Families First Coronavirus Response Act (FFCRA)

Signed March 18, 2020
Effective April 1 – December 31, 2020

The FFCRA requires paid sick leave and expanded family and medical leave for workers affected by the coronavirus and creates refundable credits for eligible employers

Who is required to pay sick & expanded FMLA leave and eligible for the refundable credits?

  • Eligible Employers = Business and tax-exempt organizations with <500 employees
  • Businesses with < 50 employees may claim exemption if the paid leave would jeopardize the viability of the business. Application for exemption details and requirements will be addressed in the forthcoming regulations from the DOL.
  • Self-employed Individuals = there will be a credit against self-employment taxes on your 2020 income tax return and will be addressed in forthcoming regulations from the IRS.

Paid SICK Leave

The FFCRA provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay (maximum of $511 per day, or $5,110 over the entire sick leave period) if the employee is unable to work because:

  • The employee is required to self-quarantine because they are subject to a Federal, State or local quarantine or isolation order related to COVID-19
  • The employee has been advised to self-quarantine by a health-care provider due to concerns related to COVID-19
  • The employee is experiencing COVID-19 symptoms and seeking a medical diagnosis

The FFCRA provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay (maximum of $200 per day, or $2,000 over the entire leave period) if the employee is unable to work because:

  • The employee is caring for an individual subject to self-quarantine because they are subject to a Federal, State or local quarantine or isolation order related to COVID-19 or they are caring for an individual that has been advised to self-quarantine by a health-care provider due to concerns related to COVID-19
  • The employee is caring for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19
  • The employee is experiencing substantially similar conditions as specified by the S. Department of Health and Human Services

Paid Expanded FMLA Leave

The Act provides that employees of eligible employers can receive up to 10 weeks of paid expanded medical leave at 2/3 the employee’s pay (maximum of $200 per day, or $10,000 over the 10 week leave period) if the employee is unable to work because:

  • The employee is caring for a child under age 18 whose school is closed or child care provider is unavailable for reasons related to COVID-19
  • If the employee is taking expanded family medical leave, they may take paid sick leave for the first 10 days of that period, or they may substitute accrued vacation, personal leave or sick leave provided for under the employer’s policy.
  • Only employees that have been employed for at least 30 calendar days immediately prior to the date leave will begin, are covered under the Expanded FMLA Leave.

Paid Sick Leave Credit

  • Eligible employers may receive a refundable sick leave credit for paid sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.
  • Eligible employers are entitled to an additional tax credit determined based on the costs to maintain health insurance coverage for the eligible employee during the leave period.
  • Eligible employers may receive a refundable sick leave credit for 2/3 of the employees regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days.

Expanded Family Medical Leave Credit

  • If the employee is eligible for up to an additional 10 weeks of expanded family medical leave due to the need to care for a child whose school or child care facility is closed due to COVID-19 reasons, Eligible employers may receive a refundable family medical leave credit for paid family medical leave for 2/3 of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate, for up to 10 additional weeks.

How do Employers receive the credit?

  • Under guidance that will be released next week, eligible employers that pay qualifying sick or family medical leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and family medical leave that they paid, rather than deposit them with the IRS.
  • The payroll taxes that are available for retention include:
    • withheld federal income taxes
    • the employee share of Social Security and Medicare taxes
    • the employer share of Social Security and Medicare taxes
  • If there are not sufficient payroll taxes to cover the cost of the qualified sick and family medical leave paid, employers will be able to file a request for accelerated payment (refund) from the IRS. The IRS expects to process these requests in 2 weeks or less. The details of this new, expedited procedure will be announced in the near future.

How do Self-Employed Individuals receive the credit?

  • A self-employed individual can claim the qualified sick leave credit if he or she:
    • Regularly carries on any trade or business for self-employment tax purposes; and
    • Would be entitled to receive paid leave during the tax year under the FFCRA if the individual were an employee of and employer
    • Calculation: The number of days (up to 10) during the tax year that the eligible self-employed individual cannot perform services multiplied by:
      • The lesser of $511 or 100% of the average daily SE income for paid sick leave described in 1, 2 or 3, or
      • The lesser of $200 or 67% of the individual’s average daily SE income for paid sick leave described in 4, 5 or 6. (Note: Average daily SE income equals net earnings from SE divided by 260) This is available for an additional 10 weeks if the individual qualifies for the expanded family medical leave

What should you do now?

