What tax credits does the FFCRA provide?
The Families First Coronavirus Response Act (FFCRA) Tax Credit provides businesses with tax credits to cover certain costs of providing employees with required paid sick leave and expanded family and medical leave for reasons related to COVID-19, from April 1, 2020, through December 31, 2020.
When can employers start claiming the credits?
Eligible Employers may claim tax credits for qualified wages paid to employees on leave due to paid sick leave or expanded family and medical leave for reasons related to COVID-19 for leave taken beginning on April 1, 2020 and ending on December 31, 2020.
Eligible Employers will claim the credits on their federal employment tax returns (e.g., Form 941, Employer’s Quarterly Federal Tax Return), but they can benefit more quickly from the credits by reducing their federal employment tax deposits. If there are insufficient federal employment taxes to cover the amount of the credits, an Eligible Employer may request an advance payment of the credits from the IRS by submitting a Form 7200, Advance Payment of Employer Credits Due to COVID-19. The IRS expects to begin processing these requests during April 2020.
For the circumstances, amounts and period for which the credits are available, see Determining the Amount of the Tax Credit for Qualified Sick Leave Wages, Determining the Amount of the Tax Credit for Qualified Family Leave Wages, and Periods of Time for Which Credits are Available.
May an Eligible Employer receive both the tax credits for qualified leave wages under the FFCRA and the Employee Retention Credit under the Coronavirus Aid, Relief and Economic Security Act (CARES Act)?
Guidance from the IRS states, YES. If an Eligible Employer also meets the requirements for the employee retention credit, it may receive both credits, but not for the same wage payments.
However, the qualified wages for the employee retention credit do not include the amount of qualified leave wages for which the employer received tax credits under the FFCRA.
May an Eligible Employer receive both the tax credits for qualified leave wages under the FFCRA and a Small Business Interruption Loan under the CARES Act?
Guidance from the IRS states, YES. However, if an Eligible Employer receives tax credits for qualified leave wages, those wages are not eligible as “payroll costs” for purposes of receiving loan forgiveness under Section 1106 of the CARES Act.
FAQs from the IRS for COVID-19-Related Tax Credits
For a thorough list of frequently asked questions and links to more information on these federal tax credits, go to the IRS ‘Coronavirus Tax Relief’ FAQs page.