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IRS, Department of Labor, and Treasury Outline Workings of Paid Leave Tax Credits

The Department of Labor, IRS and Treasury Department have released a joint notice outlining how employers may utilize tax credits to provide mandated paid leave under the Families First Coronavirus Response Act signed into law on March 18th. The paid leave provisions have been discussed in our summary of the new law here, and these three agencies have now provided a glimpse of the road map for employers to cover the costs of paid leave. While the actual guidance is slated to be issued this week, the notice included information about how these provisions will operate:

● Employers will be able to simply retain the amount of payroll taxes they would ordinarily pay in equal amounts to the qualifying leave they paid out, rather than sending them to the IRS.

● The payroll taxes that may be held back are federal income taxes and both the employee and employer share of Social Security and Medicare taxes.

● If holding on to payroll taxes is still not sufficient to cover the cost of qualified sick and child care leave paid, employers will be able to file a request for accelerated payments from the IRS, which expects to be able to process these requests in two weeks or less.

● The Department of Labor will issue a temporary non-enforcement policy for 30 days to allow employers to come into compliance with the new law.

Details are still to come, but this notice should provide a sigh of relief for employers wondering how they would pay for the mandatory leave provisions. We’ll continue to monitor guidance from these agencies and provide more details employers should know.

Cynthia L. Effinger, Member with McBrayer, is located in the firm’s Louisville office. Ms. Effinger’s practice is concentrated in the areas of employment law and commercial litigation. Her employment law practice is focused on drafting employment manuals and policies, social media, wage and hour, non-compete agreements and workplace discrimination. Ms. Effinger can be reached at ceffinger@mcbrayerfirm.com or (502) 327-5400, ext. 2316. 
Jaron Blandford
Jaron Blandford is a member of McBrayer and is located in the firm’s Lexington office. Mr. Blandford focuses his practice on civil litigation with an emphasis in all areas of labor and employment law. He can be reached at jblandford@mcbrayerfirm.com or (859) 231-8780, ext. 1252.

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This article does not constitute legal advice.

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