This evening, the Treasury Department and the Department of Labor jointly announced the outlines of guidance, to be released next week, on the new tax credits available to small businesses to cover the costs of the paid sick and family leave requirements that were just signed into law through the enactment of the Families First Coronavirus Response Act. Businesses that pay sick or childcare leave under the new law can keep the same amount of payroll taxes as the leave they paid, instead of sending that amount to the IRS.
Companies can get up to $511 per day for a total of 10 days for each employee under the paid sick leave credit. For the family and medical leave credit, they can get up to $200 per day for up to 10 days for employees who take such time away from their job. Eligible employers can also receive a refundable childcare leave credit up to $200 per day for as long as 10 weeks.
From the joint agency announcement:
Key Takeaways
Paid Sick Leave for Workers
For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees’ children’s schools are closed or child care providers are unavailable.
Complete Coverage
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.
Fast Funds
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.
Small Business Protection
Employers with fewer 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 viability of the business is threatened.
Easing Compliance
Requirements subject to 30-day non-enforcement period for good faith compliance efforts.
*To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.*
Examples
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
