Paid Sick Leave Credit and Family Leave Credit FAQ

November 27, 2020

The spread of COVID-19 has resulted in the creation of many different tax credits, including the Paid Sick Leave Credit and Family Leave Credit. Take a moment to learn about this credit to determine if it applies to you. And remember, your Encino tax consultants can help you with all new, applicable tax credits so you save as much money as possible. 

What is the Credit, Exactly? 

Paid Sick Leave Credit is a credit for businesses with employees unable to work, telework included, because they have the coronavirus or will obtain a diagnosis due to related symptoms. Employees are entitled to paid sick leave for up to 80 hours, or 10 days, at their regular pay rate. They can subsequently receive $511 per day and $5,110 total. 

The Family Leave Credit also applies to those who are caring for children who are not in school due to COVID-19 restrictions. The credit provides these employees with $200 per day for up to two weeks, or $2,000 total.

Employees are immediately refunded for these credits by lowering their mandatory deposits of payroll taxes that have been withheld from employees’ wages via the credit amount. 

What Employers Qualify? 

For the IRS to consider an employer for Paid Sick Leave Credit, one of two categories must apply. The employer must have a business that was either partially or completely suspended due to government-imposed COVID-19 restrictions, with the suspension taking place during the quarter calendar year. Alternatively, the employer qualifies if their gross receipts are less than 50% of what they were during the same quarter in 2019. If gross receipts increase to 80% or more compared to the same 2019 quarter, they no longer qualify. 

To claim this and other credits, the employer must fill out the correct forms on the IRS website, such as Form 7200

Should you require help comparing applicable COVID-19 tax credits or require any other assistance with taxes, bookkeeping, or accounting, contact the Los Angeles accountants at Wallace & Associates. We are here to streamline financial processes to make managing your business an easier experience.