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Business as usual has changed rapidly over the course of the past ten days. Many companies have gone from one or two offices to now having dozens or even hundreds of their employees being required to work remotely. One common thread is that we are all in this together, and together we will come out of this. The President recently signed the Families First Coronavirus Response Act that laid out help to small businesses (those with less than 500 employees) in providing rules for paid leave and paid sick days for employees impacted by the COVID-19 pandemic. Included in this legislation is the provision of a payroll tax credit for the wages, taxes and health insurance costs provided to employees under the paid leave and paid sick time rules. While this rushed law does not specifically include language pertaining to PEOs, it is our belief that the new law will be applied much as the former ACA and TCJA has been applied, at the client level.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
Click here to read our previous alert on this new legislation. Click here for the complete version of the most recent IRS release that provides further guidance on how the payroll tax credit is calculated and claimed. If you have further questions pertaining to the ever-changing tax landscape or need assistance finding solutions to the many challenges we are facing, please contact the PEO team at UHY.