Here is a summary of the four provisions from the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) acts, including links to more detailed information. Please read each thoroughly, as we are including information about how we will work with you on these.
FFCRA Sick and Family Medical Leave
- Refundable pay for those directly affected by COVID-19
- Generally, the Act provides that covered employers (see below) must provide to all employees:
- Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking medical diagnosis; or
- Two weeks (up to 80 hours) of paid family leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine ((pursuant to Federal, State, or local government order or advice of a health care provider), or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor.
A covered employer must provide to employees that it has employed for at least 30 days:
- Up to an additional 10 weeks of paid expanded family leave at two-thirds the employee’s regular rate of pay where an employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19. This earning type would begin only after the first two weeks of paid leave, during which time #2 above should be used. The employer must inform T4P when switching from Emergency Paid Sick/Family Leave to Emergency Extended Family Medical Leave.
Covered Employers: The paid sick leave and expanded family and medical leave provisions of the FFCRA apply to certain public employers, and private employers with fewer than 500 employees. Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
Qualifying Reasons for Leave:
Under the FFCRA, an employee qualifies for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because the employee:
- Is subject to a Federal, State, or local quarantine or isolation order related to COVID-19 (note this does not include shelter-in-place orders);
- Has been advised by a health care provider to self-quarantine related to COVID-19;
- Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
- Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
- Is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
- Is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
Under the FFCRA, an employee qualifies for expanded family leave if the employee is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19.
T4P cannot determine whether an employee qualifies for any of the FFCRA Emergency Paid Sick Leaves.
Check for documentation required from employees who request this leve pay to ensure they meet the qualifications. note that state-mandated shelter-in-place orders are not qualified reasons for this pay.
The total amount of refundable credit each quarter equals the total amount of these wages, plus the employer portion of Medicare tax. There is no employer portion of Social Security tax on these wages.
Refunds will occur in one or more of the following ways:
- Reducing the amount of Federal 941 taxes due on a given payroll
- Excess refund claimed on Form 941 for a given quarter (Q1 – Q4 2020)
- Form 7200 may be used to get faster access to excess refunds, rather than wait for Form 941 refunds to process. Don’t file the form to request an advance payment for any anticipated credit for which you already reduced your tax deposits (https://www.irs.gov/instructions/i7200). A signed release form for T4P will be required. Clients must inform T4P about their filed Forms 7200 prior to the end of each quarter, and send us copies of all filed forms submitted for each quarter. The deadline for submitting to T4P copes of all Forms 7200 fled with the IRS will be the last day of each quarter.
Paycheck Protection Plan (PPP) loans
The Paycheck Protection Plan:
- Allows businesses to apply for loans to pay for payroll costs, rent, and utilities.
- Loans may be forgiven with no related imputed revenue if funds are used for qualifying payments and meet requirements (e.g. at least 75% used for payroll).
- Loan application requirements are detailed by individual banks and lenders.
- Once a loan is forgiven, businesses can no longer defer employer Social Security tax payments.
- Businesses cannot utilize both the Employee Retention Credit and the PPP loan.
- Not all loans or portions of loans are guaranteed to be forgiven. Obviously, the rules around this are not determined by T4P.
- T4P cannot and will not police who has taken advantage of more than one option.
Employee Retention Credit
The ERC is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all qualified quarters is $10,000.00, so that the maximum credit per employee is $5,000.00.
Things to note:
- Businesses cannot utilize both the Employee Retention Credit and the Paycheck Protection Program Loan.
- To qualify, a business must be able to show a “significant decline in gross receipts” defined as a revenue decrease of more than 50% when compared to the same quarter last year.
- If you qualify for this program, your company has two options (current plan as of 4/14/2020):
- When you run your payroll, tell T4P what portion of the pay will qualify for ERC, so we can code it correctly. We expect our software to support this feature starting in May.
- For any amounts not covered in the point above, you will need to file Form 7200 to get an advance refund for this credit. A signed release form for T4P will be required. Clients must inform us about their filed Forms 7200 prior to the end of each quarter, and send us copies of all filled forms submitted for each quarter. The deadline for submission is the last day of each quarter.
Employer Social Security Tax Deferral
This program allows businesses to defer payments for the employer portion of Social Security taxes due between March 27, 2020 and December 31, 2020.
Things to know:
- Deferrals are not allowed once a PPP loan has been forgiven.
- Deferred amounts will not be forgiven, and are due as follows:
- 50% of deferred amount due December 31, 2021
- Remaining amount due December 31, 2022
- If you elect to defer these payments, you will be responsible and must make the payments directly to the IRS, without any further involvement or reminders from T4P
- Signed release form is required