On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (FFCRA) into law. Below is a brief summary of the tax-related provisions, which are effective April 2, 2020, and expire December 31, 2020.
Paid Sick Leave
- Small to mid-size employers (1 to 499 employees) are required to provide:
- Full-time employees are eligible for up to 80 hours of paid sick leave.
- Part-time employees are eligible for the average amount of hours the employee would work over a
- Paid sick leave covers days when the employee is unable to work (or telework) due to any of the following:
- An employee is caring for a child whose school/day care is closed for reasons related to COVID-19;
- The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis; or
- An employee (or a family member whom the employee cares for) is self-quarantined as advised by a health
care provider or Federal/state or local quarantine order related to COVID-19.
- These wages are exempt from the employer’s portion of Social Security tax and an additional payroll tax credit
is allowed for the amount of Medicare tax paid on those wages.
Payroll Tax Credits
The paid sick time payroll tax credit can be claimed on a quarterly basis, equal to 100 percent of the amount of sick leave wages paid. The credit is limited to up to $511 per day ($5,110 total) if an employee is taking time off to care for themselves; or up to $200 per day ($2,000 total) if the sick leave is to care for an individual who is quarantined or showing symptoms of COVID-19 or a minor child whose school/daycare is closed. The credit is refundable if it exceeds the amount the employer owes in payroll tax.
For employers who pay family leave wages under the FFCRA, a separate payroll tax provision allows a 100 percent credit against the employer’s share of the payroll tax for each employee, limited to $200 per day, or a total of $10,000 per employee. The credit is refundable if it exceeds the amount the employer owes in payroll tax.
Self-employed workers, including independent contractors also can claim a credit against their regular income taxes related to sick or family leave. The credit covers 100 percent of self-employed individuals’ daily self-employment income or 67 percent if an individual is taking care of a minor child whose school/daycare is closed. The per-day amount is limited to the lesser of $511 per day if for themselves, $200 per day for a minor child or their average daily self-employment income