On March 18, 2020, President Trump signed the Families First Coronavirus Response Act into law. The Act will go into effect on April 2, 2020.
What this means for you (as an employer):
- Paid Sick Leave - As an employer with less than 500 employees, you are required to provide 2 weeks (up to 80 hours)paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. This is capped at $511 a day or $5,110 for a total of 10 days.
- Paid Sick Leave - As an employer with less than 500 employees, you are required to provide 2 weeks (up to 80 hours) paid sick leave at 2/3 of the employee’s pay if the employee is unable to work because of a need to care for an individual subject to quarantine or to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19. This is capped at $200 per day or $2,000 for a total of 10 days
- Child Care Credit Leave – As an employer with less than 500 employees, you are required to provide up to 10 weeks of qualifying child care leave at 2/3 of the employee’s pay if an employee is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus. This is capped at $200 per day or $10,000 for a total of 10 weeks.
- Employers with less than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed or child care is unavailable in cases where the payments would jeopardize the ability of the business to continue. The waiver request is not yet available.
- An employee must have been with the employer for at least 30 calendar days to be eligible for the credits.
- Part-time employees are eligible for the credits based on their regularly scheduled work hours (i.e. you can’t pay a worker for 80 hours if they would normally only work 64 in a 2 week period.)
How do you pay for the required sick/child care leave:
- These payments will be treated just like regular payroll. You will still withhold federal income taxes and the employee’s share of Social Security, Medicare and state unemployment taxes. In your QuickBooks payroll setup, you will need to add items for Paid Sick Leave and Child Care Credit Leave. Please let me know if you need help with this. These payments will need to be separated from your regular payroll payments.
- You will be able to deduct your Paid Sick Leave and Child Care Leave payments from the payroll taxes (both employee and employer paid taxes) you would normally deposit with the IRS.
- If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able to file a request for a payment from the IRS. These forms are not yet available.
- The leave payments will be included on the employee’s W-2 and they will receive credit for any income taxes, social security and Medicare taxes withheld.
A couple of points to note:
- Paid Sick Leave is not applicable if your business is closed due to the mayor’s/governor’s order. It would apply to any employees who are working remotely.
- Paid Sick Leave Credit is not applicable if your employee is self-isolating (for example, they traveled out of state and upon their return, they self-isolated for 14 days). Your employee must have, is seeking a diagnosis for or is being quarantined for coronavirus or is caring for a family member that has, is seeking a diagnosis for, or is being quarantined for coronavirus.
- Child Care Leave may be paid even if your business is closed due to the mayor’s/governor’s order.
- Self-employed individuals and partners will receive an equivalent credit (I’m not sure how this will work. There hasn’t been any guidance released).
- S Corp and C Corp owners will need to pay themselves through payroll in order for the business to be eligible for the credits.
- Employers will receive a 100% reimbursement for payment of these credits.
- These paid sick leave benefits are temporary and last through December 31, 2020 (unless they are extended).
Please let me know if you have any questions about this Act and how it applies to your business. Since this is 100% refundable, it makes sense to take advantage of the credits for yourself and your employees, if the need arises.
I’ll try to keep you updated as more information regarding this topic, small business loans, etc. is released.
Joyce A. Herr, CPA, ATA, ATP
Joyce A. Herr, CPA, LLC
Accounting and Tax Services
P.O. Box 770873
Eagle River, AK 99577
(907) 622-0800 - Anchorage
Fax: (907) 622-8707
Note: The advice in this communication is not intended or written to be used, and cannot be used by you or any other person or entity for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or any applicable state or local tax law or promoting, marketing, or recommending any tax-related matters addressed within to another party. You are not prohibited from sharing this advice with third parties. However, the third parties should seek their own advice based on their particular facts and circumstances from an independent tax advisor.