A refundable tax credit is available for employers equal to 100 percent of qualified paid sick leave wages required to be paid by the Emergency Paid Sick Leave Act for each calendar quarter. The tax credit is allowed against the tax imposed by section 3111(a) of the Internal Revenue Code (the employer portion of Social Security taxes).
The highlights of these tax credits include:
The tax credits would be administered by the IRS and be creditable against employer-side payroll tax liability, with any excess refunded to the employer
Self-employed workers facing the same employment disruptions would be eligible for refundable tax credits similar in scope and amount
Payments to employees would be taxable income to the employees and subject to employee-side payroll taxes, but not subject to the employer portion of payroll taxes
Guidance on receiving tax credits for paid sick and family leave
The U.S. Treasury Department, Internal Revenue Service, and Department of Labor have published guidance that small and midsize employers can begin taking advantage of the two new refundable payroll tax credits described above to be immediately and fully reimbursed, dollar-for-dollar, for the cost of providing COVID-19-related leave to their employees. The IRS website contains guidance on how to obtain the payroll tax credits. The Department of Labor published guidance on the employer paid leave requirements, employees’ rights to paid leave, and FAQs.
For a more detailed summary of the above changes, download the AADA’s full analysis.
Other assistance to help practices stay afloat
The Coronavirus Phase III Response Legislation also creates an employee retention credit for employers subject to closure due to COVID-19. You may be eligible for a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50% when compared to the same quarter in the prior year.
You may also defer payment of employer payroll taxes, which includes the employer share of the Social Security tax you otherwise are responsible for paying to the federal government with respect to your employees. You may also carry net operating losses from 2020 back five years. Please note, you cannot take both a tax credit and a loan through the paycheck protection program. You can only apply for one program.
Additionally, CMS is expanding its accelerated and advance payment program for all Medicare physicians; see below.
The Academy recommends you consult your tax advisor or accountant for help in implementing these provisions.
Additional COVID-19 business meeting resources
All content solely developed by the American Academy of Dermatology