Through the COVID-19 chaos and daily updates of the guidelines, we know you are receiving an overwhelming amount of information to digest. Cokinos | Young is here to help. We have broken it down to the highlights that employers should be aware of below. If you need any help applying these new COVID-19 related requirements for your business, whether it be related to furloughs, work stoppage orders, leave, tax credits or other critical business decisions, please reach out to our team members, who are following these developments closely.
The DOL has issued its first two sets of guidance for employers and employees regarding some of the details of the paid sick leave and expanded FMLA leave passed into law last week under the FFCRA. The DOL posted on its website the following helpful materials: (1) Model Workplace Poster for FFCRA compliance; (2) FFCRA Fact Sheet for Employers; (3) FFCRA Fact Sheet for Employees; and (4) FFCRA Q&As. DOL indicated that additional guidance may be forthcoming, and is continuing to solicit public feedback as it develops regulations.
The highlights of this DOL guidance that employers should be aware of:
FFCRA Tax Credits
A few more details about the employer tax credits to pay for paid sick leave/FMLA have also been released, with more guidance to come next week:
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.
Prompt Payment for the Cost of Providing Leave
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child-care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
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.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments, and file a request for an accelerated credit for the remaining $2,000.
Equivalent child-care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Small Business Exemption
Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern. The Department of Labor will provide emergency guidance and rulemaking to clearly articulate this standard.
For More Information
For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted next week.