ALERT IRS DEPT OF TREASURY AND DEPT OF LABOR ISSUE FIRST GUIDANCE ON THE FAMILIES FIRST CORONAVIRUS RESPONSE ACT

ALERT: IRS, DEPT. OF TREASURY, AND DEPT. OF LABOR ISSUE FIRST GUIDANCE ON THE FAMILIES FIRST CORONAVIRUS RESPONSE ACT

On March 20, 2020, the Internal Revenue Service (IRS), the U.S. Department of the Treasury, and the U.S. Department of Labor provided some preliminary guidance on the Families First Coronavirus Response Act (FFCRA), which significantly amends and expands the Family and Medical Leave Act (FMLA), by issuing Notice IR-2020-57 (Notice). You can access the Notice by clicking on this link to the IRS website. More extensive guidance will be issued next week. Here are some important takeaways:

  • Employers can offset their qualified sick leave and qualified FMLA leave payments against their federal employment tax deposit requirements, including income tax withholding and employment tax withholding (employee portion) and employer match tax (collectively “941 taxes”).
  • Although the refund procedure available where qualified sick leave and qualified FMLA payments exceed the 941 taxes is not yet finalized, the Notice states that the IRS expects to process in 2 weeks or less.
  • Tax exempt organizations with less than 500 employees can also use the qualified sick leave and qualified FMLA leave payments to offset their employment tax liability.
  • Regarding the small business exemption (fewer than 50 employees) from FMLA, the Notice states that the exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of a business as a going concern.
  • The U.S. Department of Labor will issue a temporary nonenforcement policy that provides a period of time for employers to come into compliance with the Act so long as the employer acted reasonably and in good faith to comply with the Act. It then states that the U.S. Department of Labor will instead focus on compliance assistance during the 30-day period. Although not clear, this seems to suggest a 30-day grace period after enactment of the Act for an employer to come into compliance provided the employer meets the reasonable/good faith standard.

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