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What Coronavirus Tax Credits may be Available to Our Institution?


In a previous “QIP” (Quick Information Profile), we noted:


One thing to consider is whether your school desires to "qualify" for the exemption for fewer than 50 employees. At the end of the day, analysis might show that the 100% tax credit for payments to workers under the "New Sick Leave" and/or "Expanded FMLA" may be more advantageous financially than just the 50% credit under the "Employee Retention Credit."

Basically, we are looking at three types of Coronavirus/COVID-19 tax credits these days.

1. Paid Sick Leave Refundable Credit (100%)

2. Paid Family Leave Refundable Credit (100%)

3. Employer Retention Credit (50%)


Let’s take a look at what the IRS has to say about each of the three…

Overview of Paid Sick Leave Refundable Credit

Direct from the IRS:


The EPSLA requires Eligible Employers to provide employees with paid sick leave if the employee is unable to work (including telework) due to any of the following:

  1. the employee is under a Federal, State, or local quarantine or isolation order related to COVID-19;

  2. the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;

  3. the employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;

  4. the employee is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;

  5. the employee is caring for the child of such employee if the school or place of care of the child has been closed, or the child care provider of such child is unavailable, due to COVID–19 precautions;

  6. the employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.

An employee who is unable to work for reasons due to a COVID-19 circumstance described in (1), (2) or (3) above is entitled to paid sick leave for up to two weeks (up to 80 hours) at the employee’s regular rate of pay, or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $511 per day and $5,110 in the aggregate.


An employee who is unable to work due to a COVID-19 circumstance described in (4), (5) or (6) above is entitled to paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay or, if higher, the Federal minimum wage or any applicable State or local minimum wage, up to $200 per day and $2,000 in the aggregate.


The Eligible Employer is entitled to a fully refundable tax credit equal to the required paid sick leave. This tax credit also includes the Eligible Employer’s share of Medicare tax imposed on those wages and its allocable cost of maintaining health insurance coverage for the employee during the sick leave period (qualified health plan expenses). The Eligible Employer is not subject to the employer portion of social security tax imposed on those wages. (Eligible Employers subject to the Railroad Retirement Tax Act are not subject to either social security tax or Medicare tax on the qualified sick leave wages; accordingly, they do not get a credit for Medicare tax.)

OUR NOTE: This credit is applied to the 7.65% employer match/share of "FICA taxes" (6.2% Social Security and 1.45% Medicare). And, any amounts beyond those taxes are designed to be "refundable" - sent to you as a payment on a dollar-for-dollar basis.


Overview of Paid Family Leave Refundable Credit

Per the IRS:


In addition to the paid sick leave credit, under the expanded FMLA, an employee who is unable to work (including telework) because of a need to care for a child whose school or place of care is closed or whose child care provider is unavailable due to COVID-19, as described in (5) above, is entitled to paid family and medical leave equal to two-thirds of the employee’s regular pay, up to $200 per day and $10,000 in the aggregate. Up to ten weeks of qualifying leave can be counted towards the family leave credit. The Eligible Employer is entitled to a fully refundable tax credit equal to the required paid family and medical leave (qualified family leave wages). This tax credit also includes the Eligible Employer’s share of Medicare tax imposed on those wages and its cost of maintaining health insurance coverage for the employee during the family leave period (qualified health plan expenses). The Eligible Employer is not subject to the employer portion of social security tax imposed on those wages. (Eligible Employers subject to the Railroad Retirement Tax Act are not subject to either social security tax or Medicare tax on the qualified family leave wages; accordingly, they do not get a credit for Medicare tax.)


OUR NOTE: This credit is applied to the 7.65% employer match/share of "FICA taxes" (6.2% Social Security and 1.45% Medicare). And - as with the Sick Leave tax credits - any amounts beyond those taxes are designed to be "refundable" - sent to you as a payment on a dollar-for-dollar basis.

Overview of the Employer Retention Credit

Per the IRS:

The credit is available to all employers regardless of size, including tax-exempt organizations.


There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.


Qualifying employers must fall into one of two categories:

  1. The employer's business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.

  2. The employer's gross receipts are below 50% of the comparable quarter in 2019. Once the employer's gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

These measures are calculated each calendar quarter.


The amount of the credit is 50% of qualifying wages paid up to $10,000 in total. Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Wages taken into account are not limited to cash payments, but also include a portion of the cost of employer provided health care.


Qualifying wages are based on the average number of a business's employees in 2019.

Employers with less than 100 employees: If the employer had 100 or fewer employees on average in 2019, the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full time and were paid for full time work, the employer still receives the credit.

Employers with more than 100 employees: If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.


Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees' wages by the amount of the credit. (Underline added.)


Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer's employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.


Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200. See the links to Form 7200 and the accompanying instructions in our “Resources” listing.


The Senate Finance has noted (in their excellent FAQ on the Employee Retention Credit):

The credit is not available to employers receiving a small business interruption loan under the SBA’s Paycheck Protection Program (CARES Act section 1102).


Please include the potential for receiving these credits in your budgeting and cash flow projections for the coming months.

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Moja & Company

P.O. Box 531

Reidsville, GA 30453

321.258.9907

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