Private Business Counsel

Implementing the business tax relief provisions of the Families First Coronavirus Response Act, signed March 18, 2020 by President Donald Trump, the Internal Revenue Service (“IRS”) announced in a Release that while further guidance would be forthcoming, small, and midsize employers as well as self-employed individuals could begin taking advantage of the new law’s two tax credits.

The law provides two tax credits for businesses with fewer than 500 employees and equivalent credits for self-employed individuals. Affected businesses are required by the new law to provide up to 80 hours of paid sick leave for workers forced to stay home because of being infected by the novel coronavirus (COVID-19), coming into contact with someone who was infected, or forced to stay home to care for a sick individual or child whose school had closed.

Paid Sick Leave Credit

Per IRS guidance, such businesses may claim a 100% dollar-for-dollar credit for sick pay paid to an employee unable to work because the employee is quarantined and/or experiencing COVID-19 symptoms and seeking a medical diagnosis. The credit is available for up to a maximum of $511 per day per employee for a maximum of 10 days – i.e. $5,110 per employee – through December 31, 2020.

Affected businesses may also claim a 2/3 credit for sick pay paid to an employee staying home to care for a person experiencing COVID-19 symptoms or a child whose school or child care facility is closed. The credit is available for up to a maximum of $200 per day per employee for a maximum of 10 days – i.e. $2,000, per employee – through December 31, 2020.

Businesses may also be entitled to an additional credit based on the costs to maintain health insurance coverage for an affected employee during the employee’s leave.

Child Care Leave Credit

In addition to the sick leave credit, an additional child care leave credit is available for businesses whose employees are unable to work because of a need to care for a child whose school or child care facility is closed. The credit is equal to 2/3 of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of leave can be counted to the child care leave credit.

Immediate Benefit

Businesses may take the credit immediately out of the withheld federal income tax, employee share of Social Security and Medicare tax, and employer share of Social Security and Medicare Tax that the employer processes during each payroll period and deposits with the IRS. If such payroll taxes are not sufficient to pay for the credits, the IRS will process accelerated credit payment requests in two weeks or less. The requests should be filed on a form the IRS will make available later this week.

Our Labor and Employment group covered the new guidance issued by Department of Labor (“DOL”) and IRS for employers regarding FFCRA Paid Leave and available tax credits in an alert earlier this week.

Montgomery McCracken attorneys are available to assist with applications and have been assisting clients with numerous issues related to COVID-19.  Montgomery McCracken’s COVID-19 Resource Center is available here.