Sadly but certainly, countless small businesses have been whacked HARD by the COVID-19 pandemic. And nowhere has this hardship been more onerous for small business owners than when it comes to managing employees.
Whether an employee fell ill with COVID, had a spouse or family member fall ill, or was forced to stay home due to a school or nursing care facility closure — the working question is either not on the job or far less productive than usual.
Of course, as a small business owner, this puts you in a tight bind. On one hand, you want retain your employees. Especially seasoned, well-trained, and highly productive workers that you’ve invested years of time effort grooming.
But on the other, you’re running a business, and it’s tough to justify paying employees that aren’t actually working.
To help small business owners manage this Sophie’s Choice dilemma, the federal government created the Families First Coronavirus Response Act (FFCRA) tax credit.
How does this credit work, and who’s eligible? Here’s a closer look at how FFCRA might benefit your business.
What is the Families First Coronavirus Response Act (FFCRA)?
In March of 2020, the Trump administration signed the Families First Coronavirus Response Act (FFCRA) into law. FFCRA requires certain businesses with 500 or fewer employees to provide paid emergency sick leave.
This move was meant to aid workers directly impacted by COVID-related health issues. And while it’s a huge benefit to struggling employees, it leaves many employers holding the bag, financially speaking, for absentee workers.
What is The FFCRA Tax Credit?
To help offset the cost of paying an employee whose not actually working, the federal government created the FFCRA tax credit.
The FFCRA is a payroll tax credit covering 100% of the emergency sick leave pay and a portion of healthcare coverage costs, up to the per employee cap.
This means an employer can receive a tax credit on payroll taxes (and a portion of their healthcare coverage costs) paid for an employee out sick due to COVID-related health issues. There is, however, a per-employee cap that limits the amount of the credit.
Who Qualifies For The FFCRA Tax Credit?
Qualifying businesses include those with 500 or fewer full-time employees (based on headcount as of March 1, 2020). Businesses whose headcount dropped below the 500 employee mark after April 1, 2020, are subject to FFRCA, and thus entitled to the credit.
Which Employees Qualify For The FFCRA Tax Credit?
The overarching qualifying factor is the employee is completely unable to work remotely. Assuming remote work is out of the question, triggering factors include:
- Employees ordered home because of a positive COVID diagnosis.
- Employees ordered into quarantined because of contact with another person with a positive COVID diagnosis.
- Employees forced home to care for a spouse or immediate family member who has fallen ill with COVID
- Employees forced home because of school or daycare closures under COVID precautionary measures.
What Are The Per Employee Caps For The FFCRA Tax Credit?
For an employee taking emergency sick leave because of a positive COVID diagnosis or because they’re caring for a family member with a positive COVID diagnosis, the credit is equal to $511 per day for up to 10 days, or $5,110 in total aggregate per employee.
For an employee taking emergency sick leave because they have been advised to quarantine (after coming into contact with an individual with a positive COVID diagnosis) or because of a COVID-related school or daycare closure, the credit is equal to $200 per day for up to 10 days, or $2,000 in total aggregate per employee.
FFCRA Tax Credit Extension
While the FFCRA credit was originally signed in during the Trump administration, congress voted to extend the program. The payroll credit now covers 100 percent of wages for OVID-related emergency sick leave between April 1, 2021, and September 30, 2021.
If you’re a small business owner that was forced to pay employees out of work on COVID-related emergency sick leave, you likely qualify for the FFCRA credit.
As with much of the COVID relief legislation, determining whether you qualify for or how to take advantage of the FFCRA credit can be confusing. So, if you have more questions about this credit, please get in touch for a FREE consultation.