FMLA and Paid Sick Leave Credits

The COVID-19 pandemic created once in a lifetime business challenges and economic conditions. Not only were Atlanta businesses impacted by government orders about when and how they could operate, but there were also issues related to employee health and the threat of infection. As COVID-19 spread many Atlanta employers were forced to deal with employees that were either infected or forced to quarantine and not able to work. Not only did this impact production but it also stressed companies that had to pay sick benefits at a time when financial challenges were popping up everywhere. When Congress passed the  Families First Coronavirus Response Act (FFCRA) it mandated that qualifying businesses provide employees with up to 80 hours of paid sick leave and an additional 10 weeks of family and medical leave for COVID-19 related reasons. Concurrently, it also created two refundable tax credits including the Paid Sick Leave Credit and expanded Family and Medical Leave Act (FMLA) benefits. To help clients, prospects, and others, Wilson Lewis has provided a summary of key credit details below.  

Paid Sick Leave Credit

This new credit allows employers (with less than 500 employees) to claim a credit for the paid sick leave at the employee’s pay rate, up to $511 per day and $5,110 in total for up to 80 hours. The credit can be claimed when an employee takes paid time off due to compliance with an isolation order, advised to self-quarantine, or have COVID-19 symptoms and are seeking a medical diagnosis.

When employees are unable to work because they are caring for someone subject to a COVID-19 isolation order, caring for a child whose school or place of care is closed or the childcare provider is closed due to Coronavirus, the employer is also eligible for the credit. Qualifying businesses can claim a credit at 2/3 the employee’s regular pay rate, up to $200 per day, $2,000 in total, for up to 80 hours.  

Expanded FMLA Credits

The expanded FMLA credit permits an employee who is unable to work (including remote working) because of the need to care for a child whose school or place of care is closed due to the pandemic to claim paid family leave at the rate of 2/3 regular pay. Employers can claim a refundable tax credit equal to the required family and medical leave wages paid. The credit also includes the employer’s share of Medicare tax on the wages and cost of maintaining insurance coverage during the leave period.

Claiming the Credits

Unlike other federal tax credits that are realized after applying or annual tax returns, employers can immediately claim the credit. To make the claim an employer simply needs to reduce the amount of federal unemployment tax deposits for the corresponding quarter by the amount of qualified leave wages, health plan expenses, and employer’s share of the Medicare tax. The reduction of expenses will be accounted for on the IRS Form 941 filed at the end of each quarter.

Documentation Requirements

Since the IRS can request a review of the credit calculation and determination process it is important to maintain the following:

• Documentation demonstrating how the number of qualified wages eligible for the credit was determined. This should include records of work, telework, and qualified sick and family leave.
• Documentation showing how the amount of qualified health plan expenses allocated to wages was determined.
• Copies of Form 7200, Advance of Employer Credits to Due to COVID, submitted to the IRS.
• Copies of completed Forms 941 submitted to the IRS where the credit was claimed.

Contact Us

As year-end is quickly approaching many businesses are taking another look to determine where potential saving opportunities exist. The Paid Sick Leave Credit and expanded FMLA credits provide a tax-saving opportunity for Atlanta employers through the end of 2020. For this reason, it is important to consult with a qualified tax advisor who can review your situation and determine if you qualify to claim these credits. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.