CCA – COVID 19 – Families First Coronavirus Response Act (FFCRA)
Changes to Paid Sick Leave and Family Leave Credits
On December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA, 2021) was signed into law. The CAA includes the Additional Coronavirus Response and Relief (ACRR), which contains provisions that extend the refundable tax credits associated with mandatory paid sick and family leave under the FFCRA.
Background. Effective April 1, 2020 through Dec. 31, 2020, the Families First Coronavirus Response Act requires certain employers to provide paid leave to workers who are unable to work or telework due to circumstances related to COVID-19. FFCRA offsets the costs of providing Qualified Paid Leave, up to certain amounts, with refundable tax credits against employment taxes for qualified leave wages taken beginning April 1, 2020, and ending December 31, 2020. Additional details are provided in our previous e-mail sent March 26, 2020 as provided below.
The ACR provides three changes:
- Extension of credits for paid sick and family leave. The ACRR extends the refundable tax credits available to employers who provide paid sick and family leave related to the coronavirus (COVID-19) pandemic as enacted in the FFCRA through March 31, 2021. Employers are not mandated to provide paid sick or paid family leave COVID-19 related leave in 2021, however, employers who opt to do so may claim the tax credit through March 31, 2021
- Adjustments to provisions for self-employed individuals. The ACRR similarly extends the credits available to self-employed individuals, and allows them to use their reported wages from tax year 2019 instead of tax year 2020 to compute the credit.
- Technical adjustments to definitions and taxability for paid sick and family leave. Aligns the definitions of qualified wages for paid sick and family leave with the IRC and excludes leave payments from employer Social Security employment taxes.
Effective date. All the above listed provisions are effective as if they were included in the original FFCRA legislation.
If you have any questions regarding the above information or would like to discuss your specific situation, please contact our office.
As an additional note, government employers are not eligible for the tax credits under FFCRA; however, FFCRA wages are not subject to the employer share of Social Security (a tax savings of 6.2%).
Previous Guidance from Us on March 26, 2020
As we continue to monitor changes due to COVID-19, we are providing an update to recent changes that will impact taxpayers, employers and employees. The Families First Coronavirus Response Act (FFCRA) was signed into law on March 18, 2020. Currently, the effective date is April 2, 2020 unless the Secretary of the Treasury accelerates that date. The provisions are temporary and will expire after December 31, 2020.
Content of the law focuses on increased funding for COVID-19 testing, providing free testing, continuing student lunch programs for schools that are closed and provisions for emergency unemployment insurance In addition, there are provisions embedded in the FFCRA that will impact employers, employees and self-employed individuals.
Emergency Paid Sick leave Act (EPSLA)
EPSLA applies to employers with fewer than 500 employees and all governmental employers, regardless of size. The employer is required to provide to each employee paid sick time to the extent that the employee is unable to work (or telework) due to a need for leave because of any one of the following conditions:
- The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis
- The employee is caring for an individual who is subject to an order as described in 1 above or has been advised as described in 2 above.
- The employee is caring for a son or daughter of such employee if the school or place of care has been closed, or the childcare provider of such son or daughter is unavailable due to COVID-19 precautions
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
The obligation of the employer regarding the amount of pay falls into two categories:
- For an employee personally impacted by COVID-19 (this includes leave reasons described in 1, 2 and 3 above).
- The employer must pay an employee his or her regular pay rate for 80 hours over a two-week period
- There is a maximum of $511 per day and $5,110 in total
- For an employee helping someone else impacted by COVID-19 (this includes leave reasons described in 4, 5 and 6 above).
- The employer must pay two-thirds of the regular pay rate.
- There is a maximum of $200 per day and $2,000 in total.
Other items to note include the following:
- Existing sick leave policies – EPSLA takes precedence over all existing sick leave policies. The employer may not require the employee to utilize existing sick leave as a substitute for EPSLA benefits
- Eligibility – It applies to all employees; there is no eligibility period.
- Hours – Full-time employees are entitled to take up to 80 hours. Part-time employee are entitled to leave based on the average number of hours worked in a two-week period. If hours of a part-time employee fluctuate from week to week, the average number of hours must be determined based on hours worked in the prior six months.
Emergency Family and Medical Leave Expansion Act (EFMLEA).
EFMLEA applies to employers with fewer than 500 employees and certain public employers. The employer is required to provide an employee with up to 12 weeks of leave for a “qualifying need related to a public health emergency” and to return the employee to work at the end of the leave. The term “qualifying need related to a public health emergency”, with respect to leave, means the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable due to a public health emergency.
EFMLEA provisions include the following:
- The rate of pay for paid leave is calculated based on two-thirds of the regular pay rate. There is a maximum of $200 per day up to a total of $10,000 per employee plus a pro rata share of the employer’s qualified health plan expenses.
- Under EFMLEA, the first 10 days of the employee’s leave may consist of unpaid leave and an employee may choose to substitute any accrued paid leave.
- The employee must have a minimum period of employment of 30 days and there are no required number of hours worked during the 30-day period in order for an employee to be eligible.
- Small business with fewer than 50 employees may qualify for exemption from the requirement if the requirements would jeopardize the viability of the business as a going concern.
- For employers with fewer than 25 employees, there is an exception to the requirement to return an employee to work at the end of the leave under certain conditions.
- The employer is required to notify employees of rights under EFMLEA
Tax credits are available for covered employers; they may qualify for 100% refundable credits for all qualifying wages paid under the FFCRA. Qualifying wages are those paid to an employee who takes leave under the Act for a qualifying reason, up to the appropriate per diem and aggregate payment caps. In addition, tax credits extend to amounts paid or incurred to maintain health insurance coverage.
Comparable Credits for Self-employed
The Act provides for similar refundable credits against self-employment tax. It covers 100% of the self-employed individual’s sick-leave equivalent and two thirds of the amount if they are taking care of a sick family member. A cap of $511 per day to care for the self-employed individual or $200 per day to care for family member or child following a school closing, paid under EPSLA Self-employed individuals can also receive a credit for as many as 50 days multiplied by the lesser of $200 or two thirds of their average self-employment income paid under EMFLEA.
The Internal Revenue Service has additional information on their website at https://www.irs.gov/coronavirus for information relating to Coronavirus tax relief. The Department of Labor also has information on their website regarding the workplace at the link https://www.dol.gov/agencies/whd/pandemic
We are continuing to monitor changes as they occur and will be providing updates as we go along. Please contact our office at 816-776-3584 if you have questions or concerns.
May we all stay safe in this volatile time and get through this together.