In late March 2020, the Federal government passed the "Families First Coronavirus Response Act (FFCRA)", with the purpose of easing the impact of the COVID-19 outbreak on businesses and employees.

With this came some important Tax Credits and Deferrals which Employers should be aware of.

Emergency Paid Sick Leave (PSL) Credit

All employees are now eligible for up to a maximum of 80 hours of paid sick leave if they are considered "unable to work" at any time between April 1 and December 31, 2020, no matter how long they have worked for the employer previously, based on the following guidelines.

Employers will receive a tax credit for this Emergency PSL based on the formula:

  • Total gross pay + Employer's Medicare cost + Employer's Health Insurance cost

As an additional note, this Sick Pay is exempt from Social Security Employer tax, and is subject to the following limitations:

  • Sick pay for self-care is to be paid at the employee's regular rate, with a daily limit of $511, and an annual limit of $5,110.
  • Sick pay for the care of others is paid at 2/3 of the employee's regular rate, with a daily limit of $200, and an annual limit of $2,000.

Emergency Paid Child Care (FMLA) Credit

Very similar to the Emergency PSL Credit, Emergency Paid Child Care (FMLA) has its own guidelines as follows.

All employees are now eligible for paid child care leave if they are considered "unable to work" at any time between April 1 and December 31, 2020, as long as they have been employed for at least 30 calendar days, regardless of a number of hours worked.

Employers will receive a tax credit for this Child Care Leave based on the same formula:

  • Total gross pay + Employer's Medicare cost + Employer's Health Insurance cost

This pay is also exempt from Social Security Employer tax, and is subject to the following limitations:

  • Emergency Paid Child Care (FMLA) is paid at 2/3 of the employee's regular rate, with a daily limit of $200, and an annual limit of $10,000.

Employee Retention Credit

This tax credit is for the purpose of encouraging eligible employers to retain employees on their payroll.

Employers are considered eligible for this credit as long as they have not elected to take a Small Business Administration (SBA) Loan or participate in the Paycheck Protection Program (PPP) and debt was forgiven, based on the following criteria:

  • For employers with less than or equal to 100 employees: Credit is calculated based on all employee wages, regardless of if they are currently working.
  • For employers with over 100 employees: Credit is calculated based on wages paid only to employees who are not working due to COVID-19.

Employers who are eligible can receive a payroll credit, which applies to the above wages stated, paid between March 12, 2020, and December 31, 2020, based on the formula:

  • 50% of Total Gross Pay + Employer's Health Insurance cost

There is also a limit of $5,000 in tax credit, per individual employee. 

Social Security Employer Tax Deferral

Eligible employers may elect to defer their regular Social Security Employer tax payments into a two-installment payment plan, the first installment due December 31, 2021, and the second due December 31, 2022.

Employers are considered eligible for this deferral as long as they have not elected to take a Small Business Administration (SBA) Loan or participate in the Paycheck Protection Program (PPP) and debt was forgiven.

If you wish to pursue this deferral, contact us and we will send you the necessary paperwork to apply for it.

Lastly, if ever you (or your employer) have any questions regarding anything in this article, you can contact us at 1-800-610-9501, or, use our in-app messaging feature by logging into our secure site and initiating a conversation.

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