Tax Credits under the FFRCA

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Currently, the tax credit for employers who voluntarily provide leave consistent with the FFCRA had been extended until March 31, 2021.  Now, effective April 1, 2021, the American Rescue Plan ct (ARPA) has extended the date employers can receive tax credits for qualified wages paid to employees through September 30, 2021.

Employees now have 14 weeks of paid leave available (two weeks of EPSL and twelve weeks of EFMLEA).

Let’s begin by reviewing the reasons that employees can take leave (either EPSL or EFMLEA) under the new Act:

  1. Instances where an employee is subject to a quarantine or isolation order;
  2. Where an employee was told to self-quarantine by a healthcare provider due to COVID-19;
  3. Where an employee is experiencing symptoms  of COVID-19 and is seeking a medical diagnosis, seeking/awaiting the results of a medical diagnosis, or obtaining a COVID-19 vaccine or recovering from any injury, disability, illness, or condition related to the vaccine;
  4. Where an employee is caring for an individual who is subject to a quarantine or isolation order or has been advised to self-quarantine; and
  5. Where an employee’s son or daughter’s school or place of child care is closed due to COVID-19.

The tax credits available between April 1, 2021 and September 30, 2021 are the same as under the original FFCRA, except for the increased aggregate cap under the EFMLEA.

Tax credits are available as described below.

EPSL

The credit available for EPSL when used for reasons 1, 2, or 3 (self-care) is up to 100% of an employee’s regular rate of pay, with a limit of $511 per day.

The credit available for EPSL when used for reasons 4 or 5 (care for another) is up to 2/3 of an employee’s regular rate of pay, with a limit of $200 per day.

EFMLEA
The credit available for EMFLEA for any reason is up to 2/3 of an employee’s regular rate of pay, with a limit of $200 per day and a cap of $12,000 per employee.

Employers can now also claim a credit for their share of the Medicare tax on the employee’s wages (1.45%), in addition to the 6.2% credit for social security.

Applicability of tax credits under the ARPA are subject to IRS guidance, and we expect the IRS will issue additional FAQs in the near future.

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