New information available on employer tax credit related to COVID-19
On March 20, the IRS issued a news release regarding the federal payroll tax credit that will be available to employers with fewer than 500 employees that are required to provide emergency leave and/or paid sick time under the Families First Coronavirus Response Act.
The release provides that:
- Employers will be entitled to a refundable credit for their required emergency leave payments (including the cost of providing health insurance coverage for an employee during the employee’s emergency leave period) and emergency sick payments.
- The credit will be available for federal income tax withholding and the employer and employee portions of the federal Social Security and Medicare taxes.
- Employers will be able to take immediate advantage of the available credits by retaining the funds they otherwise would be required to use for payroll tax withholdings.
- If there are not sufficient payroll taxes to cover the employer’s costs for providing the emergency leave and emergency sick pay, employers will be able to file a request for an accelerated refund of their payroll taxes from the IRS, which the IRS expects to process within two weeks or less.
- Specific IRS guidance regarding the credit will be provided during the week of March 22, 2020.
Update: Since this writing, the IRS has issued more detailed guidance on the Employee Retention Credit. Read our overview.
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