14 Oct COVID-Related Dollar-For-Dollar Tax Credit
We at Reconciled Solutions want to give you an update on the Dollar- For-Dollar Tax Credit that is available to employers who had an employee on leave due to COVID-19. This is a valuable tax credit that you’ll want to be aware of! This applies to you if you have provided paid leave to an employee (including employee owners) for leave taken related to COVID-19.
Businesses and tax-exempt organizations with fewer than 500 employees are required to provide Paid Sick Leave and Paid Family and Medical Leave (FMLA) under the Families First Coronavirus Response Act (FFCRA). Employers may claim a dollar-for-dollar tax credit against payroll tax deposits for wages paid as either Paid Sick Leave or Paid FMLA under the provisions of the FFCRA.
Who is Eligible for Paid Sick Leave?
- Employee is subject to federal, state or local quarantine (this does not cover businesses required to close during the pandemic—only required quarantine).
- Employee was advised to quarantine by a healthcare professional.
- Employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.
- Employee is taking care of an individual subject to federal, state or local quarantine or has been advised to self-quarantine.
- Employee has a son or daughter to care for and the childcare center is closed or unavailable due to COVID-19 precautions.
- Employee is experiencing substantially similar condition specified by the Secretary of Health and Human Services.
How Much Paid Sick Leave are Employees Eligible for?
- Full-time employees can receive up to 80 hours of paid sick leave.
- Part-time employees can receive sick leave for the standard hours worked or the average of hours worked over the course of six months. If neither are applicable, the number of hours expected at time of hire should be applied.
- Employees can receive up to $511 per day ($5,110 aggregate total) if they meet paid sick leave eligibility requirements 1, 2, and 3 (from above).
- Employees can receive up to $200 per day ($2,000 aggregate total) if they meet paid sick leave eligibility requirements for items 4, 5 and 6 (from above).
Who is Eligible for Paid FMLA?
- Employees who have been employed for at least 30 calendar days (some exclusions may apply).
- Employees who must care for children under the age of 18 in the event of school and place-of-care closures or if care provider is unavailable due to a public health emergency with respect to COVID-19.
How much Paid FMLA are Employees Eligible for?
- First 10 days of employee leave is unpaid.
- Employees paid no less than 2/3 of normal pay rate and at the number of hours an employee would work for up to 10 weeks. Note: Two weeks of paid sick leave must be taken first before FMLA benefits kick in (this provides a total of 12 weeks leave).
- Per employee cap of $200 per day up to $10,000 in the aggregate.
- Employees entitled to reinstatement of same or similar position after leave is over.
The provisions of the FFCRA became effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020. Keep this dollar-for-dollar tax credit in mind when it comes time to prepare your 2020 taxes!