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. 

_{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}