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1 1 (April 1, 2021)

handle is hein.crs/govecwt0001 and id is 1 raw text is: C r~s W ~#s~rc~h $an4~ ~ ~ ~ 4 UpdatedApril 1,2021 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 September 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 later 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) and the American RescuePlan Act (ARPA: P.L. 117- 2). Payroll Tax Credits for Paid Sick and Family Leave in FFCRA (P.. I I 6-127) FFCRA included an employer payrolltaxcredit 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. 2020 Leave Requirement The Emergency Paid SickLeave Act (Division Eof P.L. 116-127) generally requiredprivate employers with fewer than 500 employees, and all government 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 compensatedat their regular rates ofpay (subjectto aper- day maximum), whereas leave used for caregiving was partially compensated (als o 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 res ponders fromleave requirements, and allowing certain smallbusinesses an exemption from providing leave for certain caregiving purposes. Formore, see CRS In Focus IF11487, The Families First CoronavirusResponseActLeaveProvisions,by SarahA. Donovan andJon O. Shinabukuro. Employer Payroll Taxes and Paid Leave Tax Credits Under FFCRA, the employer payroll tax credit was computed using qualifying wages paid, and claimed against the employer's share of the Social Security orrailroad retirement payrolltaxin each calendar quarter. The Social Security trust funds were not generally affected by the tax credit, as a general fund transfer was provided to offset any reductionin trust fund revenues fromthe taxcredit. 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. All types of employers-businesses, nonprofits, and governments- generally pay theemployer share of payroll taxes for their employees. Employers claimed tax credits for FFCRA paid leave on employment taxreturns, which are generally filed quarterly (certain small employers may file annually). Employers could reducep ayroll taxdeposits in anticipationof receiving paid leave taxcredits. Employers could also reques tan advance oftaxcredit amounts. The taxcredit was refundable, meaning thatif the amount of taxcredits an employer claims exceeded payrolltax liability, the exces s was received as a payment fromthe Treasury. Employers claiming the credit were required to include the amount claimed in gross income, for income taxpurposes, offsetting thereduction in gross income fromdeducting wages paid (preventing a double benefit). Additionally, employers could not claimthis credit for any wages taken into account for the purposes of calculating the Section 45S employer tax credit forpaid family and medical leave. Government employers could not claimthe FFCRA tax credits. Qualifying SickLeave Wages Under FFCRA, an employer could claima tax credit for 100% of the amount required to be paid in sickleave wages fromApril 1, 2020, through December31,2020. Sick leave wages were required to be paid for up to 80hours (two workweeks) for a full-time employee (prorated for part- time employees). The maximum amount that was required to be paid to workers using FFCRA sickleave depended on the purpose for which the sick leave was taken. Sick leave wages were limited to $511 per day for employees taking leavebecause (1) the employee was subject to a federal, state, or local quarantine or isolation order related to COVID-19; (2) the employee was advised by ahealth care providerto self-quarantinedueto COVID- 19; or (3) the employee was experiencing symptoms of COVID-19 and was seeking a medicaldiagnosis. https://crsrepc

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