Families First Coronavirus Response Act-Mandatory Paid Sick Time Rules and Payroll Tax Credit

Mar 20, 2020 | Federal Tax Developments

The President signed the Families First Coronavirus Response Act into law on March 18, 2020. As part of this law employers with less than 500 employees now have mandatory paid sick time and paid family leave, but can receive a refundable payroll tax credit to offset the costs.  The link to the actual law is https://www.congress.gov/bill/116th-congress/house-bill/6201/text.


There is still much guidance needed from the Department of Labor, Department of the Treasury (IRS) and other agencies to clarify the technicalities of how this will be implemented. The information below is based on the law as passed, before any supporting guidance has been issued. We are still waiting for the announcement of the effective date of the law, but it will be no later than April 2nd.


For the clients that we do payroll for, we are working with the payroll system providers to determine how the credit below will be implemented into your payroll. If we do not currently do your payroll, please contact us if you are interested in changing over.


Paid Sick Time

The two weeks of paid sick leave must be paid when the employee is unable to work or telework for any of the following:

  1. The employee is subject to 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 number 1 or 2 above.
  5. The employee is 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 child care provider of such son or daughter is unavailable, due to COVID–19 precautions.
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.


The number of hours of paid sick time an employee receives is:

  • 80 hours for full time employees
  • For part time employees, it is the average number of hours that employee works in a two-week period.


The hourly rate of pay is:

  • The employee’s standard rate of pay (or minimum wage if greater) for leave taken due to situations 1, 2 and 3 above or
  • Two-thirds of that amount for leave taken due to situations 4, 5, and 6 above.


The maximum required amount of paid sick time is:

  • $511 per day ($5,110 in total) for leave paid due to situations 1, 2, and 3 above
  • $200 per day ($2,000 in total) for leave paid due to situations 4, 5, and 6 above


An employer cannot require, as a condition of providing this paid sick time to an employee, that the employee find a replacement employee to cover his/her hours. The employer must provide this paid sick time to an employee regardless of how long the employee has been working for the employer. The employee may first use this special paid sick time before using other paid sick time available from the employer.


Extended Family Leave

A much narrower extended paid family leave is also part of the law.  Paid leave is available for up to 10 weeks for an employee who is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.


The first 10 days of such leave may consist of unpaid leave. However, the employee may elect to substitute any other accrued paid leave for some or all of the unpaid leave under this provision.


The amount paid per day is calculated using the same “two-thirds” rule as described above for paid sick leave, but with the maximum total paid out of $10,000 per employee.


As with paid sick leave, paid family leave is also eligible for a similar payroll tax credit[27] which is also available to the self-employed.[28]


Payroll Tax Credits

Employers who pay these required sick or extended family leaves will receive a refundable credit equal to the required wages as described above against FICA taxes paid. The employer will also receive a credit for qualified group health plan expenses allocable to the qualified sick pay. At this point, it is our assumption that this credit will be applied towards the quarterly 941 payroll reports.


A similar credit is available for self-employed individuals who personally have to take qualified sick leave, subject to the same limits. At this point, it is our assumption that this credit would be applied towards the self-employed individual’s personal tax return for 2020.


We will communicate any clarifications of the above Act to you via email, our website (www.prescottaccountants.com) and Facebook page.


Schutte & Hilgendorf offers a broad range of professional accounting, tax, and audit services to individuals and businesses throughout Yavapai County and Northern Arizona.   With over 40 years combined certified public accounting experience, we specialize in providing services to numerous industry specific areas, including non-profit organizations, homeowner’s associations and construction contracting.  We also provide tax planning and preparation, sales tax, ongoing accounting/bookkeeping, live payroll, and QuickBooks setup and training (QuickBooks Proadvisors).  Given our small size, we can still provide a personal touch with professional expertise. Come in and see us anytime at 2086 Willow Creek Road, Prescott, Arizona or call us at 928-778-0079.


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