President Trump signed a second Coronavirus emergency aid package into law Wednesday, March 18, after it passed with overwhelming support from the Senate.

The Families First Coronavirus Response Act responds to the growing health and economic crises with provisions for paid sick leave, paid family leave, free testing and expanded unemployment benefits. The summary below focuses on paid sick and family leave and its impact on both the employer and the employee.

  • Division C – Emergency Family and Medical Leave Expansion Act
    • • This section of the Act expands the existing Family and Medical Leave Act (FMLA) by providing additional coverage for those employees unable to work due to a need for leave to care for their child due to the closing of the child’s school or day care provider because of the COVID-19 pandemic.
  • Employee
    • • Receives leave of up to 12 weeks, which includes job protection under FMLA
    • • After 2 weeks, receives 2/3 of regular pay, up to $200/day
    • • Total benefit under Division C over the 12 weeks is capped at $10,000. This can be combined with the $2,000 available under Division E below, for a total of $12,000.
    • • Must have worked for the employer for at least 30 days
  • Employer
    • • Employer receives a full credit against payroll taxes for the amounts paid to the employee per the above provisions.
    • • Applicable employers include businesses with < 500 employees.
    • • Small businesses with < 50 employees are exempt if compliance with the requirements threatens the viability of the business.
  • Division E – Emergency Paid Sick Leave Act
    • • This section of the Act provides emergency paid sick time leave to those employees that are unable to work or telework due to the impact of the COVID-19 pandemic.
  • Employee
    • • Employees can receive up to 80 hours of paid sick leave.
    • • There is no required waiting period for eligibility.
    • • If cannot work or telework due to any of the following reasons, the employee will receive regular pay, up to $511/day, which is capped at $5,110 over the two-week period.
      • • Subject to federal, state or local quarantine or isolation order,
      • • Advised by a health care provider to self-quarantine, or
      • • Experiencing COVID-19 symptoms and is seeking a medical diagnosis
    • If cannot work or telework due to any of the following reasons, the employee will receive 2/3 of regular pay, up to $200/day, which is capped at $2,000 over the two-week period.
      • • Caring for their son or daughter whose school or child care center is closed for reasons related to COVID-19, or
      • • Caring for an individual who is subject to a quarantine order or who has Coronavirus
  • Employer
    • • Employer receives a full credit against payroll taxes for the amounts paid to the employee per the above provisions.
    • • Applicable employers include businesses with < 500 employees.
    • • Small businesses with < 50 employees are exempt if compliance with the requirements threatens the viability of the business.
    • • Employer cannot require the employee to use other available paid leave provided by the employer prior to taking advantage of the benefits provided under this
      section of the Act.
  • Division G – Tax Credits for Paid Sick and Paid Family and Medical Leave
                             (Employer Payroll Credit for Required Paid Sick Leave)

    • • This section of the Act provides a credit for the amounts required to be paid by employers pursuant to the provisions outlined under Division C and Division E. This
      reimbursement results in a net $0 out-of-pocket expense and is claimed against payroll taxes on the employer’s Form 941, Employer’s Quarterly Federal Tax
      Return. Congressional intent is for payroll tax deposits to be reduced in anticipation of the credit. More specific guidance on how to claim these credits is to be
      released this week by Labor.
  • Self-Employed Individuals
    • Sick Leave
      • • For those who are self-employed, there is offered a tax credit equal to the qualified sick leave equivalent amount, which is the number of days (not to exceed 10) the individual is unable to perform services in a trade or business, multiplied by the lesser of:
        • • $200 per day ($511 per day for individuals who are subject to quarantine or isolation or are experiencing symptoms of COVID-19 and seeking a medical diagnosis) OR
        • • 67% (100% for individuals who are subject to quarantine or isolation or are experiencing symptoms of COVID-19 and seeking a medical diagnosis) of the net earnings from self-employment of the individual for the taxable year, divided by 260
      • • The total sick leave credit cannot exceed $2,000 ($5,110 for individuals subject to quarantine or isolation or are experiencing symptoms of COVID-19 and seeking a medical diagnosis).
    • Family Leave
      • • For those who are self-employed, there is also offered a tax credit equal to 100% of the qualified family leave equivalent amount, which is the number of days (not to exceed 50) the individual is unable to perform services in a trade or business multiplied by the lesser of:
        • • 67% of the net earnings from self-employment of the individual for the taxable year, divided by 260 OR
        • • $200
      • • The total family leave credit cannot exceed $10,000.
    • • Both credits available to self-employed individuals will be claimed when the 2020 individual tax return is filed. If the credit is larger than the total federal tax liability, the excess will be refunded.

Note that employers will be required to post a notice incorporating the new paid leave requirements, and the Secretary of Labor is directed to create a notice within 7 days of enactment of the Families First Coronavirus Response Act, which should be any day now. March 26 update: The poster is now available at this link.

We will continue to update you as we get more information on Coronavirus legislation and guidance that may impact you. If you have more questions contact an MCB Advisor at 703-218-3600 or click here. 

The information contained within this communication is provided for informational purposes only and is not intended as a substitute for obtaining accounting, tax, or financial advice from a certified professional. Continue to check back here for the most up to date tax information and changes in response to Coronavirus.

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