IRS Issues Guidance on Tax Credits for Coronavirus Paid Leave

Small and midsize employers may begin using two new refundable payroll tax credits to obtain reimbursement for the costs of providing coronavirus-related leave to their employees, the U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) announced on March 20, 2020.

This relief is provided under the Families First Coronavirus Response Act (the Act), which was enacted on March 18, 2020. The Act provides funds for employers with fewer than 500 employees to provide paid leave, either for their employees’ own health needs or to care for their family members. The Act aims to help employers keep workers on their payrolls while ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the coronavirus (COVID-19).

Highlights

• Paid Leave Requirements
  • The federal coronavirus relief law requires employers to provide paid sick and family leave for COVID-19-related reasons, including lack of child care.
• Employer Tax Credits
  • Eligible employers may claim two tax credits based on the COVID-19-related paid leave that they provide between April 2 and Dec. 31, 2020.
• Small Business Exemption
  • Employers with fewer than 50 employees may qualify for an exemption from paid child care leave requirements.

Action Steps for Employers

• Employers should become familiar with their obligations to provide paid leave to employees under the Act and with the IRS’ guidance regarding tax credits for reimbursement. For more information regarding the IRS' tax credit guidance, click on our full compliance bulletin linked below.
• Employers should also monitor the IRS’ Coronavirus Tax Relief website for additional guidance, which is expected to be released in the near future, and:
  • Closely monitor the CDC, WHO and state and local public health department websites for information on the status of the coronavirus; and
  • Consider measures that can help prevent the spread of illness, such as allowing employees flexible work options like working from home

If you have questions related to this update, please contact your North Risk Partners advisor. Don’t have an advisor? No problem. We’ll help you find one.

This regulatory update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.