The Families First Coronavirus Response Act (FFCRA,) signed into law on March 11th, 2020 has many financial implications for small business owners and entrepreneurs. Most notably, the Act includes guidelines for COVID-19 related sick, medical, and family leave, as well as corresponding tax credits for employers to help ease the financial burden of these coronavirus absences.
The FFCRA requires businesses with under 500 employees to provide paid leave for any staff members who have worked 30 or more days with the company prior to the Act’s effective date. As we detailed in our article “IRS Announces Paid Leave and Tax Credit Policies for Coronavirus,” the maximum benefit amount for Corona-related illness is $511 per day for up to 10 days. The article also requires that employers provide up to ten days of 2/3 pay for leave taken as a result of a family member who is sick and/or quarantined and up to 12 weeks of leave to care for a child who is experiencing school closure. The maximum for this family leave is $200 per day up to $10,000 and is stackable with the aforementioned two weeks of emergency paid leave.
In order to offset the financial burden on employers, the IRS has announced that it will offer tax credits to help pay for leave costs. Business owners may take their credit out of their normal payroll taxes, as it is allowed against the employer portion of Social Security Taxes. If payroll taxes do not cover the full amount of leave, the company can file for expedited payment from the IRS.
According to Accounting Pro Today, there is also a refundable tax credit for self-employed individuals which covers 100% of qualified sick leave wages (for themselves or to care for a sick family member) and 67% of family leave wages for school and workplace closures.
In order to claim these credits, employers should be sure to keep proper documentation of employee Coronavirus-related leave for testing, illness, and childcare. Create an internal system that logs the dates, times, and purposed of any COVID-19 related leave that your employees take in order to create documentation should the IRS require it in the future in order to support your credit claim.
While the leave and financial portions of the FFCRA are the most immediately pertinent to small business owners, there are also many other sections with which you should make yourself familiar if relevant to your company or personal situation. For example, the Act also includes provisions for free Coronavirus testing, unemployment insurance, food security measures, and Medicaid funding by the Federal government. For more information and answers to frequently asked questions about the FFCRA, read our article here.