Congress Passes Tax Relief Bill to Mitigate Impact of the Coronavirus

On March 18, President Trump signed the Families First Coronavirus Response Act into law providing relief through tax credits, and a 90-day waiver of penalties and interest on tax payments.  The bill also increases funding for testing for the coronavirus.

Here are the main takeaways and tax credits from the bill:

Paid Leave

Employers with fewer than 500 employees are required to provide paid sick leave to employees who are forced to stay home due to quarantining or to care for a family member.  The bill compensates employers for this in the form of a tax credit which is refundable  against their share of FICA tax.  The credit can be claimed on a quarterly basis.

The amount of the credit is limited to $200 per day.  However, the credit is increased to $511 per day if the employee is on leave because he/she:

  • is subject to a federal, state or local quarantine or isolation order related to COVID-19
  • has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
  • is experiencing symptoms of COVID-19 and seeking a medical diagnosis

The total hours of paid sick leave is limited by the new law and the payroll tax credit is limited to 10 days of wages.

For family leave wages paid by the employer, under the qualified family leave provision where the employee is forced to stay at home to care for a child if the school or place of care is closed, a separate refundable payroll tax credit applies. The 100% credit against the employer’s share of the payroll tax is limited to $200 per day, up to an aggregate of $10,000.

For self-employed persons, the credit is allowed against regular income taxes. The limit on sick leave wages is determined by multiplying the number of days (subject to limitation) the self-employed person is unable to perform services in the trade or business by the lesser of 67% of the taxpayer’s average daily self-employment income or, $200.

The limits are increased to 100% and $511, respectively, in the case of the three scenarios listed above that apply to the employer payroll tax credit.

The same calculation is made for family leave wages, with days unable to perform services (no more than 50) multiplied by the lesser of 67% of the taxpayer’s average daily self-employment income, or $200.

These provisions are all temporary and apply until December 31, 2020.

Sax will continue to keep you posted as updates emerge.  Should you have any questions, please reach out to your Sax advisor.