Employment Tax & Benefits Considerations in
Covid-19 Environment
This letter provides updates on benefits to employees and employers under the Families First Coronavirus Response Act (FFCRA) and the CARES Act. More importantly, we urge employers to implement record keeping procedures and contact their payroll service providers as soon as possible to take advantage of these benefits

Paid Sick Leave and Paid Family Leave under the FFCRA

Employers with fewer than 500 full-time and part-time employees working in the U.S. (covered employers) are subject to the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA) under the FFCRA, effective April 1, 2020 through December 31, 2020.
Employers must provide continuation of health insurance during the leave periods, and are prohibited from discharging, disciplining or otherwise discriminating against any employee who takes paid sick leave under or files a complaint or institutes a proceeding under or related to the Act’s paid leave requirements.

Employees' Benefits

Employee Paid Sick Leave (EPSLA) Benefits:
A)   Regular Rate of Pay, up to $511/day 
An employee is entitled to his/her regular rate of pay, up to $511/day for a maximum of 10 days (or 80 hours) for a total of $5,110, if the employee is unable to work due to the following conditions:

  • 1)  COVID-19 quarantine by government orders; or
  • 2)  COVID-19 self-quarantine advised by health care provider; or
  • 3)  Experiencing COVID-19 symptoms and seeking a medical diagnosis.

B)   Two-thirds of Pay, up to $200/day 
An employee is entitled to two-thirds of his/her regular rate of pay, u p to $200/day for a maximum of 10 days (or 80 hours) for a total of $2,000, if the employee is unable to work due to the following conditions:

  • 1)  caring for someone subject to (1) or (2) above; or
  • 2)  caring for a child because the school or childcare is closed due to COVID-19 or
  • 3) experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services.

A part-time employee is also entitled to EPSLA leave for his/her average number of work hours in a two-week period the employee is normally scheduled to work. 

Emergency Family and Medical Leave Expansion (EFMLEA) Benefits:
All employees, including full-time and part-time employees, of covered employers are eligible for EFMLEA if they have been employed by their employer for at least 30 calendar days.
A full-time employee who is caring for a child whose school or child care provider is closed due to COVID-19 qualifies for up to 12 weeks of leave at 40 hours a week under the EFMLEA. 

A part-time employee is eligible for this leave for the number of hours that the part-time employee is normally scheduled to work over that 12 weeks period. 
The initial 2 weeks are unpaid with the remaining 10 weeks paid at two-thirds of the employee's regular rate of pay, up to $200/day or $10,000 total under EFMLEA.
Employees can substitute the first two weeks of unpaid EFMLEA with the two weeks paid sick leave, or with any accrued vacation leave, personal leave, or medical or sick leave that's available under the employer's current policy.

Rehired Employees are Eligible:
An employee who was laid off on March 1, 2020 or later, and subsequently rehired by the same employer is eligible for paid leave benefits under the FFCRA, so long as the employee was employed for at least 30 of the last 60 calendar days prior to layoff.

Small Business Exemption under EFMLEA:
Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern. 

Employers' Payroll Credits under FFCRA

How much credit can an employer receive?
Employers receive dollar-for-dollar payroll credits for:

  • sick leave and family leave paid under the FFCRA;
  • employer's share of medicare tax allocable to those wages; and
  • qualified health plan expenses (including both portion of the cost paid by the employer and the portion of the cost paid by the employee with pre-tax salary reduction contributions) allocable to those wages.
Employers are not required to pay employees more than the limits (mentioned above) in the FFCRA. Any additional compensation above the limit is not eligible for a tax credit.

How can an employer claim the payroll credit?

Employers eligible for payroll credits under FFCRA will claim the credits on the federal quarterly payroll tax return Form 941 (currently under revision by the IRS).
In addition to payroll taxes deposit retention, eligible employers can use IRS Form 7200 to request an advance payment of the tax credits for qualified sick and qualified family leave wages and the employee retention credit (discussed later).
Documentation Requirements:
Employers need to obtain and retain records to substantiate the eligibility for the sick leave or family leave credits. Documentations include, but are not limited to:
  1. Written requests for such leave from employees that outline the name of the employee, date(s) for the leave, COVID-19 related reason(s) for the leave, and a statement that the employee is unable to work (including means of telework) for such reasons;
  2. Quarterly federal payroll tax return Form 941;
  3. Form 7200 Advance Payment of Employer Credits Due to COVID-19;
  4. Documentation to show how the employer determined the amount eligible for the credit.

Employers' Payroll Tax Relief under the CARES Act
New Update on Employee Retention Tax Credit (ERTC):
See our previous newsletters on the ERTC credits here , and previous update on ERTC here .

