Employment TAX Credits Under ‘Families First Coronavirus Response Act (FFCRA)’

Last month, president Trump had signed the Families First Coronavirus Response Act (“FFCRA”) into law on 18th March, 2020 and it’s a sigh of relief for small and medium business employers.

This act becomes boon for employers in their employee retention process as it offers COVID-19 Related Tax Credits towards the mandated Paid Sick Leave and Paid Family Leave.

As the situation with COVID-19 continues to evolve, the small and medium size business (SMB) are in uncharted waters. In such uncertain times, acts like FFCRA are really crucial to make sure that they are taking care of their employees, while adjusting to the new legal requirements.

The Families First Coronavirus Response Act, addresses the nation’s employers by enabling refundable tax credits to reimburse dollar-to-dollar for the costs incurred in providing wages of paid sick & family leaves due to the impact of COVID-19 outbreak on Americans.

Coverage and Eligibility Information

  • The following payroll related tax credits are for the employers with fewer than 500 employees and only for payrolls, that are run between April 1st to Dec 31st, 2020. So, the payroll check date is mandate to be in-between these dates only.
  • For each employee, the Paid Sick Leave wages are limited up to $5110 and $74.09 of Employer Medicare, to a tax credit total of $5184.09 is made available for the Employer.
  • Employers need NOT pay their Social Security (OASDI) portion of taxes of 6.2% on these Paid Sick Leaves, which is up to $5,110 per employee, who acquired Paid Sick leave.
  • For each employee, the Paid Family Leave is entitled up to $10,000 and the Employer Medicare is of $145, which sums up to a total of $10,14 tax credit – All this available for the Employer.
  • Employers need NOT to pay their portion of Social Security (OASDI) taxes of 6.2 percent on these Paid Family Leaves of up to $10,14 per employee who was on Paid Family Leave.

Besides, the FFCRA act also allocates $1 billion as funds for the state unemployment programs and empowers state governments with new flexibility of providing unemployment insurance to workers.

The FFCRA flawlessly eliminates the need for employees to wait a week before they are eligible for Unemployment Insurance and eases the work search requirements, meaning all employees will be able to apply for their unemployment insurance quickly.

The law even provides more money to the U.S. states to fund their Unemployment Insurance (UI) programs. These new rules enable SMB businesses make better decisions about their employees, especially those who are considering layoffs or staff changes in the light of coronavirus COVID-19 crisis.

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