Dear Clients of SKJ & Company, P.S.:
We understand many employees of our clients’ business are unable to work and receive wages due to current COVID-19 crisis.
In order to support the employees and business owners financially, the IRS has announced two types of tax credits.
The following credits are applicable to paid sick leave between 4/2/2020 and 12/31/2020.
Paid Sick Leave Credit: Applies to employees who are under isolation order due to COVID-19.
The credit is 100% of paid sick leave wages paid to the subject employee.
Maximum credit is $511 per day, up to 80 hours (10 days).
Child Care Leave Credit: For those who provides care to family under isolation due to COVID-19, and/or children at home.
The credit is 2/3 of sick leave wages paid to the subject employee.
Maximum credit is $200 per day, up to 80 hours (10 days).
However, businesses with 50 employees or less are exempt from this leave requirements if the leave impacts the businesses’ ability to continue as a going concern.
The tax credit applies to following businesses.
Businesses closed due to the Stay-At-Home Order issued by Washington State Governor yesterday (3/23/2020).
Businesses are still open under the Stay-At-Home Order exception but the employees are unable to work due to following reasons:
Employees unable to work for being isolated due to COVID-19.
Employees providing care to children due to school or child care facilities closures.
Employees providing care to family who are under isolation due to COVID-19.
If the employees are laid off and not paid due to decrease in sales, the tax credit does not apply. Instead, he/she must apply for unemployment benefit.
How the tax credit is paid
The business will be exempt from the existing payroll tax liabilities up to the amount of paid sick leave wages paid.
If the credit is not enough to cover the wage, the employer may request for advances.
IRS has not yet published the forms to request for the advances. It is announced to be released next week.
Sole Proprietors (Self-Employment) who files Schedule C
The tax credit applies to self-employment taxpayers that does not pay wages.
Same rules apply. However, the tax credit will be credited towards your 2020 income tax liabilities.
We will provide further details once more information is received from the IRS next week.
(Important!!) When paying paid leave wages on 4/2/2020 and after, please be aware of the following:
If your business is closed, please still send us the payroll hours as usual.
All hours / wages should be paid leave hours.
If your business is still operating, please separate the actual hours worked and sick leave hours.
For salaried employees, please note the days paid under sick leave.
For any questions, please contact our office.
SKJ & Company, P.S.
Seke Jung, CPA