Families First Coronavirus Response Act (FFCRA) benefits small businesses and families

Editor’s Note:  The article below was originally published on April 28, 2020. It outlines benefits available from the Families First Coronavirus Response Act (FFCRA), which was recently extended until Sept. 30, 2021.

As the coronavirus continues to shake up the globe, the U.S. government is jumping in to help small businesses. The Families First Coronavirus Response Act (FFCRA) was signed into law on March 18, 2020, to help American families — and small businesses —during the outbreak.

The FFCRA could offer help if your small business is struggling with COVID-19 chaos.

But what is the FFCRA, and what does it cover? We’ve broken down all the need-to-know info for you.

And for more on how your small business can make it through this pandemic, check out the H&R Block small business tax resources for coronavirus.

What is the FFCRA?

The FFCRA is a law with several elements, like guaranteed free coronavirus testing, a boost to unemployment insurance, and improvement to food safety programs. The main focus of FFCRA, though, is paid leave.

As President Biden recently announced, eligible employers can use the credit to cover leave related to receiving or recovering from COVID-19 vaccinations.

This act offers employees with paid sick leave through two new laws:

• The Emergency Family and Medical Leave Expansion Act (EFMLEA)
• The Emergency Paid Sick Leave Act (EPSLA)

Tax credits are available to help eligible employers pay the cost of providing paid leave to their employees.

The Emergency Family and Medical Leave Expansion Act

The Emergency Family and Medical Leave Expansion Act (EFMLEA) offers up to 10 weeks of paid leave to eligible employees for coronavirus-related reasons. Employees are eligible if they can’t work (or telework) because they need to care for a child whose school is closed, or whose childcare provider is unavailable, because of COVID-19 precautions.

Under standard FMLA guidelines, employees get 12 weeks of unpaid protected leave. With EFMLEA though, the first two weeks can be unpaid, but for the next 10 weeks your qualified employees should be paid two-thirds pay while on leave (as long as they’ve worked for you for at least 30 calendar days).

Your employees can also use any paid personal, medical, or sick days to cover the first two weeks unpaid leave. Or, as an employer, you can require them to do so.

But does this leave need to be taken all at once, or can your employees spread it out?

If your employees are still coming into the workplace, they can only break up the leave if you agree, and if it’s because childcare is unavailable.

The requirement to provide emergency paid family and medical leave ended on December 31, 2020. However, employers may still be able to claim a credit for qualifying leave they pay voluntarily through September 30, 2021 as if the EFMLEA was in effect.

The Emergency Paid Sick Leave Act

Okay, now for part two of FFCRA.

The Emergency Paid Sick Leave Act (EPSLA) gives full-time employees up to 80 hours, or two weeks, of paid sick leave for coronavirus-related reasons.

An eligible employee is someone unable to work (or telework) because of COVID-19-connected circumstances:

1. The employee is ill and quarantined, advised to self-quarantine, or seeking a medical diagnosis
2. The employee is caring for someone who is ill and subject to quarantine or is caring for a child whose school is closed or whose childcare provider is unavailable

Part-time employees are also eligible for sick leave, but only for the average number of hours worked during a regular two-week schedule.

Discrimination or retaliation

We know you’re probably stressed right now with all of the unexpected changes and trying to keep your business afloat. But it’s important to remember that these two acts also prevent employers from discriminating or retaliating against employees who use the benefits provided by the act, file complaints against employers, or initiate proceedings against employers.

The requirement to provide emergency paid sick leave ended on December 31, 2020. However, employers may still be able to claim a credit for qualifying leave paid through September 30, 2021 if the leave follows the requirements for the EPSLA.

Are you exempt from FFCRA? What are the requirements?

Are you worried about paying for employee sick leave under this new law? With the program extension, you won’t be required to pay for FFCRA sick leave beginning January 1, 2021 as this is now voluntary.

If money is a problem for your small business right now, take a look at these four small business temporary assistance programs.

Are you eligible for FFCRA tax credits?

Tax credits are available to help with the cost of providing paid leave to your employees. Employers can receive credits for giving employees paid sick leave or for family leave.

To be an eligible employer for these credits, you must be a business or tax-exempt organization with 500 employees or less. Your employees on leave, temporary leave, or those who are temporary with a continuing relationship count towards your eligibility. But any independent contractors you employ don’t count towards that 500-employee rule.

Also, you need to offer your employees up to 80 hours (or two weeks) of paid sick leave at 100% of their pay, with a limit of $511 per day ($5,110 total). Your employees must use the paid sick leave due to:

• COVID-19 symptoms
• Quarantine
• Obtaining a medical diagnosis
• Getting the COVID-19 vaccine (beginning April 1, 2021)

Employers must pay 2/3 of the employee’s regular rate of pay for employees who are caring for someone in quarantine, or providing childcare because of school or daycare closures, with a limit of $200 per day ($2,000 total).

