In Notice 2020-21, the IRS confirmed that the tax credits for qualified sick leave wages and qualified family leave wages required to be paid under the Families First Coronavirus Response Act (H.R. 6201, "the Act") will apply to wages paid for the period beginning April 1, 2020, and ending

December 31, 2020.

The IRS also confirmed that days occurring during the period beginning on April 1, 2020, and ending on December 31, 2020, will be taken into account for credits for qualified sick leave equivalent amounts and qualified family leave equivalent amounts for certain self-employed individuals.

Background

As previously reported (EY Payroll Newsflash, Vol. 21, 077, March 19, 2020), the Act provides certain tax relief for employers and employees as a result of the COVID-19 pandemic. The Act requires private sector employers with fewer than 500 workers and government entities to provide: (1) paid sick leave (two weeks for full-time employees and average hours over a two-week period for part-time employees) necessary to respond to COVID-19 issues; and (2) as many as 12 weeks of job-protected leave to employees to care for a child whose school or place of care is closed. Employers will receive a refundable payroll tax credit for these additional required wages being paid to impacted employees.

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) made certain minor changes to these provisions:

• Employees laid off on or after March 1, 2020, who are later rehired, are eligible employees if they worked for the employer for at least 30 of the 60 calendar days prior to the layoff
• Employers subject to the mandated leave are not required to pay employees more for the leave than the specified limits:
• $200 per day and $10,000 in the aggregate, for paid leave required by the Emergency Family and Medical Leave Expansion Act
• $511 per day and $5,110 in the aggregate, or $200 per day, and $2,000 in the aggregate, depending on the type of leave, for leave required by the Emergency Paid Sick Leave Act

The credit for this paid leave may be advanced to employers in accordance with forms and instructions provided by the Treasury Secretary, who has authority to prescribe the necessary rules. The Treasury Secretary will waive penalties for failure to deposit if the failure was in anticipation of the payroll credits for paid leave.

The Director of the Office of Management and Budget is permitted to exclude certain categories of Executive Branch employees from the paid leave requirements.

An IRS news release (IR-2020-57) and a parallel Department of Labor news release set out an early framework of the plans to allow small and midsize employers to immediately take advantage of the two new refundable payroll tax credits, fully reimbursing them for the cost of providing COVID-19-related leave to their employees. Information regarding the process to receive an advance payment of the credit will be posted next week at Coronavirus Tax Relief on IRS.gov.

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EY Payroll News Flash