We have worked together with Ascent CPA Group to further understand what the Families First Coronavirus Response Act (FFCRA) means for you and your small business. Below is a portion of their article summarizing the FFCRA and providing brief key takeaways from this new law. If you have any concerns that better suit an accountant’s insight, such as questions about tax benefits, please reach out to Ascent CPA Group. They’re super.
FAMILIES FIRST CORONAVIRUS RESPONSE ACT: WHAT EMPLOYERS NEED TO KNOW
President Trump signed the Families First Coronavirus Response Act (FFCRA or the Act) on March 19, and it will take effect on April 1 (or 2…there’s some confusion). The economic stimulus measures will extend through December 31, 2020. The Act is comprehensive and makes significant changes to previously existing rules regarding, among other things, both the Family Medical Leave Act (FMLA) and Emergency Paid Sick Leave (EPSLA).
Changes contained in the new law focus on companies with fewer than 500 employees. There is already discussion of exemptions for smaller businesses employing fewer than 50 people whose viability may be threatened by these measures. Also, the measures covered in the Act are not pertinent to companies that employ 500 or more employees. Action will likely follow with regard to companies of this size.
For more information on the specifics of EPSLA and Emergency FMLA, please review Stanton Law’s FFCRA article here.
Employers who provide these new emergency benefits to employees will be, by one mechanism or another, provided tax credits against their payroll taxes that will refund them fully for qualified sick leave and family leave wages under the Act.
WHAT THIS MEANS
We are in uncharted waters when it comes to COVID-19. Though we do not know what is going to happen, employers and employees can take some comfort in knowing that the Act tries to recognize the real-world needs of both sides. States may provide their own additional benefits at some point, but what the federal government has done means that those with full-time jobs working for companies with fewer than 500 employees can have confidence that they may be eligible for both up to 12 weeks of family medical leave and 80 hours of emergency paid sick leave if their child’s school or care facility closes down as a result of COVID-19. It all adds up to a maximum of no more than about $15,000, representing a significant cushion as compared to what had previously been available.
KEY TAKEAWAYS
Employers receive 100% reimbursement for paid leave pursuant to the Act.
• Health insurance costs are also included in the credit.
• Employers face no payroll tax liability.
• Self-employed individuals receive an equivalent credit.
• Reimbursement will be quick and easy to obtain.
• 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.
A great example for this comes straight from an IRS announcement stating, for instance “[i]f an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.”
If you have any questions regarding your obligations under the Emergency Paid Sick Leave or Emergency Family and Medical Leave, please reach out to your Stanton Law attorneys. We can be reached at 404-531-2341 or here. If you have questions about taking advantage of the tax benefits to assist covering the cost for the leave, please reach out to Ascent CPA Group at (888) 272-3683 or online.