Employee Paid Sick Leave During the Corona Pandemic: What it means for America’s small businesses

March 26, 2020

Editor's Note: David Morse is the tax policy director at the Coalition for a Prosperous America Education Fund.

The President and Congress are currently finalizing the CARES Act to address the major economic disruptions caused by the coronavirus. However, small employers around the country are wondering what the earlier new “Families First Coronavirus Response Act” (FFCRA) will mean for them. The legislation signed on March 18 is still quite new, and some reasonable questions are: Who does it apply to? Who is paying? And, how much are they paying?

[David Morse | March 26, 2020 | The Medium]

Let’s start with the basics.

The FFCRA requires employers to give full-time and part-time employees paid sick leave in the case of coronavirus-related illness. The FFCRA applies to private entities or individuals with under 500 employees. However, businesses with fewer than 50 employees can request an exemption if the legislation’s requirements jeopardize their overall viability. Full details can be found on the Department of Labor’s website.

Under the legislation, small and mid-size employers are enabled to pay for these expenses through new, refundable payroll tax credits. Eligible employers may receive a refundable sick leave credit for the employee at their regular rate of pay. This would be up to $511 per day, and $5,110 in the aggregate, for a total of 10 days. And for employees who are caring for someone with coronavirus, or their own child due to school or childcare closings, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay. That would be up to $200 per day and $2,000 in the aggregate, for up to 10 days.

Additionally, child-care related employee absences give eligible employers a longer refundable childcare leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day, or $10,000 in total. Up to 10 weeks of qualifying leave can be counted toward the childcare leave credit.

Additional tax credit is determined based on the costs of maintaining health insurance coverage for the eligible employee during the leave period.

The amount paid by employers for these qualifying expenses can be credited against payroll taxes they would normally owe in their IRS quarterly payroll filings. This includes withheld federal income taxes, the employee’s share of social security and Medicare taxes, and the employer’s share of social security and Medicare taxes with respect to all employees.

If there are insufficient payroll taxes to cover the cost of qualified sick leave or childcare leave, employers can file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The IRS will have released the details of this expedited procedure during the week of March 30.

As of this writing, more congressional assistance is expected for small businesses. However, the situation remains fluid and it’s unclear what the final legislation will look like. The Coalition for a Prosperous America will keep members informed as more details emerge.

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