Coronavirus Relief Law Includes Tax Breaks for Paid Sick Leave, Family Leave

A package of coronavirus relief legislation that was signed into law Wednesday includes provisions for paid sick leave, family leave and medical leave, along with tax credits to help employers and the self-employed pay for them. 

The Families First Coronavirus Response Act also includes provisions for free coronavirus testing, enhanced unemployment insurance, expanded food security initiatives and increased Medicaid funding from the federal government. 

The law requires employers with under 500 employees to give paid sick leave and paid family and medical leave to eligible employees who have worked at least 30 days before the impact of novel coronavirus. Businesses need to provide up to 10 business days (or two weeks) of paid sick leave and as many as 10 weeks of protected paid family and medical leave for eligible employees impacted by the disease. 

Qualifying employers are required under the law to permit two weeks of paid sick leave to employees affected by coronavirus, for a number of hours tied to an employee’s full- or part-time status. The emergency sick leave is limited to $511 per day, or $5,110 in total, for employees who are in quarantine or looking to get a diagnosis for coronavirus. Employees can also get $200 per day, or a total of $2,000, to care for a quarantined family member or for childcare. 

The bill also expands family and medical leave by giving workers the right to take up to 12 weeks of job-protected leave if the employee or a family member is in quarantine or if their child’s school or childcare location is closed due to coronavirus. Employers are required to provide at least two-third of the employee’s usual pay up to $200 per day, or a total of $10,000. Those provisions can apply after employees take the two weeks of emergency paid sick leave. 

To help employers pay for these requirements, the law provides a refundable payroll tax credit for 100 percent of qualified paid sick leave wages paid by an employer, which is permitted against the employer portion of Social Security taxes. There’s also a refundable tax credit for 100 percent of qualified family leave wages paid by an employer, which is allowed against the employer portion of Social Security taxes. 

For the self-employed, the law provides a refundable tax credit for 100 percent of qualified sick leave wages for individuals in quarantine for coronavirus, or for 67 percent of qualified wages when caring for a quarantined family member or child whose school or place of care was closed because of coronavirus. This tax credit is allowed against income taxes. There’s also a refundable tax credit for family leave for self-employed individuals equal to 100 percent of qualified family leave wages. 

Aprio, a Top 100 Firm, recommended in an email to clients Thursday that they maintain detailed documentation of the time spent by employees for virus testing, medical care, school closures and relevant information of affected family members, while also protecting employee privacy. The firm suggested that employers develop an internal mechanism on an intranet or a separate email or time-keeping system to track the time employees are absent for reasons related to coronavirus, including testing and paid sick, family and medical leave.

(Source:  AccoountingToday – IRS Watch -March 25, 2020)