Family First Act & CARES Act
Tax Credit Considerations

Updated 4-14-2020

 

Additional Covid-19 Related Payroll Tax Credits

Key provisions for our clients and friends

Family First Response Coronavirus Act Tax Credits (FFCRA): Paid Sick and Family Leave

 

Eligibility

Business with fewer than 500 employees who are required to provide additional paid sick and family leave due to the FFCRA

 

Leave Qualifications

1. Employee is under quarantine related to COVID-19

2. Employee has been advised to self-quarantine COVID-19

3. Employee is experiencing symptoms of COVID-19

4. Employee is caring for an individual in quarantine

5. Employee is caring for the child if the school or place of care closed due to COVID–19

6. Employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services

 

Credit Amount

Fully refundable tax credit equal to the required paid family and medical leave for the period 4/1/2020 – 12/31/2020:

- For conditions 1,2,3 - paid sick leave for up to 80 hours at the employee’s regular rate of pay, or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $511 per day and $5,110 in the aggregate

- For conditions 4,5,6 - paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $200 per day and $2,000 in the aggregate

 

Special Considerations

Credit includes employer’s share of Medicare tax & cost of maintaining health insurance coverage for the employee during the leave period

Wage Exclusions

Wages associated with employee retention credit are not eligible as refundable amounts for paid sick leave credit

 

*Employers can apply both FFCRA and Employee Retention credits, but the credits cannot apply to the same wages paid by the employer

 

Effect on Other SBA Loans

PPP Loan forgiveness will be reduced by tax credit amounts

 

How to receive the credit

Eligible Employers will be able to retain an amount of all federal employment taxes equal to the amount of the qualified leave wages paid, plus the allocable qualified health plan expenses and the amount of the employer’s share of Medicare tax imposed on those wages, rather than depositing them with the IRS.

*Employers can file Form 7200, Advance of Employer Credits Due To COVID-19, to claim an advance credit instead of retaining amounts

Documentation Requirements

Must retain records and documentation supporting each employee’s leave to substantiate the claim for the credits, as well retaining the Forms 941

 

 

Employee Retention Credit

 

Eligibility

Any employer (all corporations, pass through entities and sole proprietors), regardless of size that:

  1. Fully or partially suspended operations due to governmental order related to Covid-19

OR

  1. Experienced revenue loss of 50% or more in the same quarter as compared to 2019 (no longer qualify when receipts go above 80% of comparable quarter)

*Also applies to tax exempt organizations that meet item 1.

 

Credit Amount

50% of qualified wages paid by the employer for the period 3/13/2020 – 12/31/2020

*Qualified wages for all calendar quarters in 2020 cannot exceed $10,000 per employee

- Employers with more than 100 full-time employees, qualified wages include wages paid to employees when they are not providing services due to a governmental order related to COVID-19.

- For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether or not the employee is providing services to the employer.

 

Limitations

If an employee is performing services on a reduced schedule, qualified wages may not exceed the amount the employee would have been paid for working an equivalent period

 

*Qualified wages do include certain healthcare costs paid by an employer to maintain a group health plan

 

Wage Exclusions

Wages associated with the FFCRA credit are not eligible as qualified wages for the employee retention credit

 

*Employers can apply both credits, but the credits cannot apply to the same wages paid by the employer

 

Effect on Other SBA Loans

Employers cannot get both a small business loan under the PPP and also claim a tax credit

How to receive the credit

Eligible Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

 

If an employer’s tax deposits are not sufficient to cover the credit, form 7200, Advance Payment of Employer Credits Due to Covid-19, may be submitted

 

Documentation Requirements

Report total qualified wages and the related health insurance costs for each quarter on quarterly employment tax returns or Form 941 beginning with the second quarter.

 

 

Payroll Tax Deferral

 

The CARES Act allows for employers and self-employed individuals to defer the payment of the employer portion of the Social Security payroll taxes made after 3/12/2020 through 12/31/2020. All employers and self-employed individuals are eligible with the exception of those that have had a debt forgiven under the Payroll Protection Program. Remittance of deferred taxes can be done in two equal installments with 50% due on 12/31/2021 and the remaining 50% due on 12/31/2022. Employers should work with their payroll service provider to immediately begin deferrals.

 

We at TJ Advisors are committed to bringing you the most relevant and up to date information in an effort to help your business stay on track during this period of uncertainty. Please note that not all provisions, exceptions, exclusions, and special circumstances are included in order to maintain brevity. Please reach out directly so that we can provide the business support you need in these unprecedented times. We are here for you, contact us today at wecare@tjallc.com or 972-629-9164.

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