IRS Releases First Set of Guidelines for FFCRA Payroll Tax Credit

04.01.2020

On March 31, the IRS released the first of what may be several rounds of guidelines concerning payroll tax credits available to covered employers in connection with the Families First Coronavirus Response Act (“FFCRA”). Our Alert on the forms of paid leave available under the FFCRA is available here.

Important!  If the DOL’s continual updates of its guidance concerning FFCRA benefits is any indication, the IRS guidelines may change and may be updated frequently with little or no notice.   The IRS specifically notes its guidance “will be updated to address changes in the law or additional questions as they are raised.” Be sure to check the IRS website frequently for the most recent guidance.

As explained by the IRS, “Eligible Employers are entitled to receive a credit in the full amount of the qualified sick leave wages and qualified family leave wages, plus allocable qualified health plan expenses and the employer’s share of Medicare tax, paid for leave during the period beginning April 1, 2020, and ending December 31, 2020.”  If the amount of the credit exceeds the employer portion of federal employment taxes, the excess is treated as an overpayment and refunded to the employer.  Moreover, an employer can file a request for an advance payment from the IRS starting in April 2020.

Among the many important items in the IRS guidance, the agency addresses the following:

• Documentation an Eligible Employer must request from employees and retain to substantiate eligibility to claim the tax credits
• How an Eligible Employer may claim the refundable tax credits for qualified leave wages (plus allocable qualified health plan expenses and the amount of the Eligible Employer’s share of Medicare tax)
• How to claim and advance on credits when the Eligible Employer does not have enough federal employment taxes set aside for deposit to cover its obligation to provide qualified leave wages
• Definitions of “qualified sick leave wages,” “qualified family leave wages” and “qualified health plan expenses”

As with all things related to the COVID-19 pandemic, this information is expected to change rapidly.  If you have questions about recovery of these credits or the FFCRA, contact the authors or your usual AALRR employment counsel.

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

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