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COVID-19 EMPLOYEE AND TAX LEGISLATION

Federal and state governments have enacted numerous measures in response to the COVID-19 pandemic to ameliorate the impact on families and businesses.  The Families First Coronavirus Response Act (the “Act”), signed into law on March 18, 2020, is the first and currently most well-known of these laws.  The Act addresses several concerns including, unemployment benefits, food assistance programs, and Medicaid funding. Still, the most significant changes for businesses are the establishment of paid and unpaid family and sick leave.  To offset the effect of expanded paid leave, the Act provides offsetting tax credits.  Additionally, the IRS has postponed the April 15, 2020 payment deadline to July 15, 2020, for all businesses and individuals.

FAMILY LEAVE

Under the Act, qualified employees must be provided paid leave to care for a child (under 18 years old) if their school or care provider is closed or unavailable pursuant to an emergency declaration of the federal, state, or local government.  The employee is entitled to 12 weeks of job-protected leave.  The first ten days may be unpaid (provided the employee does not use any accrued vacation time or sick leave).  Thereafter, the employer must pay a percentage of the employees pay up to $200/day for another ten weeks.

SICK LEAVE

Certain employers (generally private employers with fewer than 500 employees) are required to pay two weeks of emergency sick leave to employees unable to work due to the Coronavirus.  The covered employees must either be subject to a quarantine order, self-quarantining or caring for someone who is isolating to protect the spread of Covid-19.  An employer must pay a sick, full-time employee’s actual wage up to a limit of $511/day.  An employee that is caring for someone else is entitled to 2/3 normal pay up to $200/day. 

PAYROLL CREDITS

Essentially, the Act provides an equal offset payroll tax credit for any paid family or sick leave.  Additionally, employers will also be able to include allocated qualified health plan expenses for employees utilizing family and sick leave.  These credits will be reportable on IRS Form 941, filed quarterly.  If the credit exceeds the amount paid, it will be considered an overpayment and refunded. 

TAX DEADLINE

Although regulations have not been finalized, on Friday, March 20, 2020, Treasury Secretary Steven Mnuchin informed the nation that all taxpayers, individuals, and businesses, would be able to file and pay (without interest or penalties) by July 15 rather than April 15.

Clarification on the tax deadline extension is expected shortly.  Other relief for businesses will undoubtedly be forthcoming from both federal and state governments.  We will continue to update you on new developments.