First, Treasury Secretary Mnuchin announced today that the federal filing due date for all taxpayers has been moved from 4/15/2020 to 7/15/2020. This followed the previous announcement which extended the interest-free/penalty-free payment deadline until 7/15/2020 (for up to $1 million for individual and up to $10 million for corporations). Two things we do not know right now – (1) whether all states will follow this new federal due date and (2) whether extending the filing due date for the federal tax returns resulted in an extension of time for payment of all taxes until 7/15/2020 on an interest-free/penalty-free basis. We will let you know more as details arise.
The Families First Coronavirus Response Act has been signed into law by President Trump. This is the second package from Congress dealing with the Coronavirus outbreak. Congress and the Administration are now working on “phase three” to further stem the impact of the outbreak on families and the economy.
Of particular importance to most of our clients in the Act:
- Healthcare plans, including high deductible health plans, to provide for COVID-19 testing at no cost to the insured. This includes diagnostic testing, including visits to a provider, urgent care center or emergency room. There is also a waiver of Medicare, Medicare Advantage, Medicaid and CHIP cost-sharing. In conjunction with previously issued IRS guidance, a participant in a high deductible health plan receiving this benefit would still be eligible to contribute to a Health Savings Account on a tax-advantaged basis.
- A requirement that employers with less than 500 employees and government employers provide Emergency Paid Sick Leave to employees who cannot work (or telework) due to a need of leave for any of the following reasons:
- To quarantine because the employee is diagnosed with coronavirus;
- To seek a diagnosis or preventive care for coronavirus;
- To comply with a recommendation or order by a public official with jurisdiction or healthcare provider on the basis that the physical presence of the employee would jeopardize the health of others due to exposure of the employee to coronavirus or exhibition of symptoms by the employee; or
- To care for an individual described in (1) above or to care for a child whose school has closed, or child care provider is unavailable, due to the coronavirus.
Full-time employees are entitled to 10 days of Emergency Paid Sick Leave and part-time employees are entitled to the typical number of hours that they work in a typical two-week period, paid at two-thirds of the employee’s regular rate.
The sick leave amount is calculated based on the employee’s “required compensation” (i.e., the largest of (i) regular rate of pay, (ii) federal minimum wage, or (iii) local minimum wage) multiplied by the number of hours normally scheduled to work, but capped at (i) $511 per day ($5,110 in total per affected employee) for those described above in items 1-3; and (ii) $200 per day ($2,000 in total per affected employee) for other employees.
- Employers with less than 500 employees and government employers must provide up to 12 weeks of job-protected Emergency Family and Medical Leave in situations where the employee cannot work (or telework) for a “qualifying need related to a public health emergency.” The first 10 days of this leave can consist of unpaid leave. A “qualifying need relates to a public health emergency” is solely limited to caring for a son or daughter under age 18 if their school or place of care has been closed or the child care provider is unavailable due to a public health emergency. A public health emergency means an emergency with respect to COVID–19 declared by a Federal, State, or local authority.
Emergency Family and Medical Leave is calculated for an employee at an amount not less than 2/3 of the employee’s regular rate of pay (using the Fair Labor Standards Act of 1938) multiplied by the number of hours the employee would normally be scheduled to work. This required paid leave cannot exceed $200 per day and $10,000 in total for an employee.
- The law funds the Emergency Paid Sick Leave and Emergency Family and Medical Leave for employers (including tax-exempt employers) through a refundable credit against payroll taxes.
- Self-employed taxpayers can receive an Emergency Paid Sick Leave benefit for their own qualifying illness through a refundable credit (subject to limitations) against income taxes for periods during which work cannot be done. Their business enterprise must be a qualifying business (i.e. must employ less than 500 individuals) to receive the benefit for their personal qualifying time off.
- Employers with more than 499 employees are NOT required to pay Emergency Paid Sick Leave or Emergency Family and Medical Leave and are NOT provided with the refundable credit against payroll taxes.
Amounts under Paid Sick Leave and Emergency Family and Medical Leave are also NOT subject to the employer’s FICA tax, The employee’s portion of FICA tax still applies.
Thank you as always for your support and trust in LBMC. We encourage you to reach out to your tax advisor at LBMC if you ever have any questions. They can always be reached through our main telephone number (615) 377-4600.
Cindy Harper, Arthur H. Van Buren, and Justin W. Follis
Tax Practice Leaders, LBMC