In the past two weeks, two major pieces of legislation have been passed in response to the COVID-19 pandemic: the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES).
Having supported small and mid-sized businesses for two decades, PeopleStrategy is striving to continue that effort during this unprecedented and unsettling time. Below you will find summaries of key provisions within each Act that impact employers and employees. In addition, you will find links to sites we believe are the best sources for finding guidance and detailed information on these laws.
Please be advised that the information contained in this email is not intended to be exhaustive nor should any wording be construed as legal or tax advice. We encourage you to review the FAQs and guidance provided by the IRS and related agencies and to consult with your tax professional or financial advisor.
FFCRA Provisions that Impact Payroll Taxes
Emergency Paid Sick Leave Act (EPSLA): Under the FFCRA, employers with fewer than 500 employees are required to provide two weeks (up to 80 hours) paid sick leave to certain employees unable to work for specified reasons related to COVID-19. These provisions will apply from April 1, 2020 through December 31, 2020.
Emergency Family and Medical Leave Expansion Act (Expanded FMLA): Under the FFCRA, employers with fewer than 500 employees are required to provide up to an additional 10 weeks of paid family leave to qualified employees unable to work for specified reasons related to COVID-19. These provisions will apply from April 1, 2020 through December 31, 2020.
Employment Tax Credits under FFCRA: Under the FFCRA, covered employers are entitled to refundable tax credits for qualified sick leave wages and qualified family leave wages paid during the period from April 1, 2020 through December 31, 2020. Credits will be claimed on the federal employment tax returns but may opt to apply them earlier by reducing their federal employment tax deposits.
NOTE: Credit applied during the quarter may not exceed the federal employment taxes liable, however excess amounts may be refunded.
Click here for more information from the DOL.
Click here for more Information from the IRS.
CARES Act Provisions that Impact Payroll Taxes
Deferred payment of employer portion of SS tax: Under the CARES Act, employers can choose to defer payment of their 6.2% employer share of social security taxes due between the date of enactment, which was March 27, 2020, and before January 1, 2021.
NOTE: As a deferral, employers are liable to pay these taxes to the IRS. 50 percent of the deferred tax amount is due by December 31, 2021 and the other 50% is due by December 31, 2022. The IRS advises employers to keep track of amounts accrued and to be prepared to pay the amounts when due.
Employee Retention Credit: This credit is designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
- For employers with more than 100 employees, this credit is for wages paid to employees that provided no services during the shut-down.
- For employers with 100 or less employees, all wages qualify for the credit without regard to whether the employee worked, or the employer was in operation.
NOTE: Credit applied during the quarter may not exceed the federal employment taxes liable, however excess amounts may be refunded. Click here for more information from the IRS.
Recently Announced – IRS Provides Penalty Relief, Reduced Federal Employment Tax Deposits in Anticipation of Tax Credits (COVID-19): IRS Notice 2020-22 provides penalty relief with regard to employers’ deposits of federal employment taxes – including deposits of withheld income taxes and employment taxes – that are reduced in anticipation of tax credits under legislation recently enacted to address the COVID-19 pandemic.
Recently Announced – Advance Payment of Employer Credits Due to COVID-19: The IRS has published Form 7200 – Advance Payment of Employer Credits Due to COVID-19, which will be used to reclaim any employment tax deposits that were not able to be reduced during deposit. Click here for more Information from the IRS.
Paycheck Protection Program /Small Business Interruption Loan: The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. The PPP will be available through June 30, 2020.
NOTE: Lenders will require employers to supply documentation that validates employment and wages levels through the period. Click here for more information from the SBA.
IMPORTANT: YOU CANNOT APPLY TO MORE THAN ONE PROGRAM
Employers may not apply to more than one program at a time (i.e. an employer receiving assistance from the PPP cannot elect to defer the employer portion of Social Security taxes). Please consult with your tax advisor to determine which option is best suited for your organization. For more guidance, please download a copy of the Small Business Owner’s Guide to the CARES Act created by the U.S. Senate Committee on Small Business & Entrepreneurship.
Reliable Information Sources
SBA Coronavirus Loan Resources
Department of Labor Coronavirus Resources
ThinkHR COVID-19 Crisis Response Center
Additional Resources to Download
Small Business Administration infographic with guidelines for the PPP and Economic Injury Disaster Loan (EIDL) Grants
U.S. Chamber of Commerce Emergency Loans Small Business Guide and Checklist
FFCRA Emergency FMLA and Emergency Paid Sick Leave Guide
DOL Required FFCRA Posters for Federal Employers