Available Tax Credits
Sick Leave
Credit
For an
employee who is unable to work because of Coronavirus quarantine or
illness, the employer may receive a refundable tax credit for the employee’s
regular wages paid, up to $511 per day and $5,110 in total, for a total of 10
days.
For an
employee that is caring for someone with Coronavirus or caring for a
child whose school or child care facility is closed, the employer may claim a
credit for two-thirds of the employee’s regular rate of pay, up to $200 per day
and $2,000 in total for up to 10 days.
Expanded
Child Care Leave Credit
In addition
to the sick leave credit, for an employee who is unable to work because of a
need to care for child whose school or child care facility is closed or
whose child care provider is unavailable due to the Coronavirus, an
eligible employer can receive a Child
Care Leave Credit. This credit is equal to two-thirds of the
employee’s regular pay capped at $200 per day or $10,000 in total. The
aggregate amount of this credit is larger and can be provides for up to 10
weeks of pay.
Method to Obtain the Credit
Payroll Tax
Retention
Under
IRS notice IR-2020-57, March 20, 2020, the IRS provided that employers who
pay qualifying sick leave or child care leave will be able to retain an amount
of payroll taxes equal to the amount of qualifying sick and child care leave
paid, rather than depositing these taxes with the IRS.
The payroll
taxes that are available for retention include withheld federal income taxes,
the employee share of Social Security and Medicare taxes, and the employer
share of Social Security and Medicare taxes with respect to all
employees.
Payroll Tax
Refund
If there are
not sufficient payroll taxes to cover the cost of qualified sick and child
care leave paid, employers will be able to file a request for an
accelerated refund from the IRS. The IRS expects to make these payments in two
weeks or less.
Application
to Self-Employed Individuals
Equivalent sick
leave and childcare credit amounts are available to self-employed individuals
under similar circumstances. These credits will be claimed on their income tax
return and will reduce estimated tax payments.
The IRS will
provide additional guidance on obtaining the tax credit during the next
week.
We are
available to assist in evaluating other COVID-19 government
programs, such as the Economic Injury Disaster Loan Program offered
by the Small Business Administration. If you have any questions regarding
the application of these tax credits or the process for claiming these credits,
please contact the following people at RVG & Company: Larry Rice, Joao
Gomes and Paul Buchman
