FAQs: Families First Coronavirus Response Act Provides Tax Credits in Limited Circumstances for Paid Sick and Family Leave

Alerts / March 23, 2020

On March 18, 2020, the Senate passed and the president signed H.R. 6201, the Families First Coronavirus Response Act (the Act). In addition to providing free diagnosis testing for COVID-19 and strengthening unemployment benefit programs and certain food assistance programs, the Act expands paid leave in limited situations and includes a new quarterly payroll tax credit intended to fund the mandated paid leave obligation.

Q: Who is required to provide paid leave under the Act and in what amounts?

A: Generally, only an employer with fewer than 500 employees is a “covered employer” under the Act and will be required to provide two weeks of employee emergency paid sick leave and 10 weeks of paid family leave. However, all public agencies that are subject to the Fair Labor Standards Act are covered employers, regardless of their number of employees. See here for a more detailed discussion of these issues. Sick leave for employee self-care (due to being quarantined or symptomatic and awaiting diagnosis) is equal to 100 percent of regular pay, up to a maximum of $511 per day. Sick leave provided to an employee caring for others, including children due to school closures, is equal to two-thirds of regular pay, up to a maximum of $200 per day. Family leave, also equal to two-thirds of regular pay, up to a maximum of $200 per day, is limited to employees who are “unable to work (or telework) due to a need for leave to care for a son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency” related to COVID-19. Employers with 500 or more employees are not “covered employers” under the Act and are not required by law to provide such sick or family leave.

Q: May employers receive payroll tax credits for sick leave and family leave not payable pursuant to the Act?

A: No. Tax credits specified in the Act are intended to offset the cost of providing the mandated paid leave, and the payroll tax credit therefore is available only on mandated wage amounts an employer pays pursuant to the Act. Therefore, an employer with 500 or more employees that is not required to pay qualified sick leave wages under the Act is also not entitled to claim the payroll tax credit on sick pay or family leave wages, regardless of whether the wages relate to COVID-19. Further, the credit is not available for leave paid by government employers.

Q: Are the tax credits available to self-employed individuals?

A: Yes. A self-employed individual who would qualify for paid sick leave or paid family leave under the Act if the individual were an employee is eligible for the equivalent amount of credit against self-employment tax.

Q: Can employers expedite credits or receive immediate tax refunds for qualifying leave paid?

A: Yes. Under forthcoming IRS guidance, eligible employers may forego depositing payroll taxes, including federal income tax withholding and both the employer’s and employees’ shares of Social Security and Medicare taxes, equal to the amount of qualifying leave paid. Employers with insufficient payroll taxes to cover the amount of the qualified leave will be able to request accelerated payment from the IRS; such requests are expected to be processed in two weeks or less. Further details of these procedures will be announced in the coming days.

Authorship Credit: Jeffrey H. Paravano, Michelle M. Hervey and John R. Lehrer II

For more information on the Act, please see the alert, “President Trump Signs the Families First Coronavirus Response Act Into Law.”

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