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Churches can begin taking advantage of two new refundable payroll tax credits designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing COVID-19-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (FFRCA).

The act gives businesses(including churches) with fewer than 500 employees funds to provide employees with up to 80 hours of paid leave, either for the employee’s own health needs or to care for family members.

The effective date for time off take is April 1, 2020. Time off prior to this date would not be eligible for these credits.

Paid sick leave credit

There are 6 difference scenarios in which an employee can use this leave. If they :

  1. are subject to a federal, state, or local quarantine or isolation order related to COVID-19. This DOES NOT include “stay at home,” “shelter in place” or “hunker-down” orders.
  2. has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. are experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  4. are caring for an individual who (a) is subject to a federal, state, or local quarantine or isolation order related to COVID-19; or (b) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  5. are caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such child is unavailable, due to COVID-19 precautions; or
  6. are experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

For an employee who is unable to work due to scenarios 1, 2 or 3 eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days (up to 80 hours).

For an employee unable to work due to scenarios 4, 5 or 6 eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days (up to 80 hours).

Child care leave credit
In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to COVID-19, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Before taking this leave, employee must take 10 days (2 weeks) of unpaid leave. However, this unpaid time can be supplemented by Vacation, Sick, PTO or the Paid Sick Leave Credit above. This would effectively give them 12 weeks of partially paid leave.

How to receive both credit:

Eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

For example:

If an employee takes 1 day of leave and is paid gross $150.
The next IRS tax liability created from the whole church’s payroll is $1000.
The church would only be required to remit $850 to the IRS for that remittance.  

 

 

 

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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