IRS Guidance for Employers on Refundable Credits for Covering Qualified Employee Leave

By Mark LeRoux

On March 18, 2020, Congress enacted the Families First Coronavirus Response Act (the "Act") providing for paid sick leave and expanded family and medical leave for coronavirus-related reasons and creating refundable credits for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. The IRS issued guidance on receiving the refundable credits.

Employers are normally required to withhold federal income taxes and the employee's share of Social Security and Medicare taxes from their employees' paychecks and pay such amounts to the IRS. 

In lieu of making such payments to the IRS, eligible employers can retain such taxes, plus the employer's share of Social Security and Medicare taxes, in an amount equal to the qualifying sick and childcare leave paid by the employer. If the retained amounts do not fully cover those payments, an employer can file a request for an accelerated payment from the IRS, which it expects to process in two weeks or less. The details of this expedited procedure will be announced next week.

For more information, see the IRS update here.

If you have questions about this issue, please contact any of the attorneys in our Tax Practice Group.

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