Second Coronavirus Law Provides Tax Credits for Employers and Self-Employed
Last updated March 19, 2020
The Families First Coronavirus Response Act (the “Act”) provides tax credits to employers who pay wages to employees while they are taking time off under the Act’s sick leave and family leave programs. Both of the paid sick leave and family leave credits described below may be increased to include the amount an employer pays for the employee’s group health plan coverage while the employee is on leave. The credit is first applied against the payroll taxes owed by the employer and the excess credit, if any, is refundable.
Sick Leave Credit
The sick leave credit is limited to $511 per day for up to 10 days ($5,110 maximum per employee) while the employee is receiving paid sick leave because they are quarantined, or $200 per day ($2,000 maximum) if they are caring for someone else who is quarantined or if their child’s school is closed or their day care provider is not available because due to COVID-19 precautions.
Family Leave Credit
The family leave credit for each employee would be for wages paid up to $200 per day for up to 50 days while the employee is receiving paid leave, or an aggregate of $10,000 per employee.
The Act provides similar credits against self-employment tax. The sick leave credit is the lesser of $511 per day or an individual’s average daily self-employment income if quarantining themselves or the lesser of $200 or 67% of their average daily self-employment income if they are caring for someone else who is quarantined or a minor whose school is closed or day care provider is not available. The credit is limited to 10 days.
Self-employed individuals may also receive a family leave credit equal to the lessor of $200 or 67% of their average daily self-employment income for up to 50 days.
Further Rules and Guidance
The Act provides limitations so that tax benefits may not be obtained under more than one provision of the tax code. For example, a self-employed individual’s qualified family leave equivalent amount is $5,000, but the individual also works for an employer that paid her family leave wages of $9,000 to care her child while school was closed due to COVID-19. The individual’s family leave equivalent amount would be reduced by $4,000, resulting in a credit under the provision of $1,000.
The Act also requires guidance and regulations be issued to ensure the purpose of the Act is carried out and to prevent avoidance of the purpose of the Act.
The tax credits are available for amounts paid from the date set by the Secretary of the Treasury through December 31, 2020.
For additional information pertaining to the coronavirus outbreak, please visit CSG’s COVID-19 Resource Center.
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