Frequently Asked Tax Questions: Families First Coronavirus Response Act
We’ve compiled the top tax questions we’ve been asked on the Families First Coronavirus Response Act (FFCRA). Read this BKD Thoughtware® article for details of this legislation. Here are our answers to your questions, including guidance from the IRS and U.S. Department of Labor (DOL), as applicable.
What supporting documentation should employers gather from the employee regarding the qualifying event?
Employers subject to the paid leave provisions of the FFCRA should retain appropriate documentation for employees taking leave under the FFCRA, including:
- The employee’s name
- The date or dates for which leave is requested
- A statement of the COVID-19-related reason the employee is requesting leave and written support for such reason
- A statement that the employee is unable to work, including by means of telework, for such reason
In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the healthcare professional advising self-quarantine and, if the person subject to quarantine or advised to self-quarantine isn’t the employee, that person’s name and relation to the employee.
For employees requesting leave due to a child’s school closing or child care provider unavailability, the employee should provide a statement with the name and age of the child (or children) to be cared for, the name of the school that closed or place of care that is unavailable, 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, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than 14 during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
I have fewer than 50 employees. Am I exempt from providing this paid leave?
Employers with fewer than 50 employees may be exempt from providing FFCRA paid sick leave and expanded family and medical leave due to COVID-19-related reasons when doing so would jeopardize the viability of the small business as a going concern. Any small business that claims this exemption isn’t entitled to tax credits for any qualified leave wages that they’re exempt from providing.
Note, the small business exemption is only available for (a) paid sick leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons and (b) expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern.
Visit the DOL FAQ page (Question 58) for a list of scenarios that qualify for a small business hardship exemption.
If I employ fewer than 50 employees and provide these paid leave benefits, am I eligible for the tax credits?
Yes. Although there’s a small business exemption for small businesses (with fewer than 50 employees), it’s up to the employer to opt in to this exemption. Therefore, if you choose to provide the paid sick and expanded Family and Medical Leave Act (FMLA) leave to your employees under the FFCRA, you’re eligible to receive the corresponding payroll tax credits on qualified wages paid.
Does the exemption for employers of healthcare providers or emergency responders mean that a hospital would automatically be exempt as a healthcare provider, or does it mean that the hospital excludes employees who are healthcare providers from the employer’s total employee count?
There are two exceptions for healthcare providers that may apply. First, the DOL is expected to issue regulations exempting healthcare providers (the FMLA definition for healthcare providers is likely to apply). While this first exception isn’t yet official, the FFCRA also provides a second exception that allows employers of healthcare providers or emergency responders to elect to exclude their employees from the FFCRA paid leave provisions on a case-by-case basis. You should document why you’re exempting a particular employee from the paid leave provisions.
According to the DOL, a “healthcare provider” who may be excluded by their employer from the FFCRA paid leave provisions is “anyone employed at any doctor’s office, hospital, healthcare center, clinic, post-secondary educational institution offering healthcare instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home healthcare provider, any facility that performs laboratory or medical testing, pharmacy or any similar institution, employer or entity. This includes any permanent or temporary institution, facility, location or site where medical services are provided that are similar to such institutions.”
Similarly, employers of emergency responders can exclude from the FFCRA’s paid leave provisions anyone necessary for the provision of transport, care, healthcare, comfort and nutrition of such patients, or others needed for the response to COVID-19.
Note, this healthcare provider exemption isn’t for purposes of calculating the 500-employee threshold under the FFCRA to determine if you’re an eligible employer mandated to provide this type of paid leave. Instead, as an employer of healthcare providers or emergency responders, once you determine you’re subject to the FFCRA, you may exclude employees who are classified as healthcare providers or emergency responders from taking paid leave under the FFCRA. This can be done on an employee-by-employee basis.
Are nonprofits exempt from the FFCRA?
No, nonprofit organizations (including religious organizations) with fewer than 500 employees are subject to the FFCRA and eligible for the payroll tax credits on qualified wages paid.
Is the paid sick leave requirement under the FFCRA 10 days or 80 hours? If the employee was scheduled for 10 hours per day, would it be 50 the first week and 30 the second week?
The FFCRA requires paid sick leave be paid up to 80 hours over a two-week period. So, an employee scheduled to work 50 hours a week may take 50 hours of paid sick leave in the first week and 30 hours of paid sick leave in the second week.
Paid sick leave can be taken intermittently while teleworking. For example, if an employee is prevented from teleworking their normal hours because they need to care for a child whose school or child care is closed due to COVID-19-related reasons, the employer may allow the paid sick leave time to be taken intermittently. However, if an employee is unable to telework and unable to come into work due to being sick or possibly sick with COVID-19 or caring for an individual who’s sick or possibly sick with COVID-19, the paid leave shouldn’t be taken intermittently to keep the employee from spreading the virus to others.
If we pay an employee full pay versus the two-thirds pay required in certain circumstances under the FFCRA, is our credit capped at the two-thirds rate, or are we precluded from credit because we paid higher than the FFCRA rate?
You may pay your employees in excess of the FFCRA requirements, but you can’t claim, and won’t receive a tax credit for, amounts in excess of the FFCRA’s statutory limits.
How can we get the model that BKD has prepared for employers to calculate pay under emergency sick pay and FFCRA FMLA?
Contact your BKD Trusted Advisor™ for help with determining your organization’s wage exposure and potential tax credits available should you have to provide paid sick and expanded FMLA leave to your employees.
Would the FFCRA paid leave provisions apply if staff can telework but day care is closed and staff can now only work part time?
The emergency paid sick and family medical leave under the FFCRA may be taken intermittently if an employee is able to telework but must work reduced hours because they need to care for a child whose school or place of care is closed or unavailable due to COVID-19-related reasons. If the employer and employee agree to the reduced schedule, paid leave may be taken intermittently. For example, if you agree on a 90-minute increment, the employee could telework from 1 to 2:30 p.m., take leave from 2:30 to 4 p.m., and then return to teleworking.
If you have more than 500 employees and voluntarily decide to offer two weeks of paid sick or expanded family leave, can you still be reimbursed via a payroll tax credit through the FFCRA?
No, the payroll tax credits under the FFCRA are only available to eligible employers mandated by the FFCRA to provide paid sick and expanded family and medical leave to their employees. Since eligible employers are those with fewer than 500 employees, employers with 500 or more employees are neither required to provide this paid leave nor eligible for the corresponding payroll tax credits.
What are "qualified health plan expenses," and how do they apply to these paid leave tax credits?
Qualified health plan expenses are amounts paid or incurred by an eligible employer to provide and maintain a group health plan, but only to the extent those amounts are excluded from the gross income of employees.
The amount of qualified health plan expenses doesn’t include eligible employer contributions to HSAs or Archer MSAs. Eligible employers who sponsor a high-deductible health plan should calculate the amount of qualified expenses in the same manner as an insured group health plan or self-insured plan, as applicable.
In general, the tax credits for qualified sick leave wages and qualified family leave wages are increased by the qualified health plan expenses allocable to each type of qualified leave wages. Qualified health plan expenses are properly allocated to the qualified sick or family leave wages if the allocation is made on a pro rata basis among covered employees, e.g., the average premium for all employees covered by a policy, and pro rata on the basis of periods of coverage (relative to the time periods of leave to which such wages relate).
Are city governments subject to the paid leave provisions under the FFCRA?
Yes, public agencies that employ one or more employees, as of April 6, 2020, are subject to the FFCRA paid leave provisions. However, government and public agencies are not eligible for the corresponding paid leave payroll tax credits under the FFCRA.
As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.