Families First Coronavirus Response Act FAQ
Utilizing the FFCRA: Answers for Employers
The Families First Coronavirus Response Act (FFCRA), which was signed into law on March 18, 2020, offers small and midsize employers refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing COVID-19-related paid sick and family leave wages to their employees.
What businesses are eligible for relief under FFCRA?
Businesses, including nonprofit employers, with fewer than 500 employees. Full-time and part-time employees are counted. Self-employed individuals also can qualify.
What paid leave qualifies for relief?
The FFCRA requires employers to provide paid leave to workers at 100% of the employee’s pay for up to 80 hours of paid sick time when they are unable to work or telework due to:
Being subject to a government quarantine or isolation order related to COVID-19.
Being advised by a physician to self-quarantine due to COVID-19 concerns.
Experiencing symptoms of COVID-19 and seeking a medical diagnosis.
The FFCRA requires employers to provide paid leave to workers at two-thirds of the employee’s pay for up to 80 hours of paid sick time when they are unable to work or telework due to:
Caring for someone subject to a government quarantine or isolation order related to COVID-19.
Caring for someone advised by a physician to self-quarantine due to COVID-19 concerns.
Caring for a child whose school or childcare facility has been closed due to COVID-19 precautions.
How is the Paid Sick Leave Credit calculated?
Employers paying 100% of the employee’s pay receive a credit at the employee’s regular rate of pay up to $511 per day or $5,110 in the aggregate for a total of 10 days.Employers paying two-thirds of the employee’s pay receive a credit at two-thirds of the employee’s regular rate of pay up to $200 per day or $2,000 in the aggregate for a total of 10 days.
Is the reimbursement for paid leave for only 10 days in all situations?
No, there is a similar credit for childcare leave that is calculated at two-thirds of the employee’s regular pay rate capped at $200 per day but that can be continued for up to 10 weeks for an aggregate of $10,000.
Does the employer have to withhold Social Security and Medicare tax and match it on qualified sick leave or family leave wages paid?
The business does not owe the employer’s share of Social Security tax, but it will owe the employer’s share of Medicare tax. However, that also qualifies for reimbursement as part of the credit. The employee’s share of Social Security and Medicare tax must still be withheld.
When must employers begin to provide sick pay and family leave benefits?
The FFCRA requirements are effective for paid time off between April 1, 2020, and Dec. 31, 2020.
Are any businesses exempted from the rules?
Employers with fewer than 50 employees can be exempted if the employee’s leave is to care for their child whose school or daycare is closed, but only if adhering to the FFCRA requirements would jeopardize business viability.
Are any employees excluded from the rules?
Health-care providers and emergency responders are excluded.
How are employers reimbursed for the sick pay coverage?
Employers can retain funds that they would otherwise pay to the IRS in payroll taxes. If there are not sufficient payroll taxes to cover the cost of the sick and family leave paid, employers can request an expedited advance from the IRS by submitting a claim form.
Are the payroll taxes used to reimburse the employer only the employer portion of the tax deposit?
No, taxes that could be held back from deposit to cover the cost of paid leave include federal income tax, Social Security and Medicare tax withheld from employees, and the matching employer share of Social Security and Medicare tax.
How will employees know about these new rules?
A poster must be conspicuously posted, or it may be distributed online, through email, or directly mailed to employees.
Do employers have to maintain any special documentation to prove eligibility for these tax credits?
Yes, each employee’s leave must be substantiated by receipt of a written request from the employee that states the employee is unable to work, including by means of telework, and the reason the employee is requesting leave.
Are businesses allowed to claim the FFCRA credit and the Employee Retention Credit established by the CARES Act?
Yes, but not for the same wage payments.
Are businesses who have received PPP forgivable loans also allowed to claim the FFCRA credit?
Yes, but qualified leave wages are not eligible as payroll costs for the purpose of receiving PPP loan forgiveness.As you can imagine, any issue that deals with labor and tax laws and regulations is very complicated. The IRS, for instance, released 67 FAQs on the COVID-19-related tax credits for required paid leave provided by small and midsize businesses. As always, we recommend you consult your CPA or tax preparer for more information.