Coronavirus-Related Tax Credits for Employers

Congress and the Treasury Department have rolled out so many programs to help small businesses and workers, it’s almost impossible to keep up with them all. The Families First Coronavirus Response Act (FFRA) is the second of three COVID-19 relief bills passed in March 2020. One of its provisions is a new coronavirus-related tax credit for employers.

The FFRA tax credits are intended to help employers keep employees on their payrolls if they need to take coronavirus-related leave. It’s a real Win-Win situation. Employers can afford to keep good employees. Employees can get paid while they stay home to take care of themselves or a loved one and can avoid feeling forced to choose between their paychecks and their health.

Three important things to know about Coronavirus-Related Tax Credits for Employers:

  1. The credits are refundable. That means if the amount of the credit exceeds the amount of tax owed, the remainder is refunded to the business. In other words, for any calendar quarter where the amount of the credit exceeds the employer portion of the social security tax, the excess amount is treated as an overpayment and refunded to the employer.
  1. Employers must be eligible. FFRA tax credits are available to businesses that provide qualifying paid leave to employees between April 1 and December 31, 2020. The tax credits are intended to cover employer costs for providing employees with coronavirus-related paid sick leave and paid family and medical leave taken by the worker to care for her or himself, or for the worker to care for a family member due to the coronavirus. 
  1. Claim credits on federal employment tax returns. Employers will report their total qualified leave wages for each quarter on their federal employment tax return, IRS Form 941, which has been updated to allow employers to offset taxes with the credit. Cash-strapped employers may request an advance payment of the credit by submitting an IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
     

FFRA tax credits are a valuable tool for employers to keep good employees and keep their business going financially. The credits were rolled out along with so many other new provisions, some qualifying employers may not be aware of them. Let’s hope that they have some help navigating provisions in the three COVID-19 relief bills passed in March 2020 – or that they read my blog.

Keep in mind that all three of the COVID-19 relief bills were passed very quickly. New rules and clarifications are coming out regularly. Be sure to check out www.irs.gov to get all the latest information. Also, the IRS has posted FAQs about FFRA credits with links to guidance, forms and instructions that are updated as information is clarified at
https://www.irs.gov/newsroom/covid-19-related-tax-credits-general-information-faqs#12