On Friday March 20, 2020, the U.S. Treasury Department (Treasury), Internal Revenue Service (IRS) and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits. These credits are designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act).
- For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees' children's schools are closed or child care providers are unavailable. See Paid Sick Family Leave for COVID-19: Final Act Signed by the President.
- Employers receive 100% reimbursement for paid leave pursuant to the Act.
- An immediate dollar-for-dollar tax offset against payroll taxes will be provided.
- To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form. The IRS has said it will release the claim form the week of March 23, 2020.
- Where a refund is owed, the IRS has said it will send the refund as quickly as possible.
- Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.
- Requirements are subject to a 30-day non-enforcement period for good faith compliance efforts.
See the IRS announcement for more information.