COVID-19 Resources

IRS Gives Clarifying Guidance on Families First Coronavirus Response Act

Written on March 21, 2020

On March 20, 2020, the IRS published guidance for implementation of the Families First Coronavirus Response Act and announced that employers can begin taking advantage of the credits allowed under the Act.  A detailed analysis of the Act can be found here.

Background

In summary, the Act requires employers of fewer than 500 employees to provide all employees with up to 80 hours of paid leave, regardless of how long they’ve worked for the company,  if unable to work (or telework) for the following reasons related to COVID-19:

  1. The employee is subject to a federal, state or local quarantine or isolation order
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to the virus
  3. The employee is experiencing symptoms of the virus and seeking a medical diagnosis
  4. The employee is caring for another individual who falls into categories 1 or 2, above
  5. The employee is caregiving for a child of the employee if their school or place of child care has been closed or is unavailable due to the virus
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services

Employers must pay the leave at the employees’ normal rates if leave is taken by reason of categories 1 through 3 above, subject to a per employee maximum of $511 per day.  If leave is taken by reason of categories 4 through 6 above, the leave must be paid at a rate equal to at least two-thirds of his or her normal rate, subject to a per employee maximum of $200 per day.

Additionally, the Act provides that, after the initial 10 days, employers must continue to provide employees with paid leave if an employee is unable to work (or telework) due to a need to care for a child under the age of 18 if their school or place of childcare has been closed or is unavailable due to a public health emergency related to COVID-19. This leave must be paid at two-thirds of his or her normal rate, subject to a maximum of $200 per day or $10,000 in total (up to 10 weeks).

Updates Provided by the IRS

In the guidance provided on March 20, 2020, the IRS announced that employers could begin taking advantage of the credits provided in the Act. Additionally, the IRS provided for expedited methods for employers to recoup the costs of qualifying leave to employees.

The IRS indicated that employers providing paid leave under the Act may retain a portion of their payroll taxes equal to the amount of leave paid, rather than depositing the payroll tax with the IRS (this includes both the employee and employer portion of FICA, as well as amounts withheld for employees’ income tax).  In the event that retaining the aforementioned payroll taxes is not sufficient to cover the total cost of qualifying leave paid, the employer will be able to file a claim to receive accelerated payment from the IRS. The IRS expects to publish specific procedures for claiming the accelerated payment next week and indicated that it expects to process payments for expedited claims within two weeks.

The IRS also indicated that the Department of Labor will be issuing a temporary, 30-day “non-enforcement policy” to provide time for employers to come into compliance with the Act.  The Department of Labor will not bring action against any employer during this time so long as the employer has acted reasonably and in good faith to comply with the Act.

Lastly, the IRS indicated that the Department of Labor would be providing emergency guidance to clearly determine if an employer with fewer than 50 employees is able to qualify for exemption under the act.  The Act provides for this exemption if compliance with the Act would jeopardize the viability of the business as a going concern.

We will continue to monitor this provision and keep you updated on any changes. If you have any questions about how this will affect you, please contact your Warren Averett advisor or complete this form to have a member of our team reach out to you.

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