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COVID-19 Payroll Information
IMPORTANT NOTE: We are providing the information below to assist employers in determining whether they have a requirement to provide Paid Leave to their employees, or if they may qualify for any of the available tax credits or forgivable SBA Loans. Evolution Payroll Services cannot tell employers whether they qualify or which if any of these programs is the best for your company. Please review all the available information and consult with your financial advisors, accountant or attorneys for guidance.
Employer Requirements
Paid Leave
Employers with less than 500 employees are required to provide Paid Leave to current eligible employees for leave taken on or after April 1st, 2020. Employers with less than 50 employees can claim exemption from paying out the Extended Family Leave portion of the FFCRA for employees caring for children due to school or daycare closing if it would jeopardize the viability of the business as a going concern.
Additionally, Employers are required to post notice of Employee Paid Leave Eligibility in the workplace. You can download the PDF of this notice right from our website here: FFCRA Poster
Effective January 1st 2021, employers are NOT required to provide paid leave, but tax credits are still given to those employers that do.
Qualified Reasons for Leave
Qualified Reasons for paying out Sick Leave or Extended Family Leave are limited to those employees:
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Subject to a Federal, State, or local quarantine or isolation order related to COVID-19 *see note below*
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Advised by a health care provider to self-quarantine related to COVID-19
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Experiencing COVID-19 symptoms and is seeking a medical diagnosis
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Caring for an individual subject to an order described in (1) or self-quarantine as described in (2)
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Caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19
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Experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
*Note: The definitions of "Quarantine" and "Isolation" are explained by the Department of Health and Humans Services HERE
The DOL has clarified this further in THIS DOCUMENT, specifically on page 24 under section 826.20
Payroll Tax Credit for Paid Leave
The Payroll Tax Credit intended to assist employers with paying for these benefits will come in the form of a reduction in Federal 941 taxes (Federal Withholding, Social Security and Medicare Tax). Our payroll system has been updated to reduce the federal tax impound for your payroll by the amount of these benefits paid.
If your tax credit exceeds the current federal taxes due, employers can apply with the IRS to receive a refund check sent directly to the employer. There is still no explanation of how to apply for a reimbursement, but we will update you when that information is released by the IRS.
There is an additional tax credit available to employers to cover the pro-rated cost of health insurance for covering the employees during the time of paid leave. You can use the annual cost and divide it by 52 to find the weekly rate, and then use the weekly rate divided by 5 to calculate daily if necessary. We (Evolution) cannot calculate this figure for you as we have no way of verifying correct employer costs in terms of your group health insurance. You should work with your insurance agent if you are unsure of your employer health insurance costs for each employee.
If you wish to take this credit, you will have to calculate and report to us the pro-rated amount for any eligible employees.
Important Links
US Department of Labor
US Department of Labor Coronavirus
US DOL FFCRA Questions & Answers
IRS
IRS Guidance on Retention Credit
IRS Guidance on OASDI Deferral
Unemployment Benefits
File for PA Unemployment Benefits
File for NJ Unemployment Benefits
File for MD Unemployment Benefits
File for DE Unemployment Benefits
United States Congress
Families First Coronavirus Response Act
US Department of Commerce
How to Manage Paid Leave in YOUR Payroll
Employers are responsible for identifying eligible employees and providing instructions to Evolution Payroll Services on who, when and how much the employees need to be paid, as well as in which classification the employees fall. We are unable to determine the employees that are eligible on our own, but we will handle all of the required payroll calculations, pay limits and reporting.
Effective Date of Paid Leave
Sick Leave and Extended Family Leave provisions are effective on April 1st and apply to leave taken between April 1, 2020 and December 31, 2020. This has been extended into 2021 up through March 31st.
Amount of Paid Leave
The Department of Labor explains exactly how much each eligible employee is entitled to in their Employer Fact Sheet HERE
SBA Loans - Paycheck Protection Program
As part of the CARES Act passed on March 27th, the Small Business Administration (SBA) will be issuing loans to small businesses to cover the cost of payroll, mortgages interest, rent, utilities and other debt obligations. The new loan program includes loan forgiveness for the portion of the loan that is used to maintain your payroll and keep your employees paid from March 1st through June 30th, 2020. This means that you will not have to pay back at least a portion of these loans!
These loans are administered by banks, so we encourage everyone to reach out to all their banking partners to inquire about how to apply for these loans and for more details on payback terms. Banks are instructed to start taking applications by April 3rd.
The US Department of Commerce has a helpful information sheet that you can find here: Small Business Guide & Checklist
NOTE: If you are taking a tax credit for Paid Leave, those wages cannot be also be forgiven as part of an SBA Loan. This does not prevent you from taking out an SBA Loan, but it will effect the amount of the loan that can be forgiven.
Employee Retention Tax Credit
This refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19 (maximum credit is $5,000 per employee). Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Wages taken into account are not limited to cash payments, but also include a portion of the cost of employer provided health care.
The credit is available to all employers under 500 employees, including tax-exempt organizations but excluding state and local governments.
Qualifying employers must fall into one of two categories:
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The employer's business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
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The employer's gross receipts are below 50% of the comparable quarter in 2019. Once the employer's gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
These measures are calculated each calendar quarter.
NEW FOR 2021:
The Employee Retention Credit has been extended into 2021 through June 30th, with a greater credit benefit of 70% of eligible wages, with wage limits increased to a maximum of $10,000 per employee per quarter.
Additionally, you must only substantiate a 20% reduction in gross receipts to qualify in 2021. Calculating eligibility for Q1 and Q2 of 2021 can be done by using gross receipts of the immediately preceding calendar quarter. For example, if you can show the reduction in gross receipts for Q4 2020, you are eligible for the employee retention credit for wages paid in Q1 2021.
How to Manage the Employee Retention Credit in YOUR Payroll
Employers are responsible for identifying eligible employees and providing instructions to Evolution Payroll Services on who, when and how much they are requesting in the credit. Note that payrolls where forgiveable PPP loan funds were used to cover the payroll are NOT eligible for the employee retention credit.
IRS Guidance on Retention Credit