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COVID-19 Sick Pay Tax Credits

We have implemented the COVID-19 Sick Pay & FMLA earnings for many of you over the last couple of weeks. We’re now ready to let you know how the credits will work. 

Effective Monday, April 13th, all wages paid using the “COVID Sick,” “COVID Family Sick” or “COVID FMLA” earning codes will begin to process automatic credits for payroll taxes. 

We will not be sending your federal tax payments to IRS, instead those amounts will be credited back to you when you process payroll. You will see the credits noted on the payroll summary report. On the 941 form at the end of the quarter, you will see a reduction in payments for COVID-19 credits. This is fully allowable under the Families First Coronavirus Response Act. 

If we’ve paid these wages BEFORE Monday, April 13th, we’re looking forward to a software update on Monday, April 20th that will allow for us to begin going backwards and applying the credits on wages previously paid. All credits will be retro-active to April 1.

It is possible that these credits will not be returned to you immediately as there may not be enough tax credit to cover the total amount of sick pay. If you need an expedited credit, please contact us, and we can complete an expedited credit request form from the IRS. PLEASE DO NOT COMPLETE THIS FORM WITHOUT NOTIFYING US!!!

As a reminder, these COVID-19 Sick Pay Items only apply to employees who meet one or more of the following criteria: 

  1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19; (“Stay at home” order doesn’t count!)
  2. has been advised by a health care provider to self-quarantine related to COVID-19;
  3. is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
  5. is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
  6. is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

You can download the required labor law poster from our website under “resources.” 

Documenting COVID-19 Sick Pay

The Department of Labor has released new guidance related to the administration of the FFCRA and answered more common questions on their Q&A page. Here are a few highlights: 

  • Documentation: Employers may request an official “request for time off” under FFCRA, but not more. You may not require a doctor’s note for example. Download a template for employees who are requesting time off under FFCRA here
  • Childcare provider: The definition of childcare provider includes anyone who generally cares for the children in question. This includes individuals paid to provide childcare, like nannies, au pairs, and babysitters, as well as individuals who provide childcare at no cost and without a license on a regular basis, for example, grandparents, aunts, uncles, or a neighbor.

Reasons for Self-Quarantine: Employees are only eligible for COVID-19 paid sick leave if a health care provider directs or advises them to self-quarantine because the health care provider believes the employee may have COVID-19 or is particularly vulnerable to COVID-19.

Payroll Tax Deferral Under the CARES Act

We’ve recevied some questions about the payroll tax deferral provisions of the CARES Act. We have not implemented this for any clients, and we strongly advise you to use these provisions as a “last resort” during this pandemic. The CARES Act allows you to not pay the employer portion of social security tax for the rest of the year. You will have two years to re-pay this debt. This is a large debt to incur with the government. Payroll taxes add up quickly. We are happy to discuss this with you on a case-by-case basis. Please contact us for more information.