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Employer Payroll Tax Credits Under the Families First Coronavirus Response Act

The Families First Coronavirus Response Act (the “Act”) provides for paid sick leave and expands certain provisions of the family and medical leave act (“FMLA”) to provide support for employees that are absent from work due to the impact of COVID-19.  (For a summary of the Act, click here.)

The Act partially offsets these increased employer costs with refundable employer tax credits.  The eligibility of the tax credits depends on whether the qualified wages are paid under the Emergency Paid Sick Leave Act or the Emergency Family and Medical Leave Act, both subsets of the Act itself.

Emergency Paid Sick Leave Act Credits

Employers are entitled to an employment tax credit for qualified sick leave wages paid pursuant to the Emergency Paid Sick Leave Act.  The credit is capped at $511 per day for up to ten days per calendar quarter for employees that have COVID-19 or are basically quarantined or self-quarantined.  The credit is limited to $200 per day for up to ten days per calendar quarter if the leave is due to the employee’s need to care for a child or other family member.

Emergency Family and Medical Leave Act Credits

Employers are also entitled to an employment tax credit for qualified family leave wages in accordance with the Emergency Family and Medical Leave Act.  This credit is limited to qualified family leave wages of $200 per day (and $10,000 aggregate) per employee.

Self-Employed Individuals

Additionally, the Act expands the eligibility of these credits to eligible self-employed individuals.  To qualify, such self-employed individuals (i) must carry on a trade or business as defined under Section 1402 of the Internal Revenue Code and (ii) would have been entitled to paid leave if he or she were an employee.

Timing of Eligible Paid Wages

The tax credits will be available for eligible wages paid beginning with a date 15 days after the Act’s enactment (presumably meaning April 2) and ending December 31, 2020.  The credits will apply against the employer’s portion of social security taxes and the Railroad Retirement Act excise taxes.

Record-Keeping by Employers

The Act provides that the Secretary of the Treasury shall prescribe regulations to provide guidance as to “minimize” compliance and record-keeping burdens.  This guidance remains to be seen, but employers presumably will have to maintain some record of documentation to substantiate the payment of qualified wages.