Taking Advantage of FFCRA Tax Credits in 2021

At the final hour in December of 2020, the U.S. Congress passed a law extending tax benefits under the Families First Coronavirus Response Act (FFCRA) to March 31, 2021. The tax benefit is a deduction against the employer’s FICA obligations when the employer pays out sick leave to employees due to coronavirus reasons through March 31, 2021. The leave rules under FFCRA for Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA) are still largely intact, except for now it is voluntary.

For the public sector, if a public sector employer with fewer than 500 employees pays FICA, the employer may enjoy tax relief so long as it provides the additional paid leave. If the public sector employer pays into a state fund, then there is no tax relief available under this law.

For both public and private sector employers who have fewer than 500 employees, paid leave must be in addition to any other paid leave to which an employee is entitled. The rules state that it cannot in “any way diminish, reduce, or eliminate—any other right or benefit,”  and this includes another Federal, State, or local law, a collective bargaining agreement, or an Employer policy that existed prior to April 1, 2020.  This means employers who must provide paid leave by state law, such as states like Arizona and Colorado, must fulfill that obligation first.

If you have any questions about this, please contact us. We can help!