September 7, 2021
Unfortunately, COVID-19 continues to present complications for Atlanta organizations. While it appears, the restrictive regulations will not return, the arrival of virus variants (delta and MU) have become a cause for concern. It was reported by the Georgia Department of Public Health that for the two weeks ending on August 30th, both Fulton and Gwinnett Counties had experienced a sharp increase in new infections. Although far less than what was reported during the height of the pandemic, it does mean that businesses will have to plan for this new risk factor. It is also a prompt to review internal policies on COVID-19 including safeguards, exposure notification, and other policies. Despite the new risks, the good news is there is a refundable federal tax credit available to those that provide paid sick and family leave time due to COVID-19. Implemented as part of the American Rescue Plan, an eligible employer can receive a credit for qualified sick and family leave wages paid. This represents a significant savings opportunity for eligible businesses. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.
Any for-profit business or not-for-profit organization with less than 500 employees that offers paid sick or family leave to an employee that is unable to work due to COVID-19 is eligible. This includes the time taken to receive the COVID-19 vaccination or to recover from any injury, disability, illness, or condition related to vaccination. It is important to note that certain household employers may qualify to participate.
The credit is equal to 100% of the qualified sick leave wages plus allocable health plan expenses and the employer’s share of Medicare taxes imposed on the wages. The maximum amount of qualified sick leave wages includes $511 per day (up to $5,110 total) for an employee’s own health needs and $200 per day (up t0 $2,000 total) for the employee’s care of others. The amount of the qualifying wages which can be claimed varies based on why the employee is unable to work, duration of absence, normal work schedule, and regular rate of pay.
The credit(s) can be claimed on the employer’s corresponding IRS Form 941 for each quarter. In anticipation of claiming the credit, a company can keep the federal employment taxes which would have otherwise been withheld including both the employee/employer’s share of both Medicare and Social Security taxes up to the amount of the credit. It is important to note that self-employed individuals claim the credit on their annual 1040 return.
Employers are required to obtain a written request for leave. It should include the employee’s name, dates of leave requested, a statement on the COVID-19 reason for the request, and a statement on why the employee can not work (or telework). In situations where a quarantine or self-quarantine has been directed, the statement should also include the government agency or healthcare provider making the order. Finally, if leave is requested based on a school closing or lack of childcare, then the name and age of each child and institution should also be included.
In addition, the employer will also need to retain documents showing how the employer determined the amount of qualifying wages and health plan expenses. It is also advised to retain copies of any completed IRS Form 7200s and Quarterly Federal Returns. Finally, all documentation should be retained for four years.
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The resurgence of infections due to new COVID variants appears to be an issue that will not be going away anytime soon. However, for Atlanta businesses that provide qualifying paid time off, the tax savings available through these credits should not be overlooked. If you have questions about the information outlined above or need assistance with credit eligibility or calculations, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.