3 New Tax Credits Effective March 14, 2020, through December 31, 2020
$200 PER DAY, PER EMPLOYER FOR MAX 10 DAYS NOT TO EXCEED EMPLOYER’S SOCIAL SECURITY PAYROLL TAX (6.2%) PAID FOR ALL WAGES
FOR EMPLOYEES PAID QUALIFIED SICK LEAVE WAGES

• Experienced by the employer as an immediate payroll tax credit
o The payroll tax due to the U.S. Treasury is reduced immediately by the tax credit
o This does not reduce any state, local or unemployment taxes
o It is not retroactive
o An employer can elect not to take advantage of this by simply not doing it
o No special tax form is to be filed
o The credit is reported as a tax credit on the Form 941 filed quarterly
o If the credit exceeds the tax due, it is treated in the same manner as a refund due
o The credit reduces the tax deduction for the employer portion of payroll taxes

• Maximum of $200 per day, per employee
o Maximum of 10 days, per employee
 Maximum of $2,000 per employee, in total
• If an employee makes $10/hr and routinely works 8 hours per day
o The max credit is $80/day and $800/employee
• If an employee makes $1,000/day
o The max credit is $200/day and $2,000/employee
o The language includes that the credit is per quarter, however…
 Preceding quarters are taken into account to aggregate the maximum of 10 days
• Not to exceed the employer’s portion of the tax imposed under IRC section 3111(a)
o This tax is, in essence, the social security tax the employer pays on top of wages
o The tax is 6.2% of wages, only subject to the first $137,700* of annual wages per employee
 On $20,000 of quarterly wages paid to all employees, assuming no one has exceeded*
• The employer’s social security payroll tax would be $1,240
• If the employer had one employee that qualified for the full $200/day, and that employee was paid for 10 days, the initial tax credit would be $2,000
• The initial tax credit of $2,000 would be limited to $1,240

• Paid for qualified sick leave wages under the Emergency Paid Sick Leave Act
o Applies to the owners, officers, highly compensated, full-time, part-time employees
o Has to have been actually paid wages for qualified sick leave
o Employee has to actually not have worked.

• CONTINUED: Paid for qualified sick leave wages under the Emergency Paid Sick Leave Act
o If an employee works for a partial day, it only covers the paid time not working
 If an employee makes $10/hr and leaves work 2 hours early due to sickness
• The max credit for that employee is $20 for that day
• That day is used and only 9 days of credit for that employee are left
 If an employee is part-time, the credit applies to the normally worked hours
• If an employee works 4 hours per day, per work, the 10 days applies
 If any employee has un-routine hours, it is based on their average
o If any employee has accrued paid time off, there is no double benefit to the employer
o The employee experiences no extra pay or tax credit from the government
 The wages paid to the employee are still taxable to the employee
 The wages paid to the employee are still subject to all taxes
FOR THE SELF-EMPLOYED, IT IS A CREDIT AGAINST SELF-EMPLOYMENT TAXES
• For anyone self-employed and an employee, the maximum applies to 10 days and $200 maximum per day; per individual
• Self-employed would be typically for Schedule C filers and/or those receiving Form 1099-Misc “Non-Employee Compensation” (Distributions from an S-Corp or Partnership is not SE income)
• You have to be unable to work due to the provisions and have not worked.
• If you own a business and pay yourself wages, you are not considered self-employed for these purposes. If you don’t pay yourself wages, I think you can’t start now… Refer to the other provisions.
• If you are self-employed and have employees, the tax credit previously described applies to those wages you pay to your employees, and you experience the credit on your self-employment tax.
• This is experienced by reducing your individual estimated quarterly estimated tax payment.
• If you make individual estimated tax payments and do not have self-employment tax, you cannot reduce your estimated tax payments because you have no such tax to reduce.

FOR EMPLOYEES PAID FOR REQUIRED PAID FAMILY LEAVE
• The same above provisions apply when paying employees for qualified sick leave wages
• Paid wages by reason of the Emergency Family and Medical Leave Expansion Act
• A MAXIMUM tax credit of $10,000 for these wages

FOR EMPLOYERS WITH BOTH CIRCUMSTANCES
• The employer can use both tax credits, but can’t apply to the same employee, same day
• The employee must qualify separately for each provision, with the same limitations including limited to the employer’s social security tax (6.2% of wages)

DO NOT ACT WITHOUT CONSULTING YOUR TAX ADVISOR.

Credit to JJ The CPA for all the information above