The IRS has updated its frequently asked questions (FAQ) regarding determining the amount of the tax credit for family leave wages under the Families First Coronavirus Relief Act FFCRA.
Qualified family leave wages
The IRS updated FAQs 25 and 25a, clarifies that qualified FFCRA family leave wages are wages for social security and Medicare tax purposes. This can also include compensation that eligible employers must pay eligible employees for periods of leave during which they are unable to work or telework due to a need for eligible leave. Eligible reasons are expanded to cover care for a child if the child’s school or place of care has been closed (including the closure of a summer camp, summer enrichment program, or other summer program). Employees can take family leave if the child care provider of the child is unavailable, for reasons related to COVID-19.
10 Day Period Clause
The first ten days for which an employee takes leave for this reason may be unpaid. However, during that 10-day period, an employee may be entitled to receive qualified sick leave wages as provided under the ESPLA. They may als receive other forms of paid leave, such as accrued sick leave, annual leave, or other paid time off under the eligible employer’s policy. After an employee takes leave for ten days, the eligible employer must provide the employee with qualified FFCRA family leave wages for up to ten weeks.
Tax Credit for Family Leave Wages
Qualified FFCRA family leave wages for purposes of the tax credit are calculated without regard to federal taxes imposed on or withheld from the wages. This includes the employee’s share of social security taxes, the employee’s and employer’s shares of Medicare tax, and federal income taxes required to be withheld.
Visit the IRS FFCRA FAQ for more information
This summary is intended for market awareness only. It is not exhaustive and it is not to be used for legal advice or counsel. Please access any number of public resources available to monitor changes in employment laws that may affect your organization or consult with a labor law attorney.