The IRS recently re-updated its frequently asked questions on Jan 29, 2021 regarding the continued availability of employer tax credits under the FFCRA (Families First Coronavirus Response Act). The leave requirements of the FFCRA had expired on December 31st, 2020, and the law's tax credits were extended for those employers who voluntarily provide FFCRA leave to employees through March 31, 2021. The brand new updates address this extension.
FFCRA Leave Provisions
The FFCRA requires employers with less than 500 employees to provide employees 80 hours of emergency paid sick leave and 10 weeks of an expanded paid family leave for COVID-19 related reasons at specified pay rates. The leave requirements have been effective since December 31st 2020.
FFCRA Tax Credits
The FFCRA provided tax credits for employers to cover the costs of the employee leave required by the leave. The leave requirements were not continued after December 31st 2020, but the Consolidated Appropriation Act, 2021 (CAA) extended the tax credits for the employers that choose to offer leave that would have qualified under the FFCRA leave provisions.
The tax credits cover qualified paid sick leave and family leave wages, qualified health plan expenses allocable to employee leave wages, and the employer’s share of Medicare Tax related to the qualified wages. Tax credits are available for self-employed individuals too. Eligible employers can claim the credits on their federal employment tax returns (e.g., Form 941, Employer's Quarterly Federal Tax Return), but they can benefit from the credits even more by reducing their federal employment tax deposits.
As an employee or self-employed individual, you should stay informed about these updates and let your boss know what’s what with these tax credits. They’re good for you and for your employer so it’s a win-win.
Keep checking our blog for more updates on these tax credits and other informative tips and tricks that make taxes and financial planning a breeze. For more tax advice from your friendly neighborhood experts, visit Landmark Tax and contact one of their licensed professionals today.