Employers with fewer than 500 employees can now take advantage of two new payroll tax credits. These credits seek to combat the economic fallout from the coronavirus by covering paid leave for employees out of work.
The Treasury Department, Internal Revenue Service (IRS) and Labor Department announced the refundable payroll tax credits as part of the Families First Coronavirus Response Act. The Act provides relief to small businesses and their employees.
How the tax credits work
These tax credits seek to reimburse employers for coronavirus-related costs incurred from providing paid leave to their employees. Employees who wish to claim these credits must provide proof of qualifying leave by December 20, 2020. Self-employed workers may claim similar credits. Eligible individuals and employers should also note:
- Paid sick leave: Employees are eligible to receive up to 80 hours of paid sick leave for COVID-19-related reasons.
- Expanded child care leave: Credits are also available when employees’ children’s schools close or child care is unavailable.
- Health insurance costs: The tax credits also cover health insurance costs accrued by COVID-19.
- No liability: Employers are also free from any liability for payroll tax credits.
- Full reimbursement: Employers will receive 100% reimbursement in full for paid leave.
To streamline accessibility, the IRS is instructing businesses to keep any money they would pay in payroll taxes. If that still does not cover paid leave, an employer can apply for an expedited advance with the IRS.
Funds available for the American workforce
These credits aim to help low- and middle-income American families get the money they need to stay healthy and safe during the pandemic. In addition to the economic stimulus package, the government hopes these measures will lessen the damage done to the economy so people can focus on staying safe for the duration. Those currently struggling financially due to wages lost because of coronavirus should inquire about eligibility with their employer. Ultimately, most Americans will have to wait and see how these new laws will help curb the spread of the virus while keeping the economy afloat.