Samuel Haynes, Advanced Staff Accountant
As our country braces for a challenging winter, the impact of the Covid-19 Pandemic continues to be felt. One of the main areas that many working families have had to adjust to is caring for loved ones due to closures of schools, daycares, and other facilities. As a member of the Professional Services Team at Strothman and Company, I wanted to take a look at the legislation that was passed and how it may provide the relief that many families and businesses desire.
In March of this year, Congress enacted and the President signed the Families First Coronavirus Response Act (“FFCRA”). The goal of this law was to lessen the burden on families needing to balance the care of loved ones with the need for a paycheck. The act provides paid leave of up to twelve weeks from the period of April 1st to December 31st for those needing to stay home to care for their families instead of working. For companies with 500 or fewer employees, the benefits include the following:
- Employees directly impacted by the virus: The employee is eligible for up to ten days off (eighty hours) at their regular rate of pay up to a maximum amount of $511 per day.
- Employees indirectly impacted by the virus: The employee is eligible for up to ten days off (eighty hours) for the care of a sick individual or care of loved ones due to closures at two-thirds of the employee’s regular rate up to a maximum amount of $200 per day.
- Employees caring for loved ones due to closures: Additional ten weeks of expanded family and medical leave at two-thirds of the employee’s regular rate up to a maximum amount of $200 per day.
In addition to benefits provided for employees, employers are provided the benefit of being able to take an FFCRA tax credit. This credit is equal to one-hundred percent of the qualified sick leave or qualified family leave wages, including the allocable qualified health plan expenses and eligible employer’s share of Medicare tax on the qualified leave wages. Employers claim these credits by retaining payroll taxes, in an amount equal to the accrued credits, instead of depositing the amount with the IRS. The payroll taxes an employer may retain include both the employer and employee share of Social Security and Medicare taxes (i.e., FICA) and withheld federal income taxes with respect to all employees. This will be accounted for when Form 941 is filed. If the credit is greater than the amount withheld, the employer may carry forward the unused amount to be used on future payroll returns or a refund may be requested on Form 7200.
In discussions with various professional services organizations, the following recommendations were made for employers who have or will be taking advantage of these benefits this year:
- Reach out to employees to best understand their needs and how best met. To assist in this goal, the act allows for the ability to be used intermittently instead of all at once.
- Documentation is of utmost importance in order to correctly calculate and later support any credits taken and include, but are not limited to:
- Tracking the initial two weeks (80 hours) and then the additional ten weeks of time is important to ensure that both HR and the employee are on the same page, especially with things starting to shut down again as we enter the month of December.
- Document notes from the daycare, school, or other facility that has closed to keep with the personnel file of the associate.
- The IRS has indicated that records related to the credits should be kept for four years.
In summary, the FFCRA provides employers somewhat flexible benefits to assist in easing their employees’ hardships resulting from the COVID pandemic while at the same time allowing the employer to offset some of the cost through a tax credit. Understanding this legislation should allow professional service organizations to better realize the tax benefits of this legislation while better providing for the needs of their employees. If you have any further questions about this legislation, please feel free to reach out to our Professional Services Team here at Strothman and Company and we will help find the answers that you are seeking.