Tax Credits!

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Below is a quick FAQ regarding tax credits for paid sick and paid family and medical leave:

Paid Sick Leave Tax Credits

Q: Will I be entitled to take a credit for the amounts that I pay in paid sick leave under FFCRA?
A: Yes. All employers, except for government employers, required to pay paid sick leave under the FFCRA will be entitled to take a tax credit for the amount paid. These non-government employers will be entitled to a refundable federal employment tax credit for the entire amount that they pay in paid sick leave.

Q: Are government employers eligible for a tax credit for paid sick leave?
A: No. The credit does not apply to the government of the United States, the government of any State or political subdivision or any agency or instrumentality of such government.

Q: Are there limits to the tax credit I can receive for paid sick leave?
A: Yes. Credits may not exceed amounts paid for emergency paid sick leave up to the amounts described above. Because the credit is fully refundable, employers will receive reimbursement of the amount paid, subject to the caps, even if their tax liability is less than the amount paid out in emergency paid sick leave.

Q: Am I entitled to a credit if I keep paying for my employees to have health insurance while they are out on leave?
A: If you continue an employee’s health plan coverage while the employee is on paid emergency sick leave under FFCRA, the credit is increased up to an amount which includes the employer’s expense for the health plan coverage.

Q: Do I still need to pay federal employment taxes on amounts paid to employees as emergency paid sick leave under FFCRA?
A: No. Emergency paid sick leave mandated by FFRCA is exempt from Social Security taxes otherwise imposed on the employer.

Paid Family Leave Tax Credits

Q: Will I be entitled to take a credit for the amounts that I pay in paid family leave under FFCRA?
A: Yes, all employers except for government employers, are entitled to a refundable federal employment tax credit for the entire amount that they pay to eligible employees. Because the credit is fully refundable, employers will receive full reimbursement of the amount paid regardless of their actual tax liability.

Q: Are government employers eligible for a tax credit for paid family leave?
A: No. The credit does not apply to the government of the United States, the government of any State or political subdivision or any agency or instrumentality of such government.

Q: Are there limits to the tax credit I can receive for paid family leave?
A: Yes. Credits may not exceed amounts paid for an individual with respect to family medical leave, i.e., $200 per day, and an aggregate of $10,000 with respect to all calendar quarters.

Q: Am I entitled to a credit if I keep paying for my employees to have health plan coverage while they are out on family leave?
A: If you continue an employee’s health plan coverage while the employee is on paid family leave, the credit is increased by an amount equal to your expense for providing such coverage.

Q: Do I still need to pay federal employment taxes on amounts paid to employees as family leave under FFCRA?
A: Paid family leave mandated by FFRCA for paid family leave are exempt from Social Security taxes otherwise imposed on the employer.

Q: For how long will the credits under FFCRA be in place?
A: Like the paid sick and paid family leave provisions, the tax credits created by FFCRA will sunset effective December 31, 2020.

For more information, go here

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