As COVID-19 (coronavirus) began spreading rapidly across the country, legislators went to work preparing the Families First Coronavirus Response Act (FFCRA). This Act became law on March 18, 2020. The FFCRA guarantees free coronavirus testing, establishes paid sick leave, enhances unemployment insurance, and more.
We’ll cover three key highlights in this blog post: the expansion of the Family Medical and Leave Act (FMLA), paid sick leave, and payroll tax credits. Both the paid sick leave and FMLA expansion go into effect on April 1, 2020, and run through Dec. 31, 2020. But, the FFCRA only applies to employers with less than 500 employees. Here’s everything you need to know.
Emergency paid sick leaveUnder the Act, employers are required to provide up to 80 hours of paid sick leave to employees at their regular rate of pay. Full-time employees can get up to 80 hours. Part-time employees are paid for the average number of hours they work in two weeks. Employees can receive paid sick leave for any of the following reasons:
- Receiving a positive diagnosis for COVID-19
- Experiencing the symptoms of COVID-19 or self-quarantining per a health care provider’s recommendation
- Following federal, state, or local orders to self-quarantine or isolate (this doesn’t appear to include Michigan’s “stay home, stay safe” order)
The amount employees receive for these circumstances can’t exceed $511 per day or $5,110 total.In addition, employers are required to provide up to 10 days of paid sick leave to employees at two-thirds their rate of pay if employees are unable to work because they’re:
- Caring for an individual who is in isolation or quarantine as recommended by a health care provider
- Being unable to work because their child’s school or place of care closes as a result of COVID-19
- Experiencing a substantially similar condition to COVID-19, which the Secretary of Health and Human Service specifies
In these instances, the amount employees receive can’t exceed $200 per day or $2,000 total.Employers can’t require that employees use other forms of paid leave first. All employees, regardless of how long they’ve been employed, are eligible for emergency paid sick leave.
Emergency family and medical leaveThe Act also expanded the Family and Medical Leave Act of 1993 (FMLA). Under this expansion, employers are required to provide employees with up to 12 weeks of emergency FMLA leave – 10 of which must be paid – if an employee is unable to work because their child’s school or place of care is closed as a result of COVID-19.
Employees can elect to use other forms of paid time off (i.e. vacation or personal time) during the first 10 days of their emergency leave. The rate of pay for the remaining ten weeks of leave is two-thirds the regular rate of an employee’s pay, up to $200 per day and $10,000 total.
Any employee who has been employed for at least 30 days can qualify for this extended leave. However, certain employers may choose to exempt individuals such as health care providers or emergency responders. And, employers with 50 or fewer employees also are exempt from providing extended leave if it jeopardizes the viability of their business. At this time, there’s no clear definition of what viability means.
It’s possible for an employee to use both types of leave – paid sick leave and the expanded FMLA. In that case, they would receive a maximum of 12 weeks of paid leave.
How to report coronavirus paid sick leave and family leave
The IRS is requiring employers to report the qualified sick and family leave payments made to employees in box 14 of Form W-2 or in a separate statement. Employers must separately state:
- the total amount of qualified sick leave wages paid because the employee was quarantined or diagnosed with COVID-19;
- the total amount of qualified sick leave wages paid because the employee was caring for someone sick with COVID-19; and
- the total amount of qualified family leave wages paid.
The IRS recommends employers use the following language when issuing Form W-2 or statements to employees. Employers can modify it as necessary.
“Included in Box 14, if applicable, are amounts paid to you as qualified sick leave wages or qualified family leave wages under the Families First Coronavirus Response Act. Specifically, up to three types of paid qualified sick leave wages or qualified family leave wages are reported in Box 14:
- Sick leave wages subject to the $511 per day limit because of care you required;
- Sick leave wages subject to the $200 per day limit because of care you provided to another; and
- Emergency family leave wages.
If you have self-employment income in addition to wages paid by your employer, and you intend to claim any qualified sick leave or qualified family leave equivalent credits, you must report the qualified sick leave or qualified family leave wages on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, included with your income tax return and reduce (but not below zero) any qualified sick leave or qualified family leave equivalent credits by the amount of these qualified leave wages. If you have self-employment income, you should refer to the instructions for your individual income tax return for more information.”
View IRS Notice 2020-54 for more information on how to report paid sick and family leave.
Payroll tax credits for small and midsize businessesThe FFCRA includes a 100% refundable tax credit for employers who pay sick leave and family leave wages. This tax credit serves as a dollar-for-dollar reimbursement and includes self-employed individuals.
You can also receive reimbursements for health insurance costs and payroll tax liability. The DOL has yet to release more details on this. Here’s an example:
As an employer, you paid $6,000 in sick leave wages to employees. You have to deposit $10,000 in payroll taxes to the IRS. Because of the FFCRA, you can use the $6,000 spent on sick leave wages toward your payroll taxes. This decreases the amount you owe to $4,000.
Learn more about the Families First Coronavirus Response Act on the DOL’s FAQ page here.
Originally published 3/27/2020. Updated 7/10/2020.
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