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IRS Issues Guidance for Tax Credits Under Families First Coronavirus Response Act

On Behalf of | Apr 6, 2020 | Firm News

Introduction

On March 18, 2020, President Trump signed The Families First Coronavirus Response Act (the “FFRCA”) into law.

The FFRCA is designed to provide paid medical leave to workers, expanding paid leave protections in the workplace in light of the COVID-19 crisis. The FFRCA requires employers with less than 500 employees to provide paid leave under two separate legal provisions.

  • The Emergency Paid Sick Leave Act: Under the EPSLA, certain workers are entitled to up to 80-hours of paid sick time when they are unable to work for certain, specified reasons relating to COVID-19.
  • Emergency Family and Medical Leave Expansion Act: Under the expanded FMLA provisions, workers are entitled to paid family and medical leave for certain, specified reasons.

More information on the paid leave requirements of the FFRCA is available here.

Tax Credits Made Available Under the FFCRA

Generally, “eligible employers” are entitled to refundable tax credits for qualified sick leave wages and qualified family leave wages under the FFCRA.1 Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide paid sick leave under either the EPSLA or the expanded FMLA provisions of the FFRCA.

The refundable tax credits under FFRCA apply to qualified sick leave and qualified family leave wages paid for certain periods during which the employee is unavailable to work, during the period beginning April 1, 2020 and ending December 31, 2020.

Recently, the IRS issued preliminary guidance on these tax-credits (available here). Businesses are encouraged to consult the IRS’ full guidance using the attached link. In its guidance, the IRS addresses numerous issues, including:

  • A description as to what employers are eligible to claim the tax credits;
  • The documentation required to obtain the tax credits;
  • The amount of tax credit available;
  • The definitions of qualified sick leave wages, qualified family leave wages, and qualified health plan expenses, for purposes of the FFRCA;
  • Potential FFRCA exemptions for small businesses;
  • The process for claiming tax credits; and
  • How the number of employees is calculated for purposes of the FFRCA.

For more information on the paid sick leave provisions of the FFRCA, or for assistance in determining the availability of tax-credits, contact an attorney at Sagaser, Watkins & Wieland PC.


For businesses considering loans under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), specifically the Paycheck Protection Program under the CARES Act, be aware that loan proceeds used to fund paid sick leave under the FFRCA are not subject to forgiveness, unlike other payroll costs.

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