Coordinate FFCRA and Employee Retention Credits
The coronavirus pandemic has created both short-term and long-term cash flow shortages for many businesses in the United States. As a measure to help prevent business closures and keep Americans employed, Congress established new payroll tax credits in both the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. These payroll credits will help eligible businesses access a nearly immediate benefit on a quarterly basis.
For each of the new payroll credits described below, Aprio can assist with calculating, claiming and filing for applicable credits while also providing guidance on how to best calculate and track qualifying hours and wages. Aprio can also help clients create an overall tax credit strategy that maximizes short- and long-term cash flow concerns and helps clients to leverage the new payroll credits in combination with other state and federal tax credits.
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FFCRA paid sick and family leave tax credits
- The FFCRA introduced new payroll credits aimed at recouping the money paid out for the new mandatory paid sick and family leave required by the legislation.
- The FFCRA requires businesses with 500 or fewer employees to provide paid sick and family leave for employees affected by COVID-19, with pay rates determined by the employee’s qualifying circumstance.
- Employers can claim 100% of these costs, subject to certain caps:
- Up to $5,110 for each employee who takes paid sick leave for a COVID-19 diagnosis or mandated quarantine;
- Up to $2,000 for each employee who takes paid sick leave to care for a family member with COVID-19 or a child whose school has been closed; and
- Up to $10,000 per employee for paid family and medical leave for reasons related to COVID-19; or
- A total aggregate of $12,000 for each employee that takes both paid sick and paid family leave.
CARES Act Employee Retention Credit
The CARES Act created the Employee Retention Credit, which credits a portion of qualified wages for companies experiencing severe business disruptions due to the COVID-19 crisis.
- This credit is equal to 50% of qualified wages, including qualified health plan expenses, for companies with more than 100 employees. Companies with fewer than 100 employees may be eligible for a credit of 100% of qualified wages
- Employers can claim a maximum credit of $5,000 per employee
- Eligible wages for this credit must exclude any wages paid out for sick and family leave under the FFCRA
Having the conversation with the client:
“If you are concerned about how you will pay for the new paid leave requirements established by the FFCRA, or if the COVID-19 crisis is causing a severe disruption to your operations and cash flow, there are several new payroll tax credit opportunities that may be able to provide immediate assistance. Aprio’s payroll tax credit experts can help you create an effective tax credit strategy, and can also assist with calculating, documenting and claiming any applicable credits.”