COVID Tax Tip 2020-53, May 7, 2020

Small and midsize employers can claim two new refundable payroll tax credits. The paid sick leave credit and the paid family leave credit are designed to immediately and fully reimburse eligible employers for the cost of providing COVID-19 related leave to their employees.

Here are some key things to know about these credits.

Paid sick and family leave

For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave when they are sick or caring for someone else who is, and up to 10 weeks of paid family leave when their children’s schools or place of care are closed, or child care providers are unavailable due to COVID-19.

Coverage

  • Employers receive 100% reimbursement for required paid leave.
  • Health insurance costs are also included in the credit.
  • Employers do not owe their share of social security tax on the paid leave and get a credit for their share of Medicare tax on the paid leave.
  • Self-employed individuals receive an equivalent credit.

Fast funds

  • Reimbursement will be quick and easy.
  • The credit provides a dollar-for-dollar tax offset against the employer’s payroll taxes
  • The IRS will send any refunds owed as quickly as possible.

To take immediate advantage of the paid leave credits, businesses should use funds they would otherwise pay to the IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, employers can request an expedited advance from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

For details about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov.

COVID-19 paid leave tax credits for small and midsize businesses

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