Under the new CAA legislation, the FFCRA credit for family and sick leave has been extended through March 31, 2021. After December 31, 2020, providing the wages to employees who meet the qualifying reasons below is no longer mandatory. However, an employer can still voluntarily pay these wages and possibly receive the FFCRA tax credit up to 100% of the paid wages and up to certain dollar amounts.
The credit is still capped at up to $511/ per day for a maximum of ten days (80 hours) per employee from April 1, 2020, through March 31, 2021. If an employee has already used their full 80 hours in 2020, no credit can be claimed in 2021. Also, the same wages cannot be used to receive the Employee Retention Tax Credit if you’re eligible for it and apply for it.
Here is a brief summary regarding the FFCRA credit for 2021. Contact your CPA for additional guidance and clarification.
Qualifying Reasons for Leave:
An employee qualifies for paid sick time if the employee is unable to work and unable to telework due to a need for leave because the employee:
(1) is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
(2) has been advised by a health care provider to self-quarantine related to COVID-19;
(3) is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
(4) is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
(5) is caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19; or
(6) is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
Sick Pay Credit Amounts
(1), (2) or (3) above is entitled to paid sick leave for up to two weeks (up to 80 hours) at the employee’s regular rate of pay, or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $511 per day and $5,110 in the aggregate.
(4), (5) or (6) above is entitled to paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $200 per day and $2,000 in the aggregate.
Full-time employees can receive up to 80 hours over two weeks. Part-time employees are also eligible for the credit with the eligible hours limited to their average number of hours worked in a two week period.
Eligible Employers that pay qualified leave wages will be able to claim a credit equal to the qualified leave wages paid as defined above, plus the allocable qualified health plan expenses, and the amount of the employer’s share of Medicare taxes. The employer can reduce their normal federal tax deposits by the amount of the credit rather than depositing them with the IRS.
Employers claiming the credits must retain records and documentation related to and supporting each employee’s leave to substantiate the claim for the credits. Employers must also retain the related Forms 941, Form 7200, if filed, and any other applicable filings made to the IRS requesting the credit.
Author – Stephanie Baker, CPA