We know as a small business owner you care about your employees and their families. But it is difficult to support them when your business is struggling. Small businesses in America have never faced a bigger challenge than the one we face right now. But there is hope.
Small businesses are the biggest employers in the US. The federal government recognizes the importance of making sure these businesses are supported in order to avoid mass unemployment. One way they are aiming to provide this support is through the highly publicized Paycheck Protection Program.
In this article, we’ll explore another way you can support your staff, through the Families First Coronavirus Response Act.
What is the Families First Coronavirus Response Act (FFCRA)?
The Families First Coronavirus Response Act (FFCRA) gives small to medium-sized employers the opportunity to take advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees.
Small to midsize businesses include those with less than 500 employees. These businesses will be reimbursed for offering paid leave at 100% of employee’s pay for up to two weeks. The paid leave should be used for COVID-19 related issues. FFCRA also includes up to 80 hours of childcare leave when schools are closed or childcare is unavailable for the children of employees.
How Will The FFCRA Impact Small Businesses?
The FFCRA gives small business owners the funds they need to provide their team with paid leave. This makes sure employees are able to put the health of themselves and their families first without sacrificing their paycheck.
The way that FFCRA will work is that small businesses will be able to claim the two tax credits based on qualifying leave they provide between the start date and December 31, 2020.
Small businesses that successfully claim and report the two FFCRA tax credits will be able to receive a full dollar-for-dollar refund. This reimbursement will be quick and easy to obtain so businesses aren’t penalized for doing the right thing by their employees.
Paid Leave Benefits Employers Must Provide
In order to claim these tax credits, you will need to provide their employees with paid sick leave or expanded family and medical leave for reasons related to COVID-19. These benefits include the following:
Paid sick leave for employees
Employees can receive up to 80 hours (2 weeks) of paid sick leave at 100% of pay up to $511 per day or $5,110 total for the 80 hours. This is for employees who cannot work due to:
- COVID-19 Symptoms
- Seeking a medical diagnosis
Paid sick leave for caregiving
In addition to the 2 weeks of paid sick leave at 100% of their pay, employees can also receive up to 80 hours of paid leave at ⅔ their pay. If they are:
- caring for someone in quarantine
- caring for a child because schools are inaccessible due to the pandemic
The Department of Labor will be administering and enforcing the new law’s paid leave requirements. These provisions will apply from the effective date through December 31, 2020.
Expanded Child Care
The Family Medical Leave Act requires employers with 50 or more employees to provide them with 12 weeks of unpaid leave. This yearly leave is to be used for eligible medical conditions and includes caretaking for a family member. The FFCRA has recently expanded the FMLA to allow 10 weeks of leave for employees to care for a child who is out of school due to COVID-19 reasons. With this benefit, employees are paid ⅔ of their regular pay up to $200 a pay of $10,000 in total.
Tax Credits: Coronavirus Paid Leave for Employers
What Tax Credits are Available?
Paid sick leave credit caregiver credit
Employers can get a refundable sick leave credit equal to the amount paid to employees for eligible paid sick leave. Employers can receive as much as $5,110 per eligible employee that received benefits.
Employers can receive reimbursement equal to what they paid employees for any eligible leave related to caregiving Employers may receive as much as $2,000 per eligible employee that received benefits.
Paid family leave refundable credit
Employers can get a refund for the leave paid to eligible employees. Up to $10,000 per employee that received extended FMLA benefits
Tax Credits Available for Self-Employed
It’s not just employers that can benefit from the FFCRA, it can also benefit freelancers and those who are self-employed. The benefits you can claim as a freelancer include:
Leave for self-employed individuals who can’t work for COVID-19 related reasons
- 100% of the person’s average daily income.
- Up to a maximum of $411 per day.
Leave for caretaking
- Payment is the number of days unable to work multiplied by 67% of their average daily earnings.
- This is for up to 10 days of time off
- Up to $200 daily
How Small Businesses Can Report the Tax Credits
If you’re a business owner that is providing your employees with the leave wages outlined in the FFCRA you are entitled to tax credits. You can claim these tax credits using a Form 941. This is the form you would typically use to report quarterly tax withholding. This includes:
- Federal income taxes and FICA taxes are taken from employee paychecks
- Medicare withholding for employees and employer
- Social security withholding
- Adjustments for sick pay
- Adjustments for tips
The current eligibility period for coronavirus related paid leave is Quarter 2 to 4. As an employer you’ll want to document eligible paid leave for:
- Quarter 2 (April-June, due June 30)
- Quarter 3 (July-September, due Sep 30)
- Quarter 4 (October-December, due December 31)
If a due date lands on a holiday or Saturday and Sunday, the adjusted due date will be the following business day.
During this difficult period, all small businesses are encouraged to use the resources available to help you through this crisis so you can get back to business as usual. As well as the FFCRA for employees, there are a number of other disaster assistance programs you can take advantage of to get the support you need.