March 23, 2020
On Friday March 20, 2020, the Internal Revenue Service (IRS) issued News Release (NR)-2020-57, which in conjunction with the U.S. Treasury Department and the Department of Labor, announced that covered small and mid-sized employers under the Families First Coronavirus Response Act (Act) (generally, those with less than 500 employees) can immediately begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing coronavirus (COVID-19) related leave to their employees.
Under the Act, employees receive up to 80 hours of paid sick leave and expanded paid childcare leave when employees’ children’s schools are closed or childcare providers are unavailable, due to COVID-19. Employers receive 100 percent reimbursement for this paid leave in the form of a tax credit. This includes the cost of maintaining health insurance for employees during the leave period. Furthermore, employers will not incur a payroll tax liability.
How to Obtain Reimbursement
The reimbursement amount will be offset against payroll taxes paid by the employer. If a refund is owed, the IRS will do so as quickly as possible. The rationale behind this is to permit businesses to retain and access funds that they would otherwise be required to pay the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that is expected to be released this week.
The complete news release is available here. For further information regarding the Act and the most up-to-date information on COVID-19, please visit our dedicated webpage at burnhambenefits.com/covid-19.
For additional information, please contact your Burnham Benefits Consultant or Burnham Benefits at 949-833-2983 or firstname.lastname@example.org.
Burnham Benefits does not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with the Patient Protection and Affordable Care Act and other applicable federal and state law requirements, and is based on Burnham Benefit’s interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.