REFUNDABLE PAYROLL TAX CREDITS
PROGRAM FOR SMALL AND MIDSIZE BUSINESSES
By: Michael R. Torres, CPA (PAAST, P.L.)
The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor announced that small and midsize employers could begin to take advantage of two new refundable payroll tax credits, provided under the Families First Coronavirus Response Act signed on March 18, 2020. These credits will reimburse businesses with fewer than 500 employees for the cost of providing Coronavirus-related leave to their employees.
Here are some key takeaways on the Response Act:
Paid Sick Leave for Workers:
Eligible employers may receive a refundable sick leave credit for sick leave of COVID-19 related reasons at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days (80 hours).
Eligible employers may receive a refundable child care credit equal to two-thirds of the employee's regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit.
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.
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.
If you'd like to download some additional resources, we've provided some links below.