Over the weekend, the U.S. Department of Treasury, Internal Revenue Service (IRS), and Department of Labor (DOL) announced a plan for COVID-19 relief for workers and small businesses in the form of two new refundable payroll tax credits. This option would be available to small and midsize employers. The plan has been designed to immediately and fully reimburse small businesses dollar-for-dollar the cost of providing COVID-19 related leave for their employees.
COVID-19 Relief for Workers and Small Businesses
This COVID-19 relief for workers and small businesses was provided under the Families First Coronavirus Response Act. The Act was signed by President Trump on March 18, 2020. The Act will help combat the impact of COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave. This leave would apply to both the individual employee’s health needs as well as the need to care for family members. The legislation will enable employers to keep their workers on their payrolls, while ensuring that workers are not forced to choose between their pay checks and public health measures needed to combat the virus.
Details on Relief Options
The Act will provide COVID-19 relief for workers and small businesses in a variety of ways. The Act ensures paid sick leave for workers, complete healthcare coverage, fast funds, small business protection, and easing of compliance. Employees will receive up to 80 hours of paid sick leave and expanded paid childcare leave, for COVID-19 related illness and circumstances. Additionally, employers will receive 100% reimbursement for paid leave. This would include health insurance costs.
Reimbursement is designed to 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 be diligent to send that refund as quickly as possible. With respect to compliance, the Act is recognizing good faith efforts and a 30-day non-enforcement period is being instituted.
Paid Sick Leave and Childcare
The Act provides that employees of eligible employers can receive up to 80 hours, or two weeks, of paid sick leave at 100% of the employee’s pay. This would apply to employees that are quarantined, experiencing COVID-19 symptoms, and seeking medical diagnosis. Additionally, it would apply in cases where an employee must care for a family member or respond to the closure of a child’s school.
If an employee is experiencing substantially similar conditions, as specified by the U.S. Department of Health and Human Services, they may receive two weeks sick leave at 2/3 of the employee’s pay. In addition to individual employee sick leave credits, childcare leave has been provided for. An employee that is unable to work because of a need to care for a child whose school or childcare facility is closed due to COVID-19 may be eligible for a refundable child leave credit. This credit is equal to 2/3 of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the childcare credit.
What You Need to Know
The Act provided paid sick leave and expanded family and medical leave for COVID-19 related reasons and created refundable paid sick leave and childcare leave credits for eligible employers. An eligible employer is a business and tax-exempt organization with fewer than 500 employees. Eligible employers will be able to claim these credits for COVID-19 relief for workers and small businesses between the effective date of the Act (April 2, 2020) and December 31, 2020.
For more information about credits, visit Coronavirus Tax Relief on irs.gov.
Read more about the announcement here.
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