IRS Issues Press Release Regarding Tax Credit and Related Issues On Families First Coronavirus Response Act

Emergency paid sick leave refundable sick leave tax credit

The tax credit for payment of qualifying paid sick leave under the Act is determined as follows:

  • Employees are eligible for two weeks of paid sick leave at 100% of “employee’s pay” if the employee is unable to work because of a COVID-19 quarantine or a self-quarantine, or has COVID-19 symptoms and is seeking a medical diagnosis. Eligible employers are provided a refundable sick leave tax credit for sick leave payments at the employee’s “regular rate of pay” up to a maximum amount of $511/day and $5,110 in the aggregate, for a total of 10 days.
  • Employees are eligible for two weeks of paid sick leave at 2/3 of the “employee’s pay” if the employee is caring for an individual who is subject to quarantine, caring for a child whose school is closed or child-care provider is unavailable for reasons related to COVID-19. Eligible employers may claim a refundable tax credit of 2/3 of the employee’s “regular rate of pay” up to a maximum amount of $200/day and $2000 in the aggregate for up to 10 days.
  • In addition, eligible employers are entitled to an additional tax credit based on the cost of maintaining health insurance coverage for eligible employees during the leave period.

Expanded paid family and medical leave refundable child-care tax credit

The tax credit for payment of qualifying child-care leave under the Act is determined as follows:

  • Employees of eligible employers may receive up to an additional 10 weeks of expanded paid family and medical leave at 2/3of the “employee’s pay” if the employees are unable to work due to a need to care for a child whose school is closed or whose child care provider is unavailable for reasons related to COVID-19. In addition to the sick leave credit, eligible employers are entitled to a refundable child-care tax credit for the payment of expanded paid family and medical leave equal to 2/3 of the employee’s “regular pay,” up to a maximum amount of $200/day or $10,000 in the aggregate.
  • An additional tax credit is available to employers for the cost of maintaining the health insurance coverage for eligible employees during the leave period.

Retention of payroll taxes to pay for leave

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