  • If you have circumstances the would require payment of this leave, you should be tracking it as a separate payroll item in your accounting software
  • Employers need to post the Dept. of Labor poster summarizing the FFCRA at their worksite locations
  • Employers need to keep all documentation related to any sick leave or family medical leave that is requested by employees
  • If you have paid sick leave or expanded FMLA paid leave, you should start taking the credit as an offset to your 941 deposits
  • Contact your payroll provider to alert them of the sick leave and/or expanded family medical leave
  • Contact your CPA to alert them if you become eligible to pay sick leave and expanded family medical leave
  • If you are self-employed, you should be tracking the days you are unable to work for the any of the reasons listed above and keep documentation for the preparation of your 2020 Income tax

Important Information & FAQ’s

  • “Regular Rate of Pay” – the regular rate of pay used to calculate the paid leave is the average of you regular rate over a period of up to 6 months prior to the date the employee takes leave. If you are paid with commissions, tips, or piece rates, these amounts will be incorporated into the above calculation to the same extent they are included in the calculation of the regular rate under FLSA.
  • How do you count hours worked by a part-time employee? A part-time employee is entitled to paid leave for his or her average number of work hours in a two-week period. If the part-time employee’s schedule varies, you may use a six-month average to calculate the average daily hours.
  • When calculating pay due employees, must overtime hours be included? Yes, the FFCRA requires you to pay an employee for hours the employee would have been normally scheduled to work even if that is more than 40 hours in a week. However, the FFCRA requires that paid sick leave be paid up to 80 hours over a two-week period. Therefore, the maximum hours paid under the FFCRA is capped at 80.
  • If the employer closed the worksite before April 1, 2020, do the employees still qualify for sick leave or expanded family medical leave? No, if the employer stopped paying employees prior to the FFCRA’s effective date, the employee’s will not get paid sick leave or expanded family medical leave pay but they may be eligible for unemployment insurance benefits.
  • If the employer closes the worksite on or after April 1, 2020, do the employees still qualify for sick leave or expanded family medical leave? No, if the employer closes after the FFCRA’s effective date, the employees will not get paid sick leave or expanded family medical leave but they may be eligible for unemployment insurance benefits. This holds true whether the employer closes due to lack of business or if it is required to close pursuant to a Federal, State or local directive.
  • If the employer is open, but furloughs some of the employees on or after April 1, 2020, are they eligible for paid sick leave or expanded family medical leave? No, if the employer furloughs the employee because they do not have enough work or business, the employee is not entitled to take paid sick leave or expanded family medical leave but they may be eligible for unemployment insurance benefits.
  • If the employer reduces an employees scheduled work hours, is the employee eligible for paid sick leave or expanded family medical leave for the hours they are no longer scheduled to work? No, if an employer reduces work hours because it doesn’t have enough work for employees to perform, the employee is not entitled to paid sick leave or expanded medical leave for the hours they are no longer scheduled to work. However, if the employee has COVID-19 qualifying reasons that are preventing them from working a full schedule, they may qualify for sick leave or expanded family medical leave.
  • If an employee elects to take paid sick leave or expanded family medical leave, must the employer continue health coverage? If the employer provided group health coverage, the employee is entitled to continue group health coverage during the sick leave and/or expanded family medical leave. If the employee is enrolled in family coverage, the employer must maintain coverage during the expanded family medical leave and the employee must continue to make any normal contributions to the cost of the health coverage.
  • Can an employer supplement or adjust the pay mandated under the FFCRA with paid leave the employee may have under the employers normal paid leave policy? If the employee chooses to use existing leave provided by the employer, yes; otherwise, no. Under the FFCRA, the employee may choose to use existing paid vacation, personal, medical or sick leave from the employers paid leave policy to supplement the amount the employee receives from paid sick leave or expanded family medical leave. Further, the employer may not claim, and will not receive tax credit, for such supplemental amounts.

Helpful Links

https://www.dol.gov/agencies/whd/pandemic/ffcra-questions

https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave- for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus

https://www.irs.gov/pub/irs-drop/n-20-21.pdf

To our valued clients during the COVID-19 Virus Pandemic:

The 2020 individual tax deadline has been extended until July 15, 2020.

In the best interest of our clients and team at The Rodeheaver Group, we are asking our clients to send documents electronically or via mail, FedEx and UPS until further notice. We will be adding secure drop boxes at each of our office locations if you still prefer to drop off your documentation, but we will not be meeting with clients in our offices.

If you have any questions or concerns, please contact us at 301.334.3127 or via email at contact@rgroupcpa.com. Please visit our website at www.rgroupcpa.com for the latest updates. We also now offer payment via credit card or ACH via our website.

Please stay safe and we appreciate your business.