CARES Act and FFCRA Provisions Expiring: May Require Action SPARK Blog

The credit may not exceed the Social Security tax imposed on the employer, reduced by any credits allowed for the employment of qualified veterans and research expenditures of qualified small businesses. Further, no credit is allowed with respect to wages for which a credit is already allowed under Section 45S (i.e., the Paid Family Leave Credit, enacted in 2017). Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan would have access to paid emergency leave.

Families First Coronavirus Response Act (FFCRA)

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• Wages may not include paid family and/or sick leave under the FFCRA or the Section 455 Paid Family and Medical Leave Credit for which a credit is taken.
• Paid sick leave is capped at $511 per day (and a total of $5,110) for employees in categories 1-3 above, and two-thirds of wages up to $200 per day (and a total of $2,000) for employees in categories 4-6 above.
• Because the sick leave wage cap was not increased from January 1 through March 31, 2021, no more than $5,110 (or $2,000 for absences described in (4), (5), and (6) above) in the aggregate may be claimed by an employer with respect to leave provided to an employee during that period.
• Generally, the legislation affects private-sector employers with under 500 employees.
• To qualify, an employer’s operation must have been at least partially suspended due to orders from a governmental authority limiting commerce, travel, or meetings due to COVID-19, or the employer must have experienced a 50 percent decline in gross receipts when compared to the same quarter of the prior year.
• Section 2206 of the CARES Act enabled employers to contribute up to $5,250 in 2020 toward student loan repayments for employees.

To qualify, an employer’s operation must have been at least partially suspended due to orders from a governmental authority limiting commerce, travel, or meetings due to COVID-19, or the employer must have experienced a 50 percent decline in gross receipts when compared to the same quarter of the prior year. The credit may be increased by the proportionate share of the employer’s health-care costs related to such wages. The bill takes effect within 15 days of enactment, i.e., no later than April 2, 2020. The paid sick and paid family leave provisions, and tax credits created by FFCRA, will sunset effective December 31, 2020. An employee may elect to use accrued vacation, personal or medical or sick leave for those days, including paid sick leave as provided by this Act. The remainder of the leave must be paid at two-thirds the employee’s regular rate of pay, subject to a limit of $200 per day, and up to a total amount of $10,000.

Section 1102 of the CARES Act established the Paycheck Protection Program (PPP), which was intended to provide employers with funds to continue operations and payment of wages during the COVID-19 pandemic. PPP loans are 100 percent forgivable if certain measures are met, such as spending at least 60 percent of the proceeds on payroll costs and maintaining specified staffing and wage levels. If a separate statement is provided and the employee receives a paper Form W-2, the statement must be included along with the Form W-2 sent to the employee.

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Any otherwise-qualifying leave payments for periods after 2020 are not FFCRA leave payments, and no tax credit is allowed. Section 2206 of the CARES Act enabled employers to contribute up to $5,250 in 2020 toward student loan repayments for employees. Such payments would be excluded from the employee’s income and employment taxes. The $5,250 cap applies to both the new student loan repayment benefit and any educational assistance under Section 127 of the Internal Revenue Code (IRC).

NMC will begin using additional ADP pay codes that are directly related to the Families First Coronavirus Response Act (FFCRA), effective April 20, 2020, while continuing to use ff employee pay adp the COVID-19 code.

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If you have self-employment income, you should refer to the instructions for your individual income tax return for more information.” Eligible private-sector employers are entitled to fully refundable tax credits toward employment taxes to cover the cost of FFCRA leave, including qualified sick and family leave wages, plus allocable qualified health-plan expenses. FFCRA wages are exempt from employer Social Security taxes but are subject to employer Medicare taxes. However, the tax credit is increased by the employer’s share of Medicare tax on qualified leave wages. Under the Act, all non-governmental employers with less than 500 employees are allowed a credit against employer Social Security tax liability equal to 100 percent of the qualified sick leave wages paid by the employer, subject to the limits discussed above. The credit is increased by specified health expenses (e.g., employer-paid health plan premiums), but limited to qualified health plan expenses that are excluded from employees’ income as coverage under an accident or health plan.

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Employers must separately state each of these wage amounts either on Form W-2, Box 14 or on a separate statement. If a separate statement is provided and the employee receives a paper Form W-2, the statement must be included with the Form W-2 sent to the employee. If the employee receives an electronic Form W-2, then the statement must be provided in the same manner and at the same time as the Form W-2.

Covered sick and family leave payments under the Act are taxable wages for income and employment tax purposes, except that such wages are exempt from Employer Social Security taxes. Such payments are subject to Medicare taxes, but the tax credit is increased by the amount of employer Medicare taxes (i.e., 1.45%) paid on such wages. For 2021, tax credits are only available for paid sick leave due to the inability to work or telework related to COVID-19 described in (1), (2), or (3) above in limited amounts; i.e., $5,110 in the aggregate, covering April 1, 2020, through March 31, 2021. Section 2301 of the CARES Act provided that private-sector employers may receive a refundable tax credit against employer Social Security tax equal to 50 percent of qualifying wages paid, up to $10,000 per employee, for a maximum credit of $5,000 per employee. However, the credit is not available to employers who receive a Paycheck Protection Program (“PPP”) loan (unless the employer repaid the PPP loan in full by May 18, 2020).

• However, the credit is not available to employers who receive a Paycheck Protection Program (“PPP”) loan (unless the employer repaid the PPP loan in full by May 18, 2020).
• The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (P.L. 116–136) was enacted on March 27, 2020, to provide economic stimulus and relief to employers and individuals that are dealing with the COVID-19 pandemic and its economic consequences.
• In 2020, and for the first 3 months of 2021, there were up to three separate types of qualified paid sick or family leave wages that were separately reported (if applicable) in Box 14 of Form W-2.
• Paid leave hours are to be paid at the Regular Rate of Pay in accordance with the Fair Labor Standards Act (FLSA), which generally includes all wages and other forms of compensation, such as nondiscretionary bonuses, unless specifically excluded (29 U.S.C. 207(e)).
• Because the qualified sick and family leave limits were reset by the American Rescue Plan Act (ARPA), P.
• The $5,250 cap applies to both the new student loan repayment benefit and any educational assistance under Section 127 of the Internal Revenue Code (IRC).

The credit only applies to qualifying wages paid in 2020 from March 13 through December 31. Pay dates after 2020 would not qualify for ERTC, even if otherwise-qualifying wages were earned (i.e., relevant hours were worked) in December. No action is required of ADP clients to discontinue accrual of otherwise-qualifying ERTC wages after 2020.

Such information is by nature subject to revision and may not be the most current information available. Under the FFCRA, an employee who was unable to work or telework for reasons related to COVID-19 described in items (1), (2), or (3) above was entitled to paid sick leave up to $511 per day and $5,110 in the aggregate. An employee who was unable to work or telework for reasons related to COVID-19 described in items (4), (5), or (6) above was entitled to paid sick leave at two-thirds the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate. Employers are prohibited from requiring workers to find a replacement to cover their hours during time off, and from discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer. ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at /regulatorynews.