Federal aid package helps individuals affected by COVID-19

Your Guide to State, Local, Federal, Estate + International Taxation

In response to the COVID-19 pandemic, congress passed The Families First Coronavirus Response Act (H.R. 6201), a federal aid package which became law on March 18, 2020. The act is an emergency measure set to expire in late 2020. In a bid to help mitigate the pain individuals and companies are feeling during the pandemic, the act seeks to provide healthcare and sick leave, guarantees free testing for the novel coronavirus (COVID-19), expands the Family and Medical Leave Act (FMLA), bulks up unemployment insurance, expands nutrition assistance and increases Medicaid funding.

Don’t Miss: Tax Deadlines pushed due to COVID-19

Here are some highlights.

  • 80 hours of emergency paid sick leave for affected by COVID-19
  • Paid family and medical leave due to COVID-19 for up to 12 weeks.
  • First 10 days of emergency family and medical leave may be unpaid.
  • The mandatory paid leave only applies to employers with less than 500 employees, except for health care workers and first responders.
  • The federal government provides tax credits to cover sick time costs.
  • Sick time is pro-rated for part-time employees or employees with varying schedules
  • COVID-19 sick leave is paid at two-thirds of regular rate of pay, capped at $200 per day ($2,000 total) if leave is taken to care for others or due to inability to work because of the coronavirus.
  • Employers can’t require employee use other paid leave before using this paid leave.
  • Employers can’t require employees find replacement to cover their shifts.
  • Small businesses with fewer than 50 employees may be exempt from emergency paid sick if leave jeopardizes the business.
  • Employers could face penalties for violating the new emergency paid sick leave rules or discriminating against employees who take emergency paid sick leave.
  • Expands FMLA to provide employees (includes union employees) employed for at least 30 days by employers with fewer than 500 employees, with the right take up to 12 weeks of job-protected leave through December 31, 2020 due to the COVID-19. Health care workers and first responders can be excluded from this provision.
  • The first ten days of FMLA can be unpaid. Employees can use other paid time off such as vacation, sick days or emergency paid sick leave to cover the ten days.
  • Under expanded FMLA, employers can’t require employees use their accrued paid time off before using the 12 weeks of extended FMLA leave.
  • Employers pay two-thirds of regular pay for emergency FMLA leave, capped at $200 per day ($10,000 total). Payments are pro-rated to the amount of paid time off for part-time employees.
  • S. Department of Labor can exclude certain health care providers and emergency responders from taking emergency family and medical leave, exempting small businesses with fewer than 50 employees and employers with fewer than 50 employees in a 75-mile radius from civil damages in an FMLA lawsuit.
  • Employers must hold an employee’s job open until the end of the leave period. Employers with fewer than 25 employees are exempt if the employee’s position can’t be held, the employer made reasonable effort to hold it, and employer agrees to reinstate the employee if an equivalent position becomes available within a year.
  • The act creates refundable dollar for dollar payroll tax credit for employers to cover paid sick and family leave based on employer’s portion of Social Security or Railroad Retirement Tax Act (RRTA) tax.
  • Payments to employees who need time off for self-isolation, diagnosis or care of a COVID-19, or because of doctor’s order, the credit is capped at $511 per day.
  • Payments to employees who need time off to care for a family member with COVID-19 or a child under age 18 whose school or daycare is closed, the credit is capped at $200 per day.
  • The credit for emergency paid sick leave wages is only available for a maximum of 10 days. For expanded FMLA, the credit is capped at $200 of eligible wages per employee per day and $10,000.
  • Both of these credits are increased by any amounts paid or incurred by the employer to maintain a group health plan if the amount paid is excluded from the employee’s gross income under the tax code and is “properly allocable” to the respective qualified sick or FMLA wages required to be paid under the act.
  • If the credit exceeds the employer’s total tax liability, the excess is refundable to the employer.
  • Employer can’t get a deduction for the amount of the credit. In addition, employers may not receive the credit in connection with wages for which a credit is allowed under Section 45S.
  • Self-employed individuals can use the same refundable tax credit against the individual’s self-employment tax. The credit is capped at the lesser of the amounts that apply to eligible wages per employee or the individual’s lost self-employment income.
  • Payments for emergency paid sick leave or FMLA will not be considered wages for purposes of calculating the employer’s portion of the Social Security or RRTA tax.
  • Employer tax credits are increased by the amount of the employer’s liability for Medicare tax on wages paid, exempting the emergency sick leave and FMLA payments from that tax as well.
  • The law does not exempt these payments from the definition of wages for the purpose of other taxes including the employee’s portion of Social Security, RRTA and Medicare taxes.
  • This act is sent to expire on December 31, 2020.

For more information and resources on COVID-19, see our coronavirus page. Feel free to contact your Henry+Horne tax adviser with any questions on the federal aid package. We understand it is a lot of information and we are here to help if you are confused.

Beth Hawley