24 March 2020

Department of Labor and Internal Revenue Service Jointly Announce Guidance on Coronavirus-Related Paid Leave Tax Credits

***Information and guidance in client updates was up to date at time of publication. During the pandemic, information and guidance has been changing rapidly. If you have any questions about the information contained in a client update, please contact the author(s) or your Miller Johnson attorney.***

On Friday March 20, the Departments of Treasury and Labor issued a joint notice (IR 2020-57) addressing the administration of the payroll tax credits enacted as part of The Families First Coronavirus Response Act (the “Act”).  Generally, the Act requires employers of 500 or fewer employees to provide certain paid sick leave and extended FMLA benefits to employees missing work for Coronavirus-related reasons.  The ACT includes a refundable tax credit for employers intended to offset the full cost of providing employees with the paid leave required by the ACT.

Friday’s announcement clarified that, in order to expedite employers’ receipt of the cash benefits of the tax credits, employers will be permitted to reduce the amount of ordinarily-required payroll tax deposits by the amount of allowable tax credits (rather than depositing cash with the IRS and then filing for a refund).  The release states employers will be able to reduce deposits of withheld federal income taxes, Medicare and Social Security taxes with respect to all employees up to the amount of allowable credits.

In the event the amount of allowable credits under the Act exceeds an employer’s total deposit liability, the IRS promised to provide a “streamlined” refund claim form and to issue refund checks “as quickly as possible”.

Further details of the expedited refund procedures are expected later this week.  Miller Johnson is actively following these developments and will provide further updates when more information is available.