Applying COVID-19 Tax Provisions to Maximize Immediate Benefits for Employers 

April, 2020 - Nicole Dressler, Leigh Griffith

In what seems a long time past, yet was actually only three weeks ago, Congress enacted theFamilies First Coronavirus Response Act (FFCRA) that includes Emergency Family and Medical Expansion Act and The Emergency Family and Medical Leave Expansion Act. The legislation, largely administered by the Department of Labor, provides payroll tax credits to employers in order to ease the burden of new provisions requiring certain paid leave for employees due to COVID-19. However, recognizing that funding paid employee leave is only the tip of the iceberg for businesses fully or partially suspended across country due to COVID-19-related governmental orders, Congress passed the broad-sweeping stimulus bill Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on Friday, March 27. The 100% payroll tax credit for qualified leave and 50% payroll tax credit for employee retention for small employers (fewer than 500 employees), as well as payroll tax deferral for businesses (regardless of size) will assist businesses in weathering the COVID-19 storm. Discussed below, the IRS recently clarified a question concerning many employers, whether a company may participate in the Paycheck Protection Loan Program (PPP) and still receive the deferral benefit.

Interpretations of this legislation are rapidly evolving as the IRS, the Small Business Administration and other agencies release piecemeal guidance almost on a daily basis. Subsequent guidance may supplement or contradict some of the information in this article. Still, business owners need to know how to take advantage of these tax changes now. The following discussion provides a summary of the important tax provisions affecting businesses and insights into applying these provisions to maximize immediate benefits for employers.

The Families First Coronavirus Response Act

One-hundred percent tax credit for qualified leave broadly defined wagesBeginning April 1, 2020 and running through December 31, 2020, the FFCRA requires businesses with less than 500 employees to provide ten days of paid leave for their ill employees due to COVID-19 or to care for a family member ill with COVID-19 (“qualified sick leave”). The Emergency Family and Medical Expansion Leave Act provides required paid family leave for an employee unable to work (or telework) due to the need to care for the employee’s child(ren) in the case of school and childcare provider closures due to public health emergency (“qualified family leave”).

For information on the leave requirement and other provisions of FFCRA, please see these Waller blog posts:

 

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