Compliance, COVID-19

On January 28, 2021, the IRS updated their FAQs regarding the Families First Coronavirus Response Act (FFCRA) paid leave tax credits. These tax credits were extended in late 2020 under the Tax Relief Act of 2020. The paid leave tax credits are available to private employers with fewer than 500 employees.

The FFCRA provides paid leave under two provisions:

  • Emergency Paid Sick Leave Act (EPSLA): Up to 80 hours of paid sick time for reasons related to COVID-19; and
  • Emergency Family and Medical Leave Expansion Act (EFMLEA): Up to 10 weeks of paid FMLA for care for children due to school or daycare closures related to COVID-19.

These paid leave provisions expired on December 31, 2020. However, employers may voluntarily continue to provide the leave and receive the tax credits until March 31, 2021. All IRS FAQs have been updated to include the new March 31, 2021 end date for tax credits. 

Eligible employers may want to take note of the following updates:

  • Wage payments made after March 31, 2021 for leave taken before March 31, 2021 are still eligible for the credits. In other words, all payments for FFCRA leave do NOT have to be made prior to March 31, 2021 to be credit eligible.
  • Public sector employers are not eligible for the tax credits. However, for periods of leave between April 1, 2020 and December 31, 2020 public sector employers must provide the paid sick leave wages as required under the FFCRA. The requirement to provide paid leave was not extended. However, public sector employers that provide the paid leave voluntarily through March 31, 2021 will not be subject to the employer’s share of social security tax for those wages.

Key Takeaway

This updated information from the Internal Revenue Service should provide additional guidance for organizations looking to manage the paid leave provisions of the FFCRA. Organizations would be advised to partner with their financial and tax professionals to better understand the implications for their situation.

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