The IRS and DOL have released details about the Families First Coronavirus Response Act (FFCRA). These details explain employer requirements to provide leave and how the two refundable tax credits reimburse employers for the cost of providing paid sick leave and paid family leave wages to their employees for COVID-19 related reasons.
An employer may claim the sick and family leave tax credits and the CARES Act Employee Retention Credit — but not for the same wages paid. The following provides more details about the tax credits, the dollar amount of owed paid leave and sick leave wages as well as other important program details:
FFCRA requires employers, including 501(c) tax exempt organizations, to provide paid leave and paid sick leave starting on April 1 through the end of the calendar year. The requirements apply to employers with 500 or fewer employees. Businesses with fewer than 50 employees may claim a DOL exemption from providing benefits if providing them would jeopardize the viability of the business.
Workers are eligible for up 80 hours of paid sick leave for their own health needs or to care for others and up to an additional ten weeks of paid family leave to care for a child whose school is closed, whose child care center is closed or whose child care provider becomes unavailable.
To determine the number of employees for purposes of the potential 50-employee exemption and the 500-employee threshold, the employer must count all full-time and part-time employees employed within the United States at the time the employee would take leave. Every part-time employee is counted as if he or she were a full-time employee. This counts all employees currently employed, regardless of how long those employees have worked for the employer.
Per the DOL regulations for FFCRA, H-2A employees are not excluded from the FFCRA requirements even though employers are not subject to payroll tax.
Employers, including tax exempt organizations, that pay leave wages and health plan benefits will be able to retain certain federal taxes rather having to make deposits. Employment taxes that can be retained include federal income taxes withheld from employees, the employees’ share of social security and Medicare taxes, and the employer’s share of social security and Medicare taxes with respect to all employees. Self-employed individuals are entitled to equivalent credits based on similar circumstances in which the individual is unable to work.
If the retained taxes are not sufficient to cover wages and health plan expenses, the employer will be able file a request for a payment from the IRS. The IRS expects to begin processing these requests in April 2020.
FFCRA paid leave and paid sick requirements impact all employers with fewer than 500 employees. Per the guidance currently available, AFBF understands H-2A workers and employers are covered under the law. However, AFBF has requested DOL provide additional guidance specific to H-2A workers to clarify.
Employers with fewer than 50 employees are able to avoid paying paid leave or paid sick leave if doing so threatens the viability of the business as outlined below:
- The employer’s expenses and financial obligations exceed revenue and cause the employer to cease operating at a minimal capacity;
- The employee(s) absence would pose a substantial risk to the financial health or operational capacity because of their specialized responsibilities; or
- The employer cannot find enough workers to replace employees requesting leave and still be able to operate at a minimal capacity.
Agricultural operations, although deemed essential per DHS Critical Infrastructure Guidance, are not considered emergency responders per FFCRA and therefore must adhere to the paid leave provisions in this law.