Date: September 10, 2020
From: Priscilla Rodriguez, Director of Regulatory Affairs
Subject:IRS Paid Sick Leave Credit
The Families First Coronavirus Act (FFCRA) required certain employers to provide employees with up to a combined 12 weeks of paid sick leave or expanded family and medical leave for specified reasons related to COVID-19 through December 31, 2020. The employer benefit included in the FFCRA is a refundable tax credit – Paid Sick Leave Credit for eligible employers with fewer than 500 employees.
In anticipation of receiving the credit eligible employers can funds qualified leave wages and allocable qualified health care expenses and employers share of Medicare taxes on the qualified leave wages to its employees in a calendar quarter by reducing federal tax deposits for that quarter. You must account for the reduction in deposits on the Form 941 for the quarter.
The paid sick leave credit and paid family leave credit are available for eligible employers who pay qualified sick leave wages and/or qualified family leave wages from 4/1/2020 through 12/31/2020.Eligible employers may claim the tax credit if the employee is unable to work or telework due to for qualified reasons related to COVID-19.
Paid Leave Refundable Credit:
• Qualified paid leave provided between April 1, 2020 and December 31, 2020
• Fully refundable tax credit
• Includes the eligible employer’s share of Medicare tax
• Includes allocable cost of maintaining health insurance coverage
• Qualified Leave Wages are not subject to the employer portion of social security tax
As mentioned, you can claim the paid sick leave credit on the Employer’s Quarterly Federal Tax Returns, Form 941 for wages, qualified health care expenses and eligible medicare tax by reducing federal employment tax deposits. Be sure to maintain records and documents pertaining to the leave and copies of the form 941. If needed, you may also claim an advanced credit by filing IRS form 7200. For more information, attached is a one pager with additional information on the leave credits and you can find a IRS FAQ on the topic here. If you have any questions feel free to reach out to our office at (559)455-9272.
Note: If you have received the Paycheck Protection Program (PPP) you cannot claim the credit for the same wages.
|New COVID-19 Employer Tax Credits|