Federal Government Guidance on COVID-19 Related Paid Leave and Tax Credits

By SBE Council at 25 March, 2020, 12:29 pm

DOL Publishes Guidance Explaining Paid Sick Leave and Expanded Family and Medical Leave Under the Families First Coronavirus Response Act (HERE)

IRS/DOL Provides Guidance on Tax Credits Related to Paid Leave

By Karen Kerrigan-

I’ve reviewed the guidance from the Department of Labor (DOL) and Internal Revenue Service (IRS) related to the temporary paid leave mandate signed into law as part of the “phase II” Coronavirus response legislation.  The text of the guidance below is taken directly from the guidance documents. Please use the links to review the FULL guidance as I have highlighted items of importance.

DOL Guidance on Paid Leave and Expanded Family and Medical Leave Under Recently Enacted Coronavirus Legislation   

The DOL’s Wage and Hour Division announced its first round of published guidance to provide information to employees and employers about the paid leave mandate that was passed as part of the Families First Coronavirus Response Act when it takes effect on April 1, 2020. These provisions will apply from the effective date through December 31, 2020.

In the legislation, certain employers with under 500 employees are required to provide employees expanded family and medical leave for reasons related to COVID-19. It affects small businesses who now have to implement this change.

Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.

This first round of implementation guidance addresses critical questions such as:

● How does an employer count its number of employees to determine coverage?

● How can small businesses obtain an exemption?

● How does an employer count hours for part-time employees?

● How does an employer calculate wages employees are entitled to under the FFCRA?

The initial guidance is available in three-parts:

Fact Sheet for Employees

Fact Sheet for Employers

Questions and Answers

Key Question and Answer from the Q&A link above:

Q: If providing child care-related paid sick leave and expanded family and medical leave at my business with fewer than 50 employees would jeopardize the viability of my business as a going concern, how do I take advantage of the small business exemption?

A: To elect this small business exemption, you should document why your business with fewer than 50 employees meets the criteria set forth by the Department, which will be addressed in more detail in forthcoming regulations.

You should not send any materials to the Department of Labor when seeking a small business exemption for paid sick leave and expanded family and medical leave. (see Non-enforcement Period text.)

Tax Credits Guidance from IRS and DOL

Covered employers qualify for dollar-for-dollar reimbursement through tax credits for all qualifying wages paid under the FFCRA. Qualifying wages are those paid to an employee who takes leave under the Act for a qualifying reason, up to the appropriate per diem and aggregate payment caps. Applicable tax credits also extend to amounts paid or incurred to maintain health insurance coverage. You can learn more about the tax credits and how they will work here.

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.

● An immediate dollar-for-dollar tax offset against payroll taxes will be provided

● Where a refund is owed, the IRS will send the refund as quickly as possible.

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 (scheduled for the week of March 23).

Non-Enforcement Period

Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.

SBE Council will continue to work with DOL staff to alleviate any potential burdens on small businesses. We will keep you up-to-date on our progress and advocacy efforts.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.