COVID-19: A Resource Guide

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Companies can tap into payroll tax credits for coronavirus-related leave

Mar 23, 2020

The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (DOL) have announced a plan to implement the Families First Coronavirus Response Act (the Act). The plan includes complete coverage for paid leave (including health insurance costs), an immediate dollar-for-dollar tax offset against any payroll taxes, an exemption from providing emergency family and medical leave for employers with fewer than 50 employees, and a 30-day grace period for employers making good-faith efforts to come into compliance with the Act. The Act is still set to take effect on April 2, 2020. Specifics on the plan are detailed below:

Complete Coverage

Employers receive 100% reimbursement for paid leave pursuant to the Act, including health insurance costs. Employers will face no payroll tax liability, and self-employed individuals receive an equivalent credit.

Fast Funds

The plan promises that reimbursement will be quick and easy to obtain. Specifically, an immediate dollar-for-dollar tax offset against payroll taxes will be provided, and where a refund is owed, the IRS will send the refund as quickly as possible. The plan also promises more information regarding the process to receive an advance payment of the credit will be posted this week.

Under guidance that will be released this week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week. The IRS expects to process these requests in two weeks or less.


If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

Small Business Protection

Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.

Easing Compliance

Requirements subject to 30-day non-enforcement period for good faith compliance efforts.

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