As part of our effort to keep everyone informed, we want to share some of the details of the Coronavirus payroll tax credit process so you can apply them in your business or share them with your employers.
As always, please heed the advice of the CDC and other health professionals as you go through each day. We look forward to all of us serving all of you for a long time!
On 18 March, the President signed the Families First Coronavirus Response Act (the Act). The Act provides for expanded paid sick and family leave. Small and midsized employers, those with fewer than 500 employees, will recover the cost of Coronavirus leave through a direct payroll tax credit.
On 20 March the US Treasury Department, IRS and the Department of Labor explained the process for claiming the payroll tax credit. Simply identify the applicable wages and health insurance costs paid to or for the affected employees and do not send those funds to IRS in payroll tax deposits. Instead, use the cash to pay the employees. The taxes that fall under tis credit program are withheld federal income tax, Social Security, and Medicare taxes. Social Security and Medicare taxes include both employee-paid and employer-paid taxes.
The Paid Sick Leave Credit
The amount of the credit is up to $511 per day for 100% of wages paid to employees on Corona virus-related leave or $200 per day (2/3 of normal wage) for employees caring for someone with Coronavirus or for children whose schools or care facilities closed due to the virus. The upper limit is 10 days or 80 hours of wages, $5,110 in the case of employees themselves or $2.000 for care-giving employees.
The credit for paid sick leave applies to an employee who is unable to work because of Coronavirus quarantine or self-quarantine or who has symptoms and is seeking a medical diagnosis, or in the case of child care, due to the closures already mentioned.
The Child Care Leave Credit
If an employee provides care for a child as described above, the $200per day credit will apply to an additional 10 weeks, or $10,000 in total,
Small Business Exception
Businesses with fewer than 50 employees will be exempt from the requirement that leave be granted to care-giving employees if the employer would jeopardize the business by granting leave. The news release stated that simple and clear criteria will be forthcoming to help with this particular decision.
Non-Enforcement Period
For 30 days, the Department of Labor will focus on helping employers comply with the Act and will not pursue enforcement action as long as employers act reasonably and in good faith.
Example
This example shows how straightforward the process is for claiming the credits, If an employer would normally pay a quarterly total of $10,500 in federal payroll taxes and in that quarter paid Corona-affected employees $3,500, the required payroll tax deposit total would be $7.000.
