The Families First Coronavirus Response Act (FFCRA), one of Congress’s earliest responses to the COVID-19 pandemic, provided for mandatory vacation leave for employees who have been affected by COVID-19 in some way.
To help employers finance compulsory vacation, the FFCRA provided employers with a dollar-refundable income tax credit.
The law was due to expire on December 31, 2020, but the Consolidated Appropriations Act 2021 (CAA 2021) extended the FFCRA’s wage tax credits to March 31, 2021. After the 2021 CAA, the American Rescue Plan (ARP) then extended the FFCRA’s wage tax credits until September 30, 2021.
How could this interplay between the latest COVID-19 legislation and FFCRA affect your strategies for saving and recovering related payroll? Let’s take a look.
The FFCRA required private employers with fewer than 500 employees and all government employers to grant full-time employees who had to be released for any of the following five circumstances paid sick leave of up to 80 hours:
1. Quarantine order by federal, state or local authorities in connection with COVID-19
2. Self-quarantine of employees according to the instructions of the health care provider
3. Employees with COVID-19 symptoms seeking a medical diagnosis
4. Employees who take care of a person in quarantine
5. Employees unable to work due to school or day care closures to look after children
The FFCRA required employers to provide 12 weeks of Emergency Family and Medical Leave Act (E-FMLA) to workers unable to work (or telework) due to childcare concerns related to COVID-19. The first two weeks of the E-FMLA were unpaid, so employers only had to provide 10 weeks of paid E-FMLA. However, an employee could use two weeks of paid sick leave or other types of vacation to offset the two weeks of unpaid E-FMLA. Employees were eligible for E-FMLA if they were employed for 30 days.
According to FFCRA, employers could be reimbursed through federal wage tax credits equal to 100% of the amount paid for sick leave and E-FMLA plus chargeable costs for providing group health insurance.
The refundable income tax credit must be added to the gross income if the employer wishes to claim the credit either on a Form 941 submitted in good time or on an amended Form 941-X. Neither the CAA 2021 nor the ARP have changed the rules for taxing credit.
This is where the changes come into play. CAA 2021 does not extend the mandatory vacation provisions in FFCRA, but rather allows employers to voluntarily provide any remaining paid sick leave or E-FMLA that employees may have available and claim the income tax credit for that vacation until March 31, 2021. When an employee has used up all of their Paid Sick Leave and E-FMLA in 2020, an employer cannot provide additional Paid Sick Leave and / or E-FMLA from January 1, 2021 to March 31, 2021 and apply for an income tax credit.
The American Rescue Plan extends FFCRA payroll tax credits through September 30, 2021. Like CAA 2021, the ARP does not make vacation mandatory, but allows employers to voluntarily grant vacation and claim payroll tax credits in dollars. In addition to expanding the wage tax credits, the ARP made several other changes to the FFCRA.
In contrast to CAA 2021, the ARP resets the maximum sick leave paid and E-FMLA employers can make their employees available. So if an employer has claimed the maximum credit for an employee for wages from April 1, 2020 to March 31, 2021, there is a new opportunity to qualify for credit for wages that are paid to the same employee from September 1 to 30, 2021. 2021.
In addition, the eligibility criteria for paid sick leave and E-FMLA have been expanded to include:
- An employee who is seeking or awaiting the results of a test or diagnosis of COVID-19 when exposed to COVID-19, or the employer has requested the test or diagnosis
- Employees receiving the COVID-19 vaccine
- Employees recovering from an injury or vaccination-related condition
Under FFCRA, E-FMLA was only available due to childcare concerns related to COVID-19. ARP extends the qualifying reasons to include all persons who are available within the framework of paid sick leave.
In addition, E-FMLA is no longer subject to the pricelessness of the first two weeks. This means that the maximum amount of income tax credit for E-FMLA will be increased from $ 10,000 to $ 12,000 per employee.
According to the FFCRA state and local government, employers could not claim the income tax credit. According to ARP, the loan appears to have been granted to these employers. This means that state and local governments are eligible for dollar wage tax credits if they voluntarily opt for paid sick leave and / or E-FMLA between April 1, 2021 and September 30, 2021.
The Employee Retention Credit (ERC) has also been enhanced by the American Rescue Plan and can generate a quarterly benefit of 70% for any eligible employer. The ERC credits must be added back to the wage expenditure.
Finally, the job opportunity tax credit or the employer paid family and sick leave credit may add value as a lower percentage of the recovery of wages paid to eligible employees.
For more information on FFCRA in Massachusetts, contact William Moore at [email protected].
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