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It has been hard to escape the impact of the Coronavirus and the effect on the markets, the economy, and to our friends and family. I met with Rolando Garcia, JD/CPA at Doeren Mayhew to discuss the Families First Coronavirus Response Act that was just signed into law. The following discussion shares what has been passed and some of our thoughts on how it may impact you, your family, your business and your community.
Families First Coronavirus Response Act is Now Law
On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act, after overwhelming approval by the Senate, to help aid Americans impacted by the Coronavirus (COVID-19) sweeping the United States. The act increases funding for testing, extends paid sick leave to employees, and offers employer tax credits.
Below is an outline of the most impactful provisions Rolando and I wanted to highlight:
Employers with fewer than 500 employees are required to provide paid sick leave to employees, both full-time and part-time, who are forced to stay home due to quarantining, or caring for a sick/quarantined family member or child if the school or place of care is closed.
Outlined below are qualifying guidelines related to paid sick leave and family leave:
The total hours of paid sick leave are limited to 10 days of wages. It is at the employer’s discretion if they require an employee to use any existing paid sick time or paid time off before enacting this additional leave time.
Extended Paid Leave
The law creates an emergency extended paid leave program to directly respond to COVID-19. Private-sector employers with fewer than 500 workers and government entities would have to provide as many as 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA) for employees who:
The FMLA has also been amended to apply to companies of all sizes, requiring those businesses with less than 50 employees previously not subject to the act, to now provide job-protected leave if it is related to the COVID-19 virus. However, there is a provision that may allow the Secretary of Labor to exempt some businesses with fewer than 50 employees from the requirements.
The first two weeks of leave can be unpaid, though a worker
could choose to use accrued vacation days, personal leave or other available
paid leave for unpaid time off, but an employer may not require an employee to
do so. Following the first two-week period, workers are required to receive a
benefit from their employer that is equal to at least two-thirds of their
normal pay rate.
Employer Tax Credits
Employers are eligible for tax credits to cover wages paid to employees while they are taking time off under the law’s sick leave and family leave provisions through the end of 2020. The tax credits equal 100% of qualified wages paid, subject to the caps noted below. However, this may cause problems with cash-strapped companies as tax credits aren’t cash in the bank.
Wages paid due to sick leave and family leave provisions are not subject to the employer’s share of the Federal Insurance Contributions Act (FICA) tax (i.e., these payments are not considered to be wages for this purpose).
The credit is refundable if it exceeds the amount the employer owes in FICA tax on a quarterly payroll tax filing. The U.S. Department of the Treasury and Internal Revenue Service are in the process of preparing guidance for how to claim this refund as quickly as possible. Any credit claimed on a quarterly or refundable filing will increase the taxable income of the employer.
Self-Employed Tax Credit
The law provides a similar refundable credit against self-employment tax. It covers 100% of self-employed individuals’ sick-leave equivalent of 67% to take care of a sick family member or child if school was closed.
The sick-leave equivalent amount would be the lesser of the average daily self-employment income, or $511 per day if caring for themselves or $200 if caring for a family member for 10 days. Self-employed individuals can receive a family leave credit for as many as 50 days for the lesser of $200 or their average daily self-employment income.
Congress is already far along in considering a third, and significantly larger, stimulus and relief bill, that may provide amendments to the Families First Coronavirus Response Act. Stay tuned as Doeren Mayhew will continue to keep you up-to-date as things progress amongst the COVID-19 outbreak via Doeren Mayhew’s Coronavirus Resource Center. If you have any questions regarding this new law’s impact on your business, please feel free to contact your financial advisor at STA Wealth or a member of the CPA and advisory team at Doeren Mayhew.
This is for informational purposes. The information was prepared by STA Wealth Management and Doeren Mayhew CPAs and Advisors this information has not been independently verified by a third party. STA Wealth Management LLC is not an affiliate of Doeren Mayhew CPAs and Advisors, their offerings, nor their management team.
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Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by STA Wealth Management, LLC (“STA”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from STA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. STA is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the STA’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are an STA client, please remember to contact STA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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