Families First Coronavirus Response Act (FFCRA) Still Available and Potentially ValuableFebruary 24, 2021
Early last year Congress enacted the “Families First Coronavirus Response Act (FFCRA)” as a way to help businesses with employees diagnosed with or exposed to COVID-19 offset some of their payroll costs. For employers with 500 or fewer employees, the provisions of the FFCRA were mandatory through December 31, 2020. The Consolidated Appropriations Act of 2021 extended the FFCRA’s provisions through March 31, 2021 but they are now voluntary. Even though employers are no longer required to abide by them, they may still wish to do so as they can provide a significant offset against the employer’s payroll costs.
Employers who pay employees as part of an “emergency sick pay” plan, where the employees are not working from home in any capacity (via computer or otherwise), qualify for a credit if the employee:
Is subject to a federal, state or local isolation order related to COVID-19
Has been advised by a health care practitioner to self-quarantine due to COVID-19
Is expressing COVID-19 symptoms and is seeking a medical diagnosis
Is caring for an individual described in 1 or 2
Is caring for a child whose school (or other place of care) is closed for reasons related to COVID-19 or
Is experiencing any substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
An employer who is paying an employee who meets conditions 1, 2 or 3 may pay the employee up to 100% of their normal salary or hourly pay (up to $511 per day) for 10 work days ($5,110 maximum) and receive an offsetting refundable payroll tax credit for that same amount. Essentially, the government will pick up the tab for up to 10 days of wages paid to the affected employee.
An employer who is paying an employee who meets conditions 4, 5 or 6 may pay the employee up to 2/3 of their normal salary or hourly pay, up to $200 per day over a 10-day period ($2,000 maximum) and receive an offsetting refundable payroll tax credit.
Additionally, as a result of the prolonged school shutdowns around the country, provided the employer continues to pay the employee as described above, the government will provide an additional maximum $200 per day, or $1000 per week, for up to 10 weeks for those employees meeting condition 5 above. This translates to a maximum of $10,000 per employee ($200 x 5 x 10).
Based on the above, it is therefore possible for an employer to get the benefits of the additional $2,000 per employee plus the $10,000 as a result of the prolonged school shutdown, maximizing to $12,000 per employee.
The employer must obtain in writing from the employee the request for emergency leave pay, detailing the reasons it is needed. This information should then be disseminated to the respective payroll company to synthesize into the quarterly 941 payroll tax returns, so that the employer gets the appropriate credits as soon as possible. The difference between the FICA due less the credit the employer is entitled to will either result in less FICA taxes to be paid to the government, or a refund to the employer.
It is important to note that wages qualifying for FFCRA credits may not also be used to generate Employee Retention Credits or various income tax credits, nor may they also be counted toward forgiveness of an employer’s PPP loan. Also, employees may only receive up to 80 hours of paid sick leave and 10 weeks of expanded family medical leave from April 1, 2020 through March 31, 2021, so employers must keep track of FFCRA wages paid in both 2020 and 2021.
Finally, FFCRA credits are also available to self-employed individuals. Self-employed individuals who are not able to work due to any of the six conditions described above may qualify for FFCRA credits. It is important for self-employed individuals to document the number of days that they were not able to work during 2020 and/or 2021. Their credits will be calculated and claimed on their 2020 and 2021 1040 form(s).
Please contact Jay Brower, Partner, State and Local Tax Leader, if you have any questions about this article.