Starting in 2018, there is a new credit available to some employers. If your company has a written plan to provide paid time off to employees while they are on family or medical leave, you could be eligible for a credit for a percentage of the wages paid to them during this time off.
The plan must meet certain requirements, which include the length of time this benefit must last, a minimum amount the employee must be paid during the time off, how long the employee has been working for the company, and the maximum salary of the employees that qualify for the credit.
The credit is a percentage of the amount of wages paid to the qualifying employees while on family or medical leave for up to 12 weeks per taxable year. The range is between 12.5% – 25%, depending on what percentage of the employee’s wages are paid during this time off. For example, if the plan provides for payment of 50% of the employee’s normal wages and all other requirements are met, the employer is eligible for a 12.5% credit on the amount paid to the employee while on leave. If the full normal wages are paid, then the credit would be 25%.
Other restrictions and requirements exist. Make sure your payroll provider and tax consultant are aware of your plan along with any employees that are taking leave so this information can be tracked and your company can realize any benefits available. If you need assistance with formalizing or adopting a plan or would like to discuss how your company can take advantage of this, please contact us at 615-377-4600. For more information on key Federal Tax Reform updates, download the LBMC Federal Tax Business Guide.
Amy Van Buren is a shareholder in the firm’s Wealth Management Services Team at LBMC, a premier Tennessee-based professional services firm headquartered in Brentwood. This team focuses on wealth transfer and protection strategies along with providing tax planning and compliance services for high net wealth families. She can be reached at firstname.lastname@example.org or 615.309.2291.