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FFCRA & Payroll Tax Credit: How Does it Work?

Client Alert

The Families First Coronavirus Response Act (“FFCRA”) provides for refundable payroll tax credits for employers in order to assist with the cost of providing Coronavirus-related leave to their employees. These refundable payroll tax credits are designed to reimburse small and midsize employers for the cost of providing COVID-19-related leave to their employees. This tax credit goes into effect on April 1, 2020 and will remain in effect until December 31, 2020 unless extended or modified.

Who can utilize the tax credit? 

The refundable credits are available to any eligible employer. An eligible employer is a business or tax-exempt organization with fewer than 500 employees who is required to provide emergency paid leave under the Emergency Family and Medical Leave Expansion Act (“EFMLEA”) or the Emergency Paid Sick Leave Act (“EPSLA”). Self-employed individuals also receive an equivalent credit.

What is the tax credit?

The FFCRA provides a refundable tax credit against the employer’s payroll tax deposit. The tax credits are equal to 100% of the amount an employer pays under the EFMLEA and the EPSLA up to a per employee cap.

Employers are limited to a refundable credit for wages paid pursuant to sick leave at two separate pay rates depending on the reason the person is unable to work. If the employee is unable to work because the employee has Coronavirus symptoms or is in a Coronavirus quarantine, whether a self-quarantine or not, the employer’s tax credit is capped at the employee’s regular pay rate, up to $511 per day, for up to 10 days, or $5,110 total aggregate per employee. If an employee is unable to work because the employee is caring for a family member with Coronavirus or caring for a child because of school or childcare facilities closing and the closing is related to COVID-19, the employer’s tax credit is capped at the employee’s regular pay rate, up to $200 per day, for up to 10 days, or $2,000 total aggregate per employee.

Example 1: An employee has Coronavirus symptoms and is seeking a medical diagnosis. The employee is a full-time employee with a pay rate of $30 per hour. The employee works 8 hours per day and is unable to work for 14 days. The employer would receive a tax credit of $2,400 (8 hours per day x $30 per hour x 10 days).

Example 2: Same situation as above, except the employee has a payrate of $40 per hour is unable to work because the employee must take care of a parent who has Coronavirus symptoms. In this example, the employer would receive a tax credit of $2,000 (10 days x $200 per day). The amount of credit is capped in this example because 2/3 of the employee’s regular rate of pay is more than $200 per day.

In addition to the refundable tax credits outlined above, the FFCRA also provides a refundable tax credit to employers for an employee who is unable to work because the employee must care for a child whose school or childcare facility is closed or whose childcare provider is unavailable due to the Coronavirus. In this situation, an employer may receive a refundable child care leave credit for up to 10 weeks of the employee’s qualifying leave. The refundable credit for child care leave is capped at the employee’s regular pay rate, or $200 per day, or $10,000 total aggregate per employee. Employers are also entitled to an additional credit based on the costs to maintain health insurance during the child care leave period.

How are the tax credits refundable?

All tax credits under FFCRA are refundable. That means if an employer’s payroll tax deposit is less than the total FFCRA tax credits, the employer would be eligible to file a request for an accelerated credit for the amount above the employer’s payroll tax deposit. The credit can be used to offset all federal income tax withholding from all employees (including those still working) and both the employer and employee portions of Social Security and Medicare taxes for all employees.

For example, an employer has $4,000 in total tax credits for all employees currently unable to work because of COVID-19. The employer prepares its payroll taxes and has a payroll tax deposit required of $3,000. The employer would use the entire $3,000 to pay the employees’ leave payments instead of depositing that amount with the IRS. The employer can then request the remaining $1,000 as an accelerated payment.

I am self-employed, how do I claim the credits?

A self-employed individual will claim these tax credits on his/her personal income tax return. The tax credits will reduce the individuals estimated tax payments.

For additional questions related to the FFCRA and Payroll Tax Credit, please contact BMD Tax Law Attorney Tracy Albanese at tlalbanese@bmdllc.com or (330) 253-9195.


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.