Federal payroll tax credits for sick & family leave FAQs
With PPP loan money exhausted, many businesses have questions about additional federal payroll tax credits that can help in situations where employees need time off to arrange childcare for school closures, or care for someone ill with COVID-19, or to quarantine themselves.
Families First Coronavirus Response Act (FFCRA) tax credits, which cover coronavirus-related employee leave, can cover many of these costs through the end of the year. Please click here for more information on what FFCRA covers and how to claim the credits. You’ll also see why we recommend companies review whether any PPP funds to cover payroll expenses that may qualify for FFCRA tax credits – thus freeing up more PPP dollars.
Coronavirus-related leave that qualifies for FFCRA tax credits includes missing work because:
- Employee is quarantined and/or experiencing COVID-19 symptoms.
- Employee has to care for someone who is quarantined or has to look after a child whose school or care provider is unavailable due to COVID-19.
Keep in mind that calculating credits owed under FFCRA or ensuring PPP loan compliance can be complicated, and we suggest contacting your accountant to ensure you follow all the guidelines. To learn more about engaging us for PPP Loan Forgiveness Support Services, please contact us HERE. If you have questions about FFCRA, please contact us HERE.
The following are some questions clients have asked regarding FFCRA:*
Q: What is my regular rate of pay for purposes of the FFCRA?
A: It is the average of your regular rate for up to six months before the date on which you take leave. If you have not worked for your current employer for six months, use the average of your regular rate of pay for each week you have worked for your current employer.
If you receive commissions, tips, or piece rates, these amounts get added to the above calculation to the same extent they are included in the calculation of the regular rate under the FLSA.
You can also compute this amount for each employee by adding all compensation that is part of the regular rate over the above period and divide that sum by all hours worked in the same period.
Q: Can I apply FFCRA credits to pay for employees who are teleworking?
A: No. Telework is work for which normal wages must be paid and not compensated under the paid leave provisions of the FFCRA.
Q: What does it mean to be unable to work, including telework, for coronavirus-related reasons?
A: Your employer has work for you, but one of the COVID-19 qualifying reasons prevents you from doing your job. NOTE: If you and your employer agree that you will work your normal number of hours, but outside of your normal schedule (for instance early in the morning or late at night), then you can work and leave is not necessary.
Q: Do workers have to claim a whole day for leave to qualify for FFCRA credits?
A: It Depends. Paid sick leave for qualifying reasons related to COVID-19 illness must be taken in full-day increments. Additionally, if an employee is working at their usual worksite (not teleworking), coronavirus-related leave must occur on consecutive days if the worker:
- Is under a quarantine order or has been advised by a health care provider to quarantine, or is caring for someone who has.
- Experiences COVID-19 symptoms and is seeking a diagnosis.
Remember, the intent is to keep workers who are not teleworking isolated, so they don’t spread the virus. A worker can continue taking paid sick leave until they either run out of time or they no longer have a qualifying reason.
Q: Is taking intermittent leave ever allowed under FFCRA?
A: You can separate leave days if the following applies:
- The initial qualifying reason for the sick time ends and another qualifying reason occurs before Dec. 31.
- With the employer’s agreement, a worker who cannot telework and who needs to care for a child due to coronavirus-related reasons, can take intermittent days off. For example, a worker may take Mondays, Wednesdays, and Fridays off to care for their child because school is closed, and then work in their normal place of employment Tuesdays and Thursdays.
- Additionally, the Department of Labor will support employers allowing workers to take intermittent leave on less than a full workday for coronavirus-related child care reasons.
Q: What records do businesses need to keep when employees take paid sick leave or expanded family and medical leave?
A: Employers must document:
- The name of your employee requesting leave.
- The date(s) for which leave is requested.
- The reason for leave
- A statement from the employee that he or she is unable to work because of the reason.
- If they are caring for a child, document the child’s name and the school or child care provider that is closed/unavailable.
- If they are under a quarantine order or self-quarantining, document who issued the order or suggested the self-quarantine.
Q: How much in FFCRA credits can an eligible employer receive for qualified family leave wages?
A: Eligible employers can claim fully refundable tax credits equal to 100 percent of the qualified family leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified family leave wages).
*These FAQs are based on a Q/A released by the U.S. Department of Labor. To view the entire DOL document, click here.
Jeremy D. Medernach, CPA, is a director with Boyer & Ritter LLC who provides accounting, auditing, tax and management consulting services for a variety of clients and industry groups, including auto dealership, government, and various closely held business clients. For questions, contact your Boyer & Ritter representative or contact Jeremy at 717-761-7210 or firstname.lastname@example.org.