COVID-19 | Legislative Update

Chilah  Weller:

Hello everyone and welcome back to this month's legislative update. My name is Chilah Weller and this is Eric Jones, two of the owners of Workforce Pay Hub. Eric is going to update us on the various tax credits that pertain to COVID-19.

Eric Jones:

Thank you, Chilah. So for COVID-19 there have been two major laws passed. There was another one just passed last week, but the two I'm going to talk about are the Families First Coronavirus Relief Act or the FFCRA. The second one is the Cares Act.

Eric Jones:

Now going back to the FFCRA, that act gives us three different tax credit that are mandated really for employers under 500 employees. Now the first one I want to talk about is the employee paid sick leave, which includes up to 80 hours for a full time employee or a prorated amount for a part time employee. That they are able to take time off if they get sick, if their spouse or dependent gets sick, time for them to care for themselves as well as for that other person.

Eric Jones:

Now if they get sick, they get 80 hours up to their full pay, at $511 per day. So let's say they make $200 normally per day, it is capped at $200. Let's say they make $1,000 per day, it is capped at $511. Now this is 14 days. Really it's meant for 10 business days. It should work out to 14 days though as that is the normal quarantine that doctors recommend once you've been infected.

Eric Jones:

Now, if their spouse or dependent catches COVID-19 or is quarantined, that $511 is actually reduced to 2/3 of their pay up to $200. So for example, if they were making $400 per day, they would actually be capped at $200. If they were making $150 per day, they would be capped at 2/3 of 150, which is $100, if I did my math right.

Eric Jones:

Now there's the second credit that also applies. Now, let's say you have a dependent child or a dependent whose school or daycare was shut down due to COVID-19. Now they are allowed 12 weeks of protected leave after the first two, which 10 are then paid. Again, at 2/3 pay capped at $200 per day.

Eric Jones:

Now these are actual tax credits. These go against your 941 deposits that we will make on your behalf every week or every other week or whatever your pay schedule is. Most of our clients, if they get paid let's say this week, we would actually make their 941 deposit next week.

Eric Jones:

Now we are actually able to reduce dollar for dollar wages paid under these two credits against that 941. So let's for example, you have an employee that entire pay period they were off taking care of their spouse. They would be eligible potentially for $2,000. Now let's say their normal 941 deposit was $10,000. What we would actually do is short draft from your bank account. So we would keep the money in your account $2,000 and only remit to the IRS $8,000. So you immediately get to keep that tax money. Now this is a service that we're prepared and we are already offering to our clients.

Eric Jones:

Now the second act I want to talk about, The Cares Act also allows for a credit against your social security, which is 6.2%, that both the employee pays and then another 6.2% that the employer pays. Now that employer portion of 6.2% the IRS is allowing us to defer those payments up until 2021 and 2022.

Eric Jones:

Let's say you've got $100,000 that you've deferred because you do not have to pay that 6.2%. $50,000 is going to be due December 31st, 2021 and the other 50,000 will be due December 31st, 2022. Now, I got to be honest, I have mixed feelings on this one because basically it's a low interest/free loan from the government, but it's going to mandate two balloon payments, and I'm just a little nervous for our clients that they're going to have the cash flow come December 31st, 2021 and 2022. But it is available if you need cash immediately.

Eric Jones:

Now there's a second piece to The Cares Act that we don't have a lot of guidance on yet, so I'm not prepared to give it. It basically allows for an employee tax credit on the first $10,000 in wages for an employee for the rest of this year. They are allowing potentially up to a $5,000 tax credit. Now I'm waiting to hear some more guidance from the SBA and the IRS, exactly how this is calculated and claimed, but look out for that. Hopefully we should receive an FAQ guidance sometime this week or next week at the latest.

Eric Jones:

Now, if you have specific questions, please don't hesitate to reach out to us. I would suggest reaching out to me personally. Even call us at (517) 759-4026 or you can email me at ejones@workforcepayhub.com.

Chilah  Weller:

Thanks everyone.

Eric Jones:

Thanks.