Treasury, IRS and Labor : Coronavirus-related paid leave

https://www.irs.gov/coronavirus
IR-2020-57, March 20, 2020
WASHINGTON — Today the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee's own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.

Key Takeaways

Paid Sick Leave for Workers

• For COVID-19 related reasons – Employee must provide documentation and your business must maintain that documentation.

• Up to 80 hours of paid sick leave

• Up to 400 hours (10-weeks) expanded paid childcare leave or caring for a person that has Covid-19.

• Sick pay is limited to 100% of their pay, capped at $511 per day for 10-days.

• Childcare is limited to 2/3 of their pay, capped at $200 per day for 10-weeks.

• This is available April 1^st, 2020 to December 31, 2020.

Complete Coverage

Employers receive 100% reimbursement for paid leave pursuant to the Act.

• Health insurance costs are also included in the credit.

• Employers face no payroll tax liability. (Employer's share of FICA HI and OASDI insurance)

• Self-employed individuals receive an equivalent credit.

Fast Funds

Reimbursement will be quick and easy to obtain.

• An immediate dollar-for-dollar tax offset against payroll taxes will be provided

• Where a refund is owed, the IRS will send the refund as quickly as possible.

Small Business Protection

Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.

Easing Compliance

• Requirements subject to 30-day non-enforcement period for good faith compliance efforts. (April 1^st to April 30^th)

Documentation to Substantiate Eligibility to claim tax Credits

Eligible Employers claiming the credits for qualified leave wages (and allowable qualified health plan expenses and the Eligible Employer's share of Medicare taxes), must retain records and documentation related to and supporting each employee's leave to substantiate the claim for the credits, and retain the Form 941, Employer's Quarterly Federal Tax Return, and Form 7200, Advance of Employer Credits Due To COVID-19, and any other applicable filings made to the IRS requesting the credit.

Qualifying Reasons for Leave:

Under the FFCRA, an employee qualifies for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because the employee:

1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.

2. has been advised by a health care provider to self-quarantine related to COVID-19.

3. is experiencing COVID-19 symptoms and is seeking a medical diagnosis.

4. is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);

5. is caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19; or

6. is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

Under the FFCRA, an employee qualifies for expanded family leave if the employee is caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19.

AGRIS Software Plan

Be aware that FICA Expense follows the administrative department on each employee, so this will be a manual calculation for refund.

• You must use Labor Distribution.

• Use department codes to separate hours and allow for reporting via the Labor Distribution Reports

• Drive salary expense to new ledger account expense, thus separating sick and childcare pay from true department expenses.

• Enter tax credits to credit balance expense account. Expense is accrued but then countered by tax credit.

Payroll Setup:

• Key in a new department code to log in sick hours.

• Pay > Departments/Job Codes > add Department add outside of your normal sort range (V19 for Virus-19)(C19 for CCare-19)

• Set this up at admin location. This limits setup and puts all reporting under admin.Payroll clerk will location/department at hour entry time.

Open

• Key in a new job code if needed (not all business's use job codes)

• Pay > departments/job codes > add job code job codes mimic each other in every department. Do a search first in other departments to see what you are using for Job Codes. Use Regular pay and leave sick pay check-mark blank because this company is treating the sick pay as above and beyond what they pay as a company already.

Reporting:

Reporting will be done through Payroll > report manager > Labor Distribution Reports
A new user-defined report needs to be created that sorts by Department Code.

1. PAY > Report Manager > Labor Distribution Reports > Report WriterInsert > Standard Reports > 3. Labor Distribution Report by Employee

2. Select Output Type 1) fixed-Font Text ReportOK to next screen

3. Edit the title "Labor Distribution Detail by Department"OK to next screen

4. OK past the "define calculation fields" screen

5. Sort Level 1: 6) Job Location CodeSort Level 2: 7) Job Department CodeSort Level 3: 2) Name ID (no to sort alphabetically)Sort Level 4: BlankOK to the next screen

6. You may leave this screen blank or key in the Job Department Code OK to next screen

7. Value Selection Criteria: Ok to next screen

8. Value Selection Criteria (calculation fields)OK to next screen

9. Subtotal and Other Options 0 = Job Location code 1 = Job Department code0 = Name id

   Open

   

10. First Screen of field Positions Save/Exit Result:

User-defined > Labor Distribution by Department

Before first month end.

LDG Package

• LDG > maintenance options > Chart of Accounts >

• Setup payroll expense ledger account to sick pay expense.

• Setup payroll credit balance account to hold covid-19 tax credit.

Open

SJI Package

• SJI > System Accounts > Payroll system

• Key in Department Code

• Transaction Code of RP key in new ledger code that was just defined. This account will hold the payroll expense that is incurred from paying sick pay.

Open

Process:

Payroll

• If you have not switched payroll to departments, please call support.

• Select Covid-19 department to enter hoursYou can enter just the hours they took for sick time.

  Open

  

• Calculate payroll

• Issue check

Quarterly/Monthly reporting of form-941

• Run your Federal Tax reports as normalPAY > Report manager > State/Federal Tax Reports This provides your Wage Totals to help you fill in the Form 941

• Run the Labor Distribution, user defined report, LABOR DISTRIBUTION BY DEPARTMENT.This report will give you the gross salary amounts with check detail.

• Calculate your share of FICA OASDI and FICA HI expenses.This may be running a payroll check report for the checks in Labor Distribution to see what employee paid, then using that to match the amounts.Payroll Tax Report b employee – answer YES to print detail on subtotal and other options screen.

• Obtain your expense of the employee health insurance for that employee.

• Use all these reports to fill in Form 941 If the tax credit (Covid-v19 salary, FICA Expense, Health Insurance) is less than your payment owed, the there are no other forms to fill out.

• If the tax credit is MORE than the amount you pay in on the form 941, then you would fill out Form 7200 to request a check from the IRS.

Paying the Quarterly Taxes

• The Tax credit limit is determined from above.

• Enter this credit as a manual credit invoice to the same name id you issue tax vouchers too.The GL coding on the voucher will be to a contra-expense account in the ledger. This ledger account will hold a credit balance to offset payroll expenses.

• Issue the disbursement check.Paying the vouchers created at each paycheck run and picking up the tax credit voucher.This will make the check you pay into the IRS a smaller amount.