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Payroll tax credits under the Families First Coronavirus Response Act

The Families First Coronavirus Response Act was signed into law on Wednesday, March 18, 2020. The Act goes into effect on April 2 and will require certain employers to provide paid sick leave and paid family medical leave to employees for COVID-19 related circumstances. The Act also provides tax credits to employers for the paid sick and family medical leave expenses required under the Act.

Tax credits are available to employers with 500 employees or less to use against the employer’s portion of payroll taxes. The tax credits are subject to certain caps, but may allow employers to recover up to 100% of the qualified paid sick leave wages and 100% of the qualified paid family leave wages.

For paid sick time qualifying under the Act (see our recent blog post on paid sick leave and paid family leave requirements), the amount of qualified sick leave wages available for the credit may not exceed:

(a) $511 per day, or any portion of a day, for which an individual is paid sick leave related to their own illness or quarantine, or
(b) $200 per day, or any portion of a day, for which an individual is paid for sick leave related to their care for others, school closures or employee is experiencing substantially similar conditions as specified by the Secretary of the Department of Health and Human Services.

For paid family leave qualifying under the Act, a 100% payroll tax credit is available against the employer’s share of payroll taxes up to $200 per day, and not to exceed an aggregate of $10,000.

Tax credits similar to the above are also available to self-employed individuals who would normally meet the requirements to receive paid sick leave and paid family leave under the Act had they been an employee of an employer.

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