To qualify for tax credits, your employees need to take the leave between April 1, 2020, and September 30, 2021. The max number of paid sick days that would let you claim the credits would reset after March 31, 2021.

What are the FFCRA tax credits?

What credits do small businesses actually get? There are two.

You can get a refundable sick leave credit for the amount you paid to employees who are under quarantine, ill, seeking diagnosis, or to receive or recover from COVID-19 vaccinations. The credit is for an employee’s regular amount of pay — under EPSLA that is up to $511 a day and up to $5,110, for 10 days total.

And you can also get a tax credit for paying employees under EFMLEA who were acting as caregivers by claiming a credit for the employee’s paid leave: two-thirds of the employee’s standard pay — up to $200 a day and up to $12,000, for 10 weeks total (previously the amount was $10,000 for quarters before April 1, 2021).

Eligible employers can also receive additional credit based on what they spend on health care for qualified employees throughout the leave.

What if you’re self-employed?

Being a small business means you have others who work for you. But what if it’s just you running your business?

FFCRA provides a credit for self-employed individuals carrying on any trade or business if they would be allowed paid leave under the expanded FMLA (EFMLEA).

If you’re self-employed and regularly work for yourself, you could also be eligible for this tax credit (even if you telework). You’re self-employed if you are:

• An independent contractor or sole proprietor
• A member of a partnership
• In business for yourself, including part-time

The FFCRA credit is an offset from your self-employment tax, which includes Medicare and Social Security. Read more about paying self-employment tax.

If you take leave for yourself, it must be because you can’t work or telework due to:

• A federal, state, or local isolation or quarantine order
• Advisement from a health care provider to self-quarantine
• Symptoms of COVID-19 leading you to seek a medical diagnosis
• Getting the COVID-19 vaccination (beginning April 1, 2021)

Taking a leave for yourself is based on the number of days during the tax year that you can’t work due to the reasons we described above. The credit is the number of days you are on leave (up to 10 days) multiplied by whichever of these two numbers is smaller:

• Your average daily self-employment income for the year
• $511 (the average daily income)

If you need to take leave to take care of a family member because of the coronavirus, it must be because you are unable to work or telework and are:

• Caring for someone who is under a federal, state, or local quarantine or isolation order
• Caring for a child due to a school or daycare closure
• Experiencing a closely similar scenario

The credit you can receive for caring for someone else is equal to the number of days you can’t work (up to 50 days), multiplied by whichever of these two numbers is smaller:

• Two-thirds of your average daily self-employment income for the taxable year
• $200

After April 1, 2021, the days for paid sick and family leave reset, and you may be eligible for up to 10 days of paid sick leave and up to 60 days of paid family leave.

Under the American Rescue Plan Act of 2021, you can use your prior-year net earnings from self-employment to calculate the credit.

For more specifics on what you could receive if you’re self-employed, check out the IRS website.

How can you get the FFCRA tax credits?

Doesn’t all of this sound great? Okay, now how do you actually get these credits?

You’ll be able to start funding qualified leave by using the money you have reserved for deposit with the IRS for federal tax deposits. Reduce your share of Social Security taxes (also referred to as OASDI) by the value of the credit. Or, you can also request an advance from the IRS.

Note: for quarters beginning after March 31, 2021 the credit will be applied against your share of Medicare taxes as opposed to Social Security taxes.

And you can include your share of the Medicare tax on those wage payments and the health insurance coverage cost for employees during sick leave. You’re not required to pay your portion of Social Security on wages you pay an employee for leave.

Report your qualified leave wages and credits on your quarterly Form 941. (If you’re asking yourself, “What is Form 941?”, we’ve got the answers!)

To take the FFCRA tax credit, you must continue to:

• Withhold Federal Insurance Contributions Act (FICA) taxes, which include Social Security and Medicare taxes, from your employees’ regular paychecks
• Pay these taxes to the IRS with an amount from your portion of the FICA taxes
• Withhold federal income tax based on the employee’s W-4 form

Note: If you paid wages with a forgiven PPP loan or Restaurant Revitalization Grant, you cannot include those wages in the credit calculation.

The FICA tax (together for you and your employees) totals 15.3% of an employee’s gross pay for Medicare and Social Security.

Okay, done! Now, we know that was a lot to digest. These numbers can be complicated. But follow the simple steps in the last section and you can figure out how to get some of the help the government is providing for small businesses right now.

And, as always, reach out with any tax or accounting questions. Rely on our team of small business certified tax pros to get your taxes right and keep your business on track. Connect with us at blockadvisors.com.

Looking for other updates about the latest small business stimulus relief? Check out our Guide to 2020 small business tax and stimulus relief for details.