What wages are not eligible for the ERTC?
  • Wages paid under the FFCRA paid leaves;
  • Wages taken into account under the income tax credit for paid family and medical leave;
  • Wages paid to certain related individuals specified in IRC 51(i)(1);
  • Wages of an employee for whom a work opportunity tax credit is claimed.

How do I claim the ERTC?

ERTC is claimed on the federal quarterly payroll tax return (Form 941), starting in the second quarter of 2020.
If the amount of the credit exceeds the employer portion of the social security tax on all wages paid to all employees in any quarter, the excess is treated as an overpayment that can be applied to offset any remaining payroll tax liability; any remaining excess can be refunded.
To fund qualified wages, employers can request an advance of the ERTC on Form 7200 , and/or retain an amount of the federal employment taxes equal to the amount of the anticipated ERTC, without depositing them to the IRS.
If you paid any qualified wages between March 13, 2020, and March 31, 2020, inclusive, you will claim the retention credits on the second quarter Form 941.
More information will be provided when the revised Form 941 becomes available.

New Update on Deferral of Payment of Employer Payroll Taxes:
All employers are eligible to defer paying the employer portion of the social security and certain railroad retirement taxes (6.2% of wages up to $132,900) incurred between 03/27/2020 - 12/31/2020, without incurring failure to deposit and failure to pay penalties.

Interaction with Other Tax Credits/CARES Provisions:
Employers are entitled to defer the 6.2% social security tax prior to determining the paid leave credit under FFCRA, or the employee retention credit, and prior to determining the tax deposits it may retain in anticipation of these credits, or the amount of any advance payments or refunds of these credits.
Employers with Paycheck Protection Plan (PPP) loan qualify for this deferral until the amount of forgiveness is determined by the lender. Any tax amount that was deferred through the date the PPP loan is forgiven continues to be deferred to 2021 and 2022 respectively, without penalty.
(This is a correction to our newsletter on April 8, 2020 on employers with PPP loan deferral eligibility, with updated guidance made available by the IRS since our last update).

How do I keep track of the deferral? 

As part of your normal bookkeeping process, we recommend recording your deferral as a separate liability on your books. Please also retain copies of your quarterly payroll tax returns as support documents.

Working with Your Payroll Service Provider
All employers' benefits discussed in this newsletter are available to eligible employers automatically. No election is needed for deferral on the employer share of social security tax.
Your payroll service provider may require additional addendum agreements where you certify your eligibility for these benefits, as well as to process your payroll tax deposit amounts reflecting these benefits taken.
We recommend getting in touch with your payroll service provider as soon as possible to determine any records they need you to provide and/or retain.

California Relief to Employers and Employees

Extension to File Payroll Reports and Deposits:
Employers experiencing a hardship as a result of COVID-19 may request up to a 60-day extension of time from the EDD to file your state payroll reports and/or deposit state payroll taxes without penalty or interest. A written request for extension must be received within 60 days from the original delinquent date of the payment or return.

For questions, call the EDD Taxpayer Assistance Center at: 1-888-745-3886.

EDD Work Sharing Program:
The Work Sharing Program allows employers who are experiencing a slowdown in business or services as a result of the COVID-19 impact on the economy to retain employees by reducing their hours and wages that can be partially offset with unemployment insurance benefits. For more information, please visit the EDD website here .

Pandemic Unemployment Assistance:

As part of the CARES Act, Californians who usually are not eligible for regular UI benefits and are directly impacted by the pandemic now may qualify for the Pandemic Unemployment Assistance. This includes business owners, self-employed, independent contractors, and those that have limited work history. The EDD is currently working on implementing this program. You can monitor updates here .

Disability and Unemployment Insurance Benefits for Employees:

Governor Newson signed an executive order on March 12, 2020 to waive the one-week waiting period for people who are unemployed and/or disabled as a result of COVID-19.

An employee is encouraged to file a Disability Insurance (DI) claim with the EDD if he/she is unable work due to having or being exposed to COVID-19.

An employee who's unable to work due to caring for an ill or quarantined family member with COVID-19 can file a Paid Family Leave claim with the EDD.

Medical documentation is required for both Disability Insurance and Paid Family Leave claims.
Employees are also encouraged to apply for Unemployment Insurance (UI) benefits if they are subject to quarantine, are not ill, and not eligible for DI claim. Starting the week ending April 11, 2020, the EDD will begin paying an additional $600 on top of UI claimant's current weekly benefits amounts, with the federal funds made available in the CARES Act.
Self-employed individuals, independent contractor, and gig workers may also be eligible for UI benefits.
For more information about these benefits, please visit EDD's Coronavirus page


We're in this together and our thoughts go out to all who have been impacted by this unprecedented situation. Rest assured, we are here to help with your questions. Please don't hesitate to contact anyone of us or you can reach our COVID-19 team via email at  [email protected]

CC mgggy newsletter release 2020-10
Mann Gelon Glodney Gumerove Yee LLP | (310) 277-3633