Under the Families First Coronavirus Response Act, employers can receive tax credits that immediately and fully reimburse them for the cost of providing paid leave to employees affected by COVID-19. Employers may provide a full-time employee with up to 80 hours of paid sick leave and up to 10 weeks of paid family leave. Part-time employees are also covered.This relief helps ensure employees are not forced to choose between receiving a paycheck or staying home to care for themselves, a child, or other family member.
In addition to the relief for employees, businesses can claim two new refundable payroll tax credits for providing paid leave to their employees. The Paid Sick Leave Credit and Paid Family Leave Credit are available for eligible employers who pay qualified sick leave wages or qualified family leave wages from April 1, 2020 through December 31, 2020, and who have fewer than 500 employees. Both credits will immediately and fully reimburse employers for the cost of providing COVID-19 related leave to their employees.
Employees should know the following information about paid leave under the CARES Act:
Paid Sick Leave for Workers
An employer may provide a full-time employee with up to 80 hours of paid sick leave. A part-time employee may be allowed paid sick leave for the number of hours the employee works over a two-week period if the employee is unable to work or telework because they are either:
Subject to federal, state, or local quarantine or isolation orders related to COVID-19;
Advised by a health care provider to self-quarantine due to COVID-19;
Experiencing COVID-19 symptoms and are seeking a medical diagnosis;
Caring for a person subject to federal, state, or local quarantine orders related to COVID-19 or has been advised to self-quarantine;
Caring for a child whose school or place of care is closed or care provider is unavailable for reasons related to COVID-19; or
Experiencing any other substantially similar condition.
Employers pay the sick leave benefits at 100% of an employee's regular pay, up to $511 per day and $5,110 in total for the care of an employee's own health. For the care of an employee's family members, employers pay sick leave benefits at two-thirds of an employee's regular pay, up to $200 per day and $2,000 in total.
Paid Family Leave to Care for a Child
An employer may provide up to 10 weeks of paid family leave at two-thirds of an employee's regular pay, up to $200 per day and $10,000 total, if the employee is unable to work or telework because they are caring for a child whose either:
School or place of care is closed due to COVID-19; or
Childcare provider is unavailable due to COVID-19.
Combining the 2 weeks of paid sick leave and 10 weeks of paid family leave, an employee may receive up to a total of $12,000 in paid leave over a total of 12 weeks to care for a child.
For more information, see the following resources:
COVID Tax Tip 2020-63 #IRSTaxTip