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Kelly Creed, CPA, Tax Stockholder in the Oakland office.
Kelly CreedCPA / Tax Partner / Co-Managing Director of Taxview bio

Payroll Credits and Payroll-Related Assistance

Sickleave

3/31/2020

Families First Coronavirus Response Act

On March 18, 2020 the President signed the Families First Coronavirus Response Act.

The Act provides two different types of Mandatory employer-paid leave benefits:

  • Up to 80 hours paid sick leave for workers who are ill, quarantined, seeking care or taking care of sick family members (Mandatory Paid Sick Leave)
  • Up to 12 weeks of paid family leave for people caring for minor children whose school or childcare is closed (Paid Family Leave)

Large Employers are not required or eligible - only for employers with less than 500 employees

  • Both of these are mandatory for employers with less the 500 employees.  There is an exception for employers with under 50 employees if impositions of paid leave would jeopardize the viability of the employer to stay in business

Mandatory Paid Sick Leave 

Effective April 1st through December 31, 2020 – employers with fewer than 500 employees must provide up to 80 hours of paid sick leave for each employee unable to work due to the following:

  • Unable to work because of a coronavirus quarantine or self-quarantine for coronavirus like symptoms
    • Eligible employee will receive their regular pay up to $511 a day for a max of $5,110 for 10 days
  • Employee is caring for someone with virus or caring for child as school or childcare facility is closed
    • Employee will receive 2/3 of regular pay up to $200 a day for a max of $2,000 for 10 days

All employees are eligible:

  • New hires (no minimums of days need to be worked)
  • Part-time employees – will be paid for amounts they typically work in a 2-week period; based on average of the prior 6 months
  • If employee is laid off prior to April 1st, not required to pay; however, if employee is rehired, they would qualify
  • Employer cannot require an employee to use other paid leave benefits prior to claiming the paid sick leave under the act

Paid Family Leave

Effective April 1st through December 31, 2020, employees that have worked for more than 30 days for an employer who employs under 500 employees can take up to 12 weeks of employer-paid family leave.  An employee qualifies if they are unable to work because they need to take care of their child, under the age of 18, due to school or childcare closure.

  • There is a 10-day waiting period, which employee may use employer sick-time, vacation or paid the sick leave benefit discussed above
  • Benefit amount is employee's regular pay up to $200 a day up to an aggregate of $10,000

Employer Credits

Employers paying paid sick leave or paid family leave may claim a dollar for dollar refundable credit against their payroll taxes on form 941; any excess credit will be refunded or applied to the next quarter. 

Employers will be able to retain an amount of payroll taxes equal to the amount of qualifying paid sick leave and paid family leave that they paid, up to the limitation, rather than deposit with the IRS.

The amount of the credit is 100% of required paid sick leave and paid family benefits + 1.45% Medicare tax on benefits + employer’s qualified health plan expenses. 

Credit for Self-Employed (SE) Taxpayers

SE individuals may claim similar refundable credits for leave taken between March 18th, 2020 through December 31, 2020.  The credit is based on the average daily self-employment income up to the applicable maximums of $511 and $200.  The average daily self-employment income is computed by multiplying net SE earnings for the taxable year divided by 260.

Unfortunately, the credit is not claimed until the taxpayer files their 2020 tax return, however the taxpayer can decrease their required 2020 estimated quarterly tax payments now to free up cash flow.

Other items:

  • The Act requires the employer to post notice in a conspicuous place on employers’ premise – given many employees are currently working from home, the notice may need to be emailed
  • Employees working for an employer with fewer than 25 employees are not guaranteed their job if the job no longer exists as a result of economic conditions caused by the coronavirus.  However, the employer must contact the employee if an equivalent position becomes available within 1 year.
  • For employers with over 25 employees, the same job or equivalent job must be restored when the employee returns from FMLA. 

CARE Act

Employee Retention Credit for Employers Subject to Closure Due to COVID-19

Employers of any size, who have either suspended operations to some degree or experienced a loss of at least half of their gross receipts during the first quarter of 2020 are eligible for a refundable payroll tax credit equal to 50 percent of the wages paid to their employees, up to a  maximum of $5,000 per employee.  

Employers are only eligible for this credit if they have not received a Paycheck Protection Loan.   Wages paid under the above Family First Coronavirus Response Act are not considered in the calculation of wages for this credit. 

Employers can receive credit for the amount of time operations are suspended or until the quarter end where gross receipts reach 80 percent of the prior year average.

  • Credit applies for wages paid from March 12, 2020 to December 31, 2020.
  • For employers who in 2019 had less than 100 full-time employees, all employee wages are eligible for the credit.  For employers who had greater than 100 full-time employees the credit applies only to employees who were furloughed or have reduced hours. 

Delay of Payment of Employer Payroll Taxes

Employers are allowed to defer the Employer portion of payroll taxes (FICA & Medicare match) from March 27, 2020 to December 31, 2020. The deferred tax will be due as follows: 50% by the end of December 31, 2021 and the other 50% by the end of December 31, 2022.  Employers who receive loan forgiveness under Paycheck Protection Program are ineligible for the payroll tax deferral.

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