The FFCRA is the Families First Coronavirus Response Act and it was established to help employers of small and mid-size businesses and their employees during the COVID-19 outbreak. Employers with over 500 employees are exempt from the FFCRA. President Trump signed the bill March 18th, 2020 and the relief will be provided from the effective date through December 31st, 2020. It takes 15 days after the signing of a bill for it to become a law. This waiting period allows employers to understand and implement the new law.
The Family and Medical Leave Act (FMLA) requires an employer to allow a minimum of 12 weeks of unpaid leave but what the FFCRA does is require employers to pay sick leave for two weeks and child care leave for up to 12 weeks to qualifying employees. Payment for qualified employees is to begin 10 days after the first day their leave began. An employee that qualifies for paid sick leave can receive two weeks (up to 80 hours) of 100% of their normal pay (up to $511 a day or $5,110 total). An employee that qualifies for child care leave can receive up to 2/3 of their normal pay (up to $200 a day or $10,000 total). Employees should receive the benefit relief before an employer requires them to use their sick or vacation time. However, the employees have the option to use their sick or vacation time during the 10 day waiting period.
Qualifications for an Employee to be covered under FFCRA
The employee is covered if they are:
- Subject to Federal, state or local quarantine or isolation (as of March 25th that includes Idaho)
- Advised by a health care provider to self-quarantine
- Experiencing symptoms of COVID-19 and is seeking a medical diagnosis
- Caring for an individual subject to quarantine order or advised to self-quarantine
- Caring for their own son or daughter if the school or care provider is unavailable due to COVID-19
- Experiencing any other substantially similar condition specified by Health and Human Services in consultation with the Department of the Treasury and Department of Labor
Employer Relief under FFCRA
Small or mid-sized business owners are taking a hit right now but luckily the FFCRA provides tax credits for 100% of what is paid out to employees during their leave. What you need to know as the employer (further guidance coming out next week):
- If you are a business owner with less than 50 employees, you may be exempt from the FFCRA if paying out leave could jeopardize your business.
- An immediate dollar for dollar tax offset against payroll taxes will be provided. The payroll taxes allowed to be offset have not yet been confirmed. We will keep you updated as we receive guidance.
- If the amount of leave you are paying out to your qualified employees is more than the taxes that normally would be owed to the IRS, you can request a refund from the IRS for the difference. The IRS is hoping to turn around refunds within two weeks.
- Health insurance costs can be included in the credit
- Self-employed individuals can receive an equivalent credit. These credits will be claimed on your income tax return and will reduce estimated tax payments.
Employer Relief Examples
- You need to pay $7,000 in leave and are required to deposit $9,000 in Federal payroll taxes. You would pay out the $7,000 of leave to your qualified employees. The $2,000 difference in Federal payroll taxes would then need to be deposited on its next regular deposit date.
- You need to pay $12,000 in leave and are required to deposit $9,000 in Federal taxes. You would pay out the $12,000 in leave and then file a request for an accelerated credit for the difference of $3,000.
What you need to know
Guidance and updates on the FFCRA are changing constantly. The IRS will be releasing more information next week. Some of that information provided next week is supposed to include “simple and clear” criteria on the small business (under 50 employees) exemption from FFCRA. We are hoping that more information is released on how the “mechanics” of the credit will work so we can pass that information along to you. Every business is different which poses unique questions on the FFCRA. Whether you are a client or not, please reach out to us with your individualized set of circumstances, we’re here for you.