The Internal Revenue Service has issued Notice 2020-21 announcing start dates for the employment tax credits for paid qualified sick leave and family leave wages required by the Families First Coronavirus Response Act (FFCRA). As per the guidance, the credits will apply to wages and compensation paid for periods beginning on April 1, 2020, and ending on December 31, 2020. Additionally, days beginning on April 1, 2020, and ending on December 31, 2020, will be taken into account for the credits for paid qualified sick leave and family leave equivalents for certain self-employed individuals as provided by the Act.
The April 1 date was selected in coordination with the U.S. Department of Labor’s determination of the effective date for employers’ compliance with the Emergency Family and Medical Leave Expansion Act and Emergency Paid Sick Leave Act requirements. More information can be found at the Department of Labor FFCRA FAQs website
The Act’s Division C (Emergency Family and Medical Leave Expansion Act) and Division E (Emergency Paid Sick Leave Act) require employers with fewer than 500 employees to provide expanded paid family leave and paid sick leave to certain employees. These employees are unable to work or telework due to certain circumstances related to the novel coronavirus (COVID-19).
Tax Credits for Paid Leave
The Act’s Division G provides payroll tax credits to employers that make the required leave payments to their employees. The Act also provides comparable credits for self-employed individuals carrying on any trade or business, if the self-employed individual would be entitled to receive paid leave if he or she were an employee of an employer (other than himself or herself).
The refundable tax credits for most employers with fewer than 500 employees apply to qualified sick leave and family leave wages paid for the period from April 1, 2020, to December 31, 2020. Additionally, the self-employment tax credit will be determined based on days occurring during the period beginning on April 1, 2020, and ending on December 31, 2020.