State and local officials across the country are applauding the IRS and other federal agencies for making two new refundable payroll tax credits immediately available to thousands of employers providing coronavirus-related paid leave under the recently enacted Families First Coronavirus Response Act.
“This is very good news for small and medium-sized Connecticut businesses with employees on medical leave caring for themselves or family members,” Connecticut Insurance Department Commissioner Andrew Mais said in an announcement. “It removes a concern and reduces expenses related to employees on medical leave.”
The IRS, in conjunction with the Treasury Department and the Labor Department, said that small and midsize employers can receive 100 percent reimbursement for the cost of providing their workers up to 80 hours of COVID-19 related paid sick leave, as well as expanded paid child care leave when employees’ children’s schools are closed or child care providers are unavailable. Health insurance costs are also included in the credit.
Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.
Self-employed individuals receive an equivalent credit, and all employers taking advantage of this will face no payroll tax liability.
An immediate dollar-for-dollar tax offset against payroll taxes will be provided, though in the case of refunds for employers, the IRS will send the refund as quickly as possible.
To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form, expected to be released this week.
“The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members,” the IRS writes. “The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.”
The notice provides additional details for both the paid sick leave credit and the child care leave credit.