COVID Sick Pay

Families First Coronavirus Response Act

Since the expanded Unemployment benefits have ceased, at least temporarily, and some states are requiring unemployed workers to look for work, employers need be aware that their staff is potentially eligible for paid leave for reasons related to COVID-19.  The amount of paid leave is dependent upon the reason and whether the person is full or part time.  The business is eligible for a tax credit for the amount of leave paid to the worker as long as the business has proper certification from the worker and completes the necessary tax form.  The following is a review of the law and what is needed to claim a tax credit.  These rules are in effect until the end of 2020. 

If you claim a tax credit for paid sick leave you cannot also use those wages towards your PPP loan wage totals. 

Fully Paid (100%) at the worker’s regular rate of pay for up to 2 weeks of leave (80 hours or the two week equivalent for a part time worker) up to a maximum of $511 a day and $5,110 total for an employee out of work due to:

  1. They are the subject of a Federal, State or Local quarantine order
  2. Have been advised by a health care provider to self-quarantine
  3. Has symptoms and is seeking a diagnosis

Two Thirds (2/3) of the worker’s regular rate of pay for up to $200 a day or $2,000 total for up to two weeks (80 hours) total if a worker is out of work due to:

  • They are caring for an Individual who is required to quarantine as is stated in reasons 1 & 2 above.
  • They are experiencing similar conditions as is specified by the U.S. Department of Health & Human Services.

Two Thirds (2/3) of the worker’s regular rate of pay for up to $200 a day or $12,000 total for up to twelve weeks (12 ) total if a worker is out of work because their child’s school or day care provider is closed or unavailable due to COVID.  If the worker has been employed less than 30 days they are only eligible for two weeks of leave due to school/day care closure.  Small businesses with less than fifty workers may be able to claim a hardship exemption for providing the paid leave due to a school/day care closure. 

Documentation for Tax Credit

The IRS has requires employers to obtain and retain documentation to substantiate the tax credit. Employers must obtain a written statement from employees taking paid leave which must include:

  1. The employee’s name;
  2. The date or dates for which leave is requested;
  3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
  4. A statement that the employee is unable to work, including telework, for such reason.

For leaves based on a quarantine order or advisement, an employee also needs to provide the name of the government agency requiring the quarantine, or the name of health care professional advising the self-quarantine.

Similar details are required when the leave request is based on a school and/or childcare provider unavailability due to COVID-19. These statements should also include:

  1. The name and age of the child (or children) to be cared for;
  2. The name of the school that has closed or place of care that is unavailable;
  3. A representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and
  4. With respect to an inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.

The client will need to complete Form 7200 and send a copy to both the IRS and us. The IRS will send the client the refund directly.  The business may file multiple form 7200 for the same quarter.   These records must be kept for four years.

About IRS Form 7200

Additional information can be found at:

https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs

https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs#substantiate_eligibility