With many small businesses struggling under the new regulations surrounding the global pandemic of COVID-19, also known as Coronavirus, the IRS has announced measures that it plans to take to assist entrepreneurs. If your business is considered small or medium (defined by having 500 employees or fewer) you may be eligible for two new refundable payroll credits. These credits, instituted as a result of the Families First Coronavirus Response Act, which was signed by President Donald Trump on March 18, 2020, will reimburse employers dollar-for-dollar for the cost of providing Corona-related leave to employees.
According to the IRS website, under the Act, businesses can receive reimbursement for up to 80 hours of Coronavirus-related leave for each employee. This leave can be in response to a quarantine order, contracting COVID-19, or having to care for a family member, including children who have been released from school and require childcare until their educational establishment is reopened.
The reimbursement is for 100% of the employee’s pay for Corona-related illness with a maximum set at $511 per day for ten days. For leave related to family care needs, such as caring for a family member in quarantine or due to school closures, the limit has been set at 2/3 of the employee’s regular pay up to $200 per day for ten days, meaning that the maximum reimbursable payout is $2000. If the employee’s leave is childcare-related, they may also be eligible for up to 10 additional weeks of leave at 2/3 of their usual pay.
Health insurance costs are also included in the reimbursement. Eligible employers can claim the credit for applicable leave taken between the effective date of the Act and December 31st, 2020, and will face no payroll tax liability. The IRS has promised that funds will be easy to obtain and that they will send refunds as quickly as possible during this time.
How to Claim Your Reimbursement Funds
In order to take advantage of these fiscal policies immediately, small and medium-sized business owners can retain funds that they would ordinarily use to pay IRS payroll taxes. If your normal payroll taxes would not cover the required paid leave, you may request an expedited advance by submitting a streamlined claim form to the IRS. These forms are expected to be released by March 27th.
Small Business Protection and Exemptions
Small businesses with 50 or fewer employees are exempt from the requirement to provide COVID-related childcare paid leave in cases where the functionality of the business would be threatened by extended absence. The requirements for companies with 51 or more employees are subject to a 30-day non-enforcement period for good faith compliance efforts.
In a time of uncertainty for small businesses, these measures bring a collective sigh of relief amongst entrepreneurs who are balancing the health and safety of their employees and the financial wellbeing of their businesses. For more information on credits and relief measures, you can visit the Coronavirus Tax Relief page on the IRS website.