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Two New Employer Tax Credits July 15, 2020

Posted by bradstreetblogger in : Business consulting, Business Consulting, COVID, COVID-19, General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes, Uncategorized , trackback

July 15, 2020                         

Many businesses that have been severely impacted by Coronavirus (COVID-19) will qualify for two new employer tax credits – the Credit for Sick and Family Leave and the Employee Retention Credit.

Sick and Family Leave – Credit for Sick and Family Leave

An employee who is unable to work (including telework) because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, is entitled to paid sick leave for up to ten days (up to 80 hours) at the employee’s regular rate of pay, or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $511 per day, but no more than $5,110 in total.

Caring for someone with Coronavirus

An employee who is unable to work due to caring for someone with Coronavirus, or caring for a child because the child’s school or place of care is closed, or the paid child care provider is unavailable due to the Coronavirus, is entitled to paid sick leave for up to two weeks (up to 80 hours) at two-thirds the employee’s regular rate of pay or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $200 per day, but no more than $2,000 in total.

Care for children due to daycare or school closure

An employee who is unable to work because of a need to care for a child whose school or place of care is closed or whose child care provider is unavailable due to the Coronavirus, is also entitled to paid family and medical leave equal to two-thirds of the employee’s regular pay, up to $200 per day and $10,000 in total. Up to ten weeks of qualifying leave can be counted towards the family leave credit.

Credit for eligible employers

Eligible employers are entitled to receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and the employer’s share of Medicare tax on the leave, for the period of April 1, 2020, through December 31, 2020.  The refundable credit is applied against certain employment taxes on wages paid to all employees. Eligible employers can reduce federal employment tax deposits in anticipation of the credit.  They can also request an advance of the paid sick and family leave credits for any amounts not covered by the reduction in deposits. The advanced payments will be issued by paper check to employers.

Employee Retention Credit

Eligible employers can claim the employee retention credit, a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages (including health plan expenses), paid after March 12, 2020 and before January 1, 2021.  Eligible employers are those businesses with operations that have been partially or fully suspended due to governmental orders due to COVID-19, or businesses that have a significant decline in gross receipts compared to 2019.

The refundable credit is capped at $5,000 per employee and applies against certain employment taxes on wages paid to all employees.  Eligible employers can reduce federal employment tax deposits in anticipation of the credit.  They can also request an advance of the employee retention credit for any amounts not covered by the reduction in deposits. The advanced payments will be issued by paper check to employers.

Need more information on how to apply? Click here

This week’s article – From IRS.gov – Click Here

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

Correction/Update to an earlier Tax Tip of the Week regarding municipal income taxes.  A local Income Tax Administrator was kind enough to send the below information to us as follows:

“H.B. 197 sets aside 718.011 of the Ohio Revised Code, stating:

…during the period of the emergency declared by Executive Order 2020-01D, issued on March 9, 2020, and for thirty days after the conclusion of that period, any day on which an employee performs personal services at a location, including the employee’s home, to which the employee is required to report for employment duties because of the declaration shall be deemed to be a day performing personal services at the employee’s principal place of work.

That said, employees who were sent home to work during the pandemic are still considered to be working at their principal place of work and not their city of residence.  That’s why employees should not have had a change in their municipal withholding from pre-pandemic times.  There are those that question the constitutionality of the executive order, so I’m sure that the State or others will address this at a later time.  Unfortunately, due to ORC Section 718, municipalities cannot pass legislation to override H.B. 197 or any section of 718.”

– until next week.

-Mark

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