The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced in IR-2020-57
that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees.
This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act). For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave.
Employers receive 100% reimbursement for paid leave pursuant to the Act.
- Health insurance costs are also included in the credit.
- Employers face no payroll tax liability.
- Self-employed individuals receive an equivalent credit.
Reimbursement will be quick and easy to obtain.
- An immediate dollar-for-dollar tax offset against payroll taxes will be provided
- Where a refund is owed, the IRS will send the refund as quickly as possible.
The IRS also noted that eligible employers are entitled to an additional tax credit based on costs to maintain health insurance coverage for the eligible employee during a child care leave period should a child care provider be unavailable due to the Coronavirus. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit.