amount in sick leave wages
-    Must be paid up to 10 workdays for FTE (pro-rated for PTEs)
-    Maximum amount depends on purpose of sick leave
-    Cannot exceed $511 / day if because of quarantine/isolation or seeking diagnosis for symptoms
-    Cannot exceed $200 / day if because of care for someone in quarantine/isolation, a child or substantially similar condition
-    Credit can be increased by amount employers pay for employee’s health plan while on leave

Employers can claim a tax credit for 100% of the amount required to be paid in sick leave wages. Sick leave wages must be paid for up to 10 workdays for a full-time employee (prorated for part-time employees). The maximum amount that must be paid in sick leave depends on the purpose for which the sick leave is taken. Sick leave wages cannot exceed $511 per day for employees if they are taking leave because (1) the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19; (2) the employee has been advised by a health care provider to self-quarantine due to COVID-19; or (3) the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis. Sick leave wages cannot exceed $200 per day for employees if they are taking leave because (A) the employee is caring for an individual described in number (1) or (2) above; (B) the employee is caring for their own minor child whose school, place of care, or caregiver is closed or unavailable due to COVID19; or (C) the employee is experiencing any other to-be-specified “substantially similar condition.” The tax credit amounts for paid sick leave can be increased by the amount employers pay for an employee’s health care plan while they are on leave. 

Family Leave 

-    Paid period begins after 10 days unpaid, PTO, or other form of paid leave
-    After 10 day period, paid benefit is at least 2/3 of employee’s usual pay, but not more than $200/ day
-    Credit limited to $200 / day and $10K / employee
-    Credit amounts can be increased by the amount employers pay for an employees health care plan while on leave

The employer tax credit is for paid family leave, required for employees who take leave (are unable to work) because they must care for their own minor child whose school or place of care has been closed due to a COVID-19-related public health emergency. The paid leave period for the purposes of the tax credit begins once an individual has taken 10 days of leave for the family leave purpose described above. These 10 days of leave may consist of unpaid leave, or an employee may elect to use paid vacation, personal, or another form of paid leave. After this 10-day period, employees will receive a benefit from their employers that is at least two-thirds of the employee’s usual pay, but not more than $200 per day. The tax credit for family leave wages is limited to $200 per day, and $10,000 total per employee. The tax credit amounts for paid family leave can be increased by the amount employers pay for an employee’s health care plan while they are on leave.

Tax Credit for Self-Employed Individuals 

-    SEIs eligible for similar tax credits, equal to 100% of average daily self-employment income
-    Cannot exceed $511 / day if because of quarantine/isolation or seeking diagnosis for symptoms
-    Cannot exceed $200 / day if because of care for someone in quarantine/isolation, a child or substantially similar condition
-    Sick leave credit is limited to maximum of 10 days
-    FMLA limited to 50 days
-    Income tax credit is refundable

Self-employed individuals, including gig workers, are eligible for tax credits similar to above. If individuals are unable to perform services in their trade or business for the sick leave purposes described above, the individual may qualify for an income tax credit equal to 100% of average daily self-employment income. Like the employer credits, this credit is limited to $511 per day for certain qualifying sick leave purposes, and $200 for other sick and qualified family leave purposes. The sick leave credit is limited to a maximum of 10 days. The family leave credit is limited to 50 days. For self-employed individuals, the income tax credit is refundable (meaning that if the tax credit amount exceeds the individual’s income tax liability, the excess is received as a refund, or payment, from the Treasury). Like the employer tax credit, the tax credits for self-employed taxpayers can be claimed for a period to begin within 15 days of enactment, and ending December 31, 2020.