Families First Coronavirus Response Act Tax Updates

Published March 23, 2020

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The Families First Coronavirus Response Act (FFCRA), or H.R. 6201, was signed into law by the President on March 18, 2020. The law requires certain employers to provide paid limited sick leave to individuals staying home due to coronavirus infection, required quarantine or care for an infected family member. The MCM HR Solutions Group has recapped the emergency paid sick leave, emergency family and medical leave, and information for employers facing layoffs, here: https://mcmcpa.com/hr-solutions-group-families-first-coronavirus-response-act/

Below, we will recap the important tax updates enacted by the FFCRA, as well as an announcement regarding the tax filing deadline extension.

Tax credits
In connection with the temporary FMLA and emergency paid sick leave provisions, Division G of the bill includes several tax credits.

Payroll tax credit for required paid sick leave
Effective for wages paid with respect to a period that begins on a date selected by Treasury (within 15 days of enactment) and that ends December 31, 2020. The bill generally would provide an employer a payroll tax credit equal to 100% of the qualified sick leave wages paid by the employer under the Emergency Paid Sick Leave Act, subject to certain limitations. The credit would apply against the 6.2% employer OASDI tax.

The tax credit generally would be available for wages of up to either $511 or $200 for each day an individual is paid qualified sick leave, depending upon the category in which the individual falls for purposes of determining the amount paid for sick leave. The amount of the credit would be increased by so much of the employer’s “qualified health plan expenses” as are properly allocable to the qualified sick leave wages for which the credit is allowed. In addition, the total number of days taken into account in each calendar quarter could not exceed 10 days and would be reduced by the number of days so taken into account in preceding calendar quarters.

The amount of the credit for any calendar quarter generally could not exceed the tax imposed. However, the bill includes refundability provisions for credits that exceed tax liability.

Credit for sick leave for certain self-employed individuals
The bill similarly would allow an eligible self-employed individual a refundable credit against income tax with respect to qualified sick leave equivalent amounts. To qualify, an individual generally must regularly carry on a trade or business within the meaning of Code section 1402 and must have met the criteria that would apply to receive paid leave pursuant to the Emergency Paid Sick Leave Act if the individual were an employee of an employer.

Payroll tax credit for required paid family leave
Effective for wages paid with respect to a period that begins on a date selected by Treasury within 15 days of enactment and that ends December 31, 2020, the bill would provide an employer payroll tax credit for each calendar quarter generally equal to 100% of the qualified family leave wages paid by the employer to comply with the Emergency Family and Medical Leave Expansion Act with respect to such quarter. The credit would apply against the employer portion of 6.2% OASDI tax.

The amount of wages taken into account for the credit for each individual could not exceed $200 for any day for which the individual is paid qualifying family leave wages. In aggregate, a maximum of $10,000 in wages per employee for all calendar quarters would be eligible for the credit.

The amount of the credit for any calendar quarter generally could not exceed the tax imposed. However, the bill includes refundability provisions for credits that exceed tax liability.

As with the qualified sick leave program, under the modified bill, the amount of the credit for required paid family leave would be increased by so much of the employer’s qualified health plan expenses as are properly allocable to the qualified family leave wages for which the credit is allowed.

Credit for family leave for certain self-employed individuals
The bill would allow an eligible self-employed individual a refundable credit against income tax with respect to qualified family leave equivalent amounts. To qualify, an individual must regularly carry on a trade or business within the meaning of Code section 1402 and must have met the criteria that would entitle the individual to receive paid leave pursuant to the Emergency Family and Medical Leave Expansion Act if the individual were an employee of an employer.

Tax Filing Deadline Extension
On March 20, 2020, Treasury Secretary Mnuchin announced a tax filing deadline extension to July 15, 2020. For individuals and corporations, any income tax payment normally due April 15th (including 2019 balance due as well as 2020 1st Quarter Estimated Tax) can be deferred and paid July 15th without interest or penalty.

The MCM Tax Services Team is here to ensure you have the important information you need during this challenging time. Please reach out to your MCM Representative with any questions, or contact Rick Woods, Tax Partner at richard.woods@mcmcpa.com.

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