To help cover the costs of providing Coronavirus-related leave to employees, the U.S. Department of Treasury, Internal Revenue Service, and the U.S. Department of Labor announced on March 20, 2020 that employers can begin taking advantage of two new refundable payroll tax credits. The credit is designed to give an immediate, dollar-for-dollar credit for sick leave that is provided under the Families First Coronavirus Response Act (Act), signed into law on March 18, 2020. This tax credit is for small and midsized employers with less than 500 employees.

Under the Act, employees can receive paid sick leave if they are quarantined, experiencing COVID-19 symptoms, caring for someone who is quarantined or caring for a child whose school has been closed. Eligible employers who pay qualifying sick leave or child care leave under the Act will be able to retain the payroll taxes equal to the amount paid in sick and family leave, instead of depositing the money with the IRS. The payroll taxes that are available for retention are (1) withheld federal income tax, (2) employee share of Social Security and Medicare taxes, and (3) employer’s share of Social Security and Medicare taxes. If there is not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able to file a request for an accelerated payment from the IRS.

The three agencies will announce this week more specifics regarding this credit, including details of requesting an expedited payment.