It has been hard to escape the impact of the Coronavirus and the effect on the markets, the economy, and to our friends and family. I met with Rolando Garcia, JD/CPA at Doeren Mayhew to discuss the Families First Coronavirus Response Act that was just signed into law. The following discussion shares what has been passed and some of our thoughts on how it may impact you, your family, your business and your community.
Families First Coronavirus Response Act is Now Law
On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act, after overwhelming approval by the Senate, to help aid Americans impacted by the Coronavirus (COVID-19) sweeping the United States. The act increases funding for testing, extends paid sick leave to employees, and offers employer tax credits.
Below is an outline of the most impactful provisions Rolando and I wanted to highlight:
Employers with fewer than 500 employees are required to provide paid sick leave to employees, both full-time and part-time, who are forced to stay home due to quarantining, or caring for a sick/quarantined family member or child if the school or place of care is closed.
Outlined below are qualifying guidelines related to paid sick leave and family leave:
- The employee is subject to a federal, state or local quarantine or isolation order has been advised by a health care provider to self-quarantine or is seeking a medical diagnosis due to experiencing COVID-19 symptoms.
- The employee is caring for an individual subject to a federal, state or local quarantine or isolation order has been advised by a health care provider to self-quarantine or is seeking a medical diagnosis due to experiencing COVID-19 symptoms.
- The employee is required to stay home to care for a child if the child’s school or place of primary care has been closed due to COVID-19.
The total hours of paid sick leave are limited to 10 days of wages. It is at the employer’s discretion if they require an employee to use any existing paid sick time or paid time off before enacting this additional leave time.
Extended Paid Leave
The law creates an emergency extended paid leave program to directly respond to COVID-19. Private-sector employers with fewer than 500 workers and government entities would have to provide as many as 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA) for employees who:
- Comply with a requirement or recommendation to quarantine because of exposure to or symptoms of COVID-19.
- Provide care to a family member who is complying with such a requirement or recommendation.
- Provide care for a child younger than 18 whose school or daycare has closed because of COVID-19.
The FMLA has also been amended to apply to companies of all sizes, requiring those businesses with less than 50 employees previously not subject to the act, to now provide job-protected leave if it is related to the COVID-19 virus. However, there is a provision that may allow the Secretary of Labor to exempt some businesses with fewer than 50 employees from the requirements.
The first two weeks of leave can be unpaid, though a worker
could choose to use accrued vacation days, personal leave or other available
paid leave for unpaid time off, but an employer may not require an employee to
do so. Following the first two-week period, workers are required to receive a
benefit from their employer that is equal to at least two-thirds of their
normal pay rate.
Employer Tax Credits
Employers are eligible for tax credits to cover wages paid to employees while they are taking time off under the law’s sick leave and family leave provisions through the end of 2020. The tax credits equal 100% of qualified wages paid, subject to the caps noted below. However, this may cause problems with cash-strapped companies as tax credits aren’t cash in the bank.
- The family leave credit for each employee would be for wages of as much as $200 per day while the employee is receiving paid leave or an aggregate of $10,000.
- The sick leave credit for each employee would be for wages of as much as $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child if their school is closed. In either case, the credit is limited to 10 days of leave per qualifying employee.
Wages paid due to sick leave and family leave provisions are not subject to the employer’s share of the Federal Insurance Contributions Act (FICA) tax (i.e., these payments are not considered to be wages for this purpose).
The credit is refundable if it exceeds the amount the employer owes in FICA tax on a quarterly payroll tax filing. The U.S. Department of the Treasury and Internal Revenue Service are in the process of preparing guidance for how to claim this refund as quickly as possible. Any credit claimed on a quarterly or refundable filing will increase the taxable income of the employer.
Self-Employed Tax Credit
The law provides a similar refundable credit against self-employment tax. It covers 100% of self-employed individuals’ sick-leave equivalent of 67% to take care of a sick family member or child if school was closed.
The sick-leave equivalent amount would be the lesser of the average daily self-employment income, or $511 per day if caring for themselves or $200 if caring for a family member for 10 days. Self-employed individuals can receive a family leave credit for as many as 50 days for the lesser of $200 or their average daily self-employment income.
Congress is already far along in considering a third, and significantly larger, stimulus and relief bill, that may provide amendments to the Families First Coronavirus Response Act. Stay tuned as Doeren Mayhew will continue to keep you up-to-date as things progress amongst the COVID-19 outbreak via Doeren Mayhew’s Coronavirus Resource Center. If you have any questions regarding this new law’s impact on your business, please feel free to contact your financial advisor at Avidian Wealth or a member of the CPA and advisory team at Doeren Mayhew.
This is for informational purposes. The information was prepared by Avidian Wealth Management and Doeren Mayhew CPAs and Advisors this information has not been independently verified by a third party. Avidian Wealth Management LLC is not an affiliate of Doeren Mayhew CPAs and Advisors, their offerings, nor their management team.
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