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The IRS has added or updated more than 80 answers to questions in its series of FAQs on “COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses.” The changes affect questions in all 13 of the subtopics covered by the FAQs:
- Eligible employers
- Qualified sick leave wages
- Qualified family leave wages
- Qualified health plan expenses
- How to claim the credits
- Substantiating eligibility
- Deductibility of tax credits
- Interaction of tax credits
- Third-party payers
- Self-employed individuals
Refundable tax credits are available to businesses for employee paid leave taken under the federal Families First Coronavirus Response Act (FFCRA), enacted in March 2020 and effective through Dec. 31, 2020.
FFCRA Paid Leave
Under the FFCRA, employees of businesses with fewer than 500 employees may receive up to 80 hours of paid sick leave for their own health needs or to care for others. These employees are also eligible for up to an additional 10 weeks of paid family leave to care for a child whose school or place of care is closed, or child care provider is closed or unavailable due to COVID-19 precautions.
Employers may take advantage of FFCRA tax credits to cover costs related to the law’s required employee leave.
FFCRA Tax Credits for Paid Leave
The FFCRA tax credits provide employers with funds to cover certain costs of the employee leave required by the law. Specifically, the tax credits are available for:
- Qualified sick leave wages;
- Qualified family leave wages;
- Qualified health plan expenses allocable to employee leave wages; and
- The employer’s portion of Medicare tax related to the qualified wages.