About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (January 25, 2021)

handle is hein.crs/goveblv0001 and id is 1 raw text is: C sskmsI Seseanch informing th~RI di s~n~ 1914 January 25, 2021 Payroll Tax Credit for COVID-19 Sick and Family Leave Beginning in April 2020, employers were entitled to payroll tax credits for paid leave required in response to the Coronavirus Disease 2019 (COVID-19) pandemic. For employers choosing to continueproviding eligible paid leave, these taxcredits have been extended through March 2021. The paid leave mandate, however, expired at the end of 2020. This In Focus provides an overview of the tax credits for paid leave initially provided in the Families First Coronavirus Response Act(FFCRA; P.L. 116-127) and extended in the COVID-related Tax Relief Act of 2020, enacted as Division N, Title II, Subtitle B of the Consolidated Appropriations Act, 2021 (P.L. 116-260). Payroll Tax Credit for Paid Sick and Family Leave in FF CRA (L. I 16-127) FFCRA included an employer payroll taxcredit for the paid sick and family leave required as part of FFCRA. This tax credit was intended to cover the cost to businesses of providing paidleave to address the COVID-19 pandemic. Leave Requirement The Emergency Paid Sick Leave Act (Division Eof P.L. 116-127) generally requiredprivate employers with fewer than 500 employees, and allgovernment employers, to provide employees with two workweeks of paid sickleave for certain COVID-19-related leave purposes. The Emergency Family and Medical Leave ExpansionAct (Division C of P.L. 116-127) generally provided employees of private employers with fewer than 500 employees, state and localgovernmentemployees, and some federal employees expanded job-protected Family and Medical Leave Act (FMLA) leave for certain COVID-19-related caregiving responsibilities. Workers using the paid sick leave entitlement for their own needs were to be compensated at their regular rates of pay (subject to a per- day maximum), whereas leave used for caregiving was partially compensated (also subject to a per-day maximum). Employers were not required to compensate workers for the first two weeks of expanded FMLA; but after this period the leave was to be partially compensated by employers. For both sick and family leave, the law included provisions allowing employers to exclude health care providers and emergency responders fromleave requirements, and allowing certain smallbusinesses an exemption from providing leave for certain caregiving purposes. Employer Payroll Taxes and Paid Leave Tax Credits The employer payroll tax credit is computed using qualifying wages paid, and claimed against the employer's share of the Social Security orrailroad retirement payroll taxin each calendar quarter. Social Security payroll taxes are 12.4% of wages, with 6.2% paid by employers and 6.2% paid by employees (self-employed individuals pay the full 12.4% amount). The Social Security payroll taxapplies to workers' earnings up to an annuallimit: $137,700 in 2020 ($142,800 in 2021). Similar taxes are withheld for railroad employees. Employers typically deposit payroll taxes with the Internal Revenue Service (IRS) biweekly or monthly, and report employment taxes paid on quarterly federaltaxreturns filed within 30 days of the end of the calendar quarter. Employment payrolltaxes generally are paid by all types of employers: businesses, nonprofits, and government employers. Employers claim tax credits for FFCRA paid leave on employment taxreturns, which are generally filed quarterly (certain small employers may file annually). Employers can reduce payrolltaxdeposits in anticipation ofreceiving paid leave tax credits. Employers can also request an advance of taxcredit amounts. The taxcredit is refundable, meaning that if the amount of taxcredits an employer claims exceeds payroll tax liability, the excess is received as a payment from the Treasury. Employers claiming the credit are required to include the amount claimed in gross income, for income taxpurposes, offsetting thereduction in gross income from deducting wages paid (preventing a double benefit). Additionally, employers cannot claimthis credit for any wages taken into account for the purposes of calculating the Section 45S employer taxcredit for paid family and medicalleave. Employers may also elect not to have the credit apply. The credit does not apply to government employers. The Social Security trust funds will not be affectedby the tax credit. A general fund transfer to the trust funds offsets any reduction in trust funds revenues fromthe taxcredit. Employer payroll tax credits offset the cost of providing COVID - 19-related paid leave. Employers were required to provide COVID-l 9-related paid leave from April through December 2020. In 2021, tax credits may be available for employers choosing to provide paid leave. Qualifying Sick Leave Wages Employers can claim a tax credit for 100% of the amount required to be paid in sickleave wages. Sickleave wages must be paid for up to 80 hours (two workweeks) for a full- time employee (prorated forpart-time employees). The maximum amount thatmust be paid to workers using FFCRA sick leave depends on the purpose for which the sick leave is taken. https ://ctsrepurts~conigr a S

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most