Coronavirus: Tax Credits for Employers Who Voluntarily Offer FFCRA Leave in 2021

The Families First Coronavirus Response Act provided emergency paid leave to employees who needed time off due to COVID-19. Although the law has now expired, employers who voluntarily continue to offer leave under the law are eligible for tax credits.

In March 2020, in response to the coronavirus (COVID-19) global pandemic, then-President Donald Trump signed into law an emergency relief bill that provided paid sick leave and expanded family leave for employees of businesses with fewer than 500 workers, among other provisions.

The law, known as the Families First Coronavirus Response Act, took effect April 2, 2020, and its provisions expired at the end of 2020. However, the Department of Labor has stated that employers that continue to voluntarily provide paid leave under the FFCRA are eligible for a tax credit for leave taken through March 31, 2021.

Here's a look at some of the FFCRA's key provisions.

Paid Leave Provisions

The law required covered businesses to give up to 80 hours of paid sick time to any full-time employee who:

  • had contracted the virus or was quarantined
  • had symptoms of the disease and was seeking medical treatment
  • needed to care for a family member who had the virus or was quarantined, or
  • needed to care for a child under 18 whose school had closed because of coronavirus.

Payments were capped at $511 per day ($5,110 total per employee) for workers who had the virus or are under quarantine, and $200 per day ($2,000 total per employee) for workers caring for family members who were quarantined or children. Note that the law prohibited employers from requiring their workers to find a replacement or cover in order to use paid leave.

Employers were eligible for reimbursement of all their costs via tax credits. As noted above, although the FFCRA expired at the end of 2020, employers that choose to continue voluntarily offering leave under the FFCRA can claim tax credits for any leave granted through March 31, 2021.

Part-Time and Self-Employed Workers

Part-time workers who met the above conditions were also eligible for paid leave. The amount to which they were entitled was the average number of hours they worked every two weeks. So if they worked 15 hours a week, they were entitled to 30 hours of paid sick time for the year. Earned leave did not carry over into the following year.

In addition, the law provided a form of paid leave for independent contractors and gig-economy workers. Assuming they met the requirements above, self-employed individuals could claim a tax credit for each day they couldn't work equal to $200 or their average daily income, whichever was lower. To claim the tax credit, self-employed individuals were supposed to reduce their self-employment income on their next quarterly estimated tax filing.

Expanded Family and Medical Leave Act (FMLA) Leave

Also under the law, government employers and private employers with fewer than 500 workers had to give paid FMLA leave to employees who were caring for a child whose school or daycare had closed. Payments were limited to $200 per day ($10,000 total per employee). Again, employers were entitled to full reimbursement of their payments through tax credits.

In addition, the law lowered the amount of time that an employee must have worked for an employer to become eligible for emergency FMLA leave: from one year to 30 days.

The law contained a hardship exemption for businesses with fewer than 50 employees if providing leave would jeopardize their business.

Ten-Day Unpaid Period

The law provided that the first ten days of emergency FMLA leave would be unpaid, although an employee could choose to use accrued sick leave, vacation days, or other paid leave to cover any portion of the waiting period.

Once the ten-day period expired, the employer typically had to pay full-time workers two-thirds of their regular wage for the number of hours they would ordinarily be scheduled.

Other Provisions of the Law

In addition to its employment-related measures, the new law contained many other provisions, including:

  • requiring health insurance companies to fully cover coronavirus testing and treatment
  • increased funding for nutrition programs for children, the poor, and the elderly
  • emergency funding for unemployment benefit programs
  • subsidies for employer health insurance premiums

Additional Rights Available

Although the FFCRA has now expired, you might have other paid leave benefits available under state law, local law, or your employer's own policies.

Check with an employment lawyer in your area or your company's human resources department to learn the full range of options available.

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