IMPORTANT: Instructions on Time Reporting Using New Leave Codes NMC Communiqué

Employers must separately state each of these wage amounts either on Form W-2, Box 14 or on a separate statement. If a separate statement is provided and the employee receives a paper Form W-2, the statement must be included with the Form W-2 sent to the employee. If the employee receives an electronic Form W-2, then the statement must be provided in the same manner and at the same time as the Form W-2.

NMC will begin using additional ADP pay codes that are directly related to the Families First Coronavirus Response Act (FFCRA), effective April 20, 2020, while continuing to use the COVID-19 code.

Reporting Requirements

The credit may not exceed the Social Security tax imposed on the employer, reduced by any credits allowed for the employment of qualified veterans and research expenditures of qualified small businesses. Further, no credit is allowed with respect to wages for which a credit is already allowed under Section 45S (i.e., the Paid Family Leave Credit, enacted in 2017). Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan would have access to paid emergency leave.

Any otherwise-qualifying leave payments for periods after 2020 are not FFCRA leave payments, and no tax credit is allowed. Section 2206 of the CARES Act enabled employers to contribute up to $5,250 in 2020 toward student loan repayments for employees. Such payments would be excluded from the employee’s income and employment taxes. The $5,250 cap applies to both the new student loan repayment benefit and any educational assistance under Section 127 of the Internal Revenue Code (IRC).

Such information is by nature subject to revision and may not be the most current information available. Under the FFCRA, an employee who was unable to work or telework for reasons related to COVID-19 described in items (1), (2), or (3) above was entitled to paid sick leave up to $511 per day and $5,110 in the aggregate. An employee who was unable to work or telework for reasons related to COVID-19 described in items (4), (5), or (6) above was entitled to paid sick leave at two-thirds the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate. Employers are prohibited from requiring workers to find a replacement to cover their hours during time off, and from discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer. ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at /regulatorynews.

Tax Treatment of Paid Sick Leave and Paid Family and Medical Leave Payments

ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to ff employee pay adp assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice.

Manage Time and Attendance

To qualify, an employer’s operation must have been at least partially suspended due to orders from a governmental authority limiting commerce, travel, or meetings due to COVID-19, or the employer must have experienced a 50 percent decline in gross receipts when compared to the same quarter of the prior year. The credit may be increased by the proportionate share of the employer’s health-care costs related to such wages. The bill takes effect within 15 days of enactment, i.e., no later than April 2, 2020. The paid sick and paid family leave provisions, and tax credits created by FFCRA, will sunset effective December 31, 2020. An employee may elect to use accrued vacation, personal or medical or sick leave for those days, including paid sick leave as provided by this Act. The remainder of the leave must be paid at two-thirds the employee’s regular rate of pay, subject to a limit of $200 per day, and up to a total amount of $10,000.

• Covered sick and family leave payments under the Act are taxable wages for income and employment tax purposes, except that such wages are exempt from Employer Social Security taxes.
• PPP loans are 100 percent forgivable if certain measures are met, such as spending at least 60 percent of the proceeds on payroll costs and maintaining specified staffing and wage levels.
• No action is required of ADP clients to discontinue accrual of otherwise-qualifying ERTC wages after 2020.
• Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business.
• Deferred tax amounts must be repaid in equal amounts due on December 31, 2021, and December 31, 2022.
• If the employee does not have six-months of work history with the employer, hours are based on “the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work.”

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Covered sick and family leave payments under the Act are taxable wages for income and employment tax purposes, except that such wages are exempt from Employer Social Security taxes. Such payments are subject to Medicare taxes, but the tax credit is increased by the amount of employer Medicare taxes (i.e., 1.45%) paid on such wages. For 2021, tax credits are only available for paid sick leave due to the inability to work or telework related to COVID-19 described in (1), (2), or (3) above in limited amounts; i.e., $5,110 in the aggregate, covering April 1, 2020, through March 31, 2021. Section 2301 of the CARES Act provided that private-sector employers may receive a refundable tax credit against employer Social Security tax equal to 50 percent of qualifying wages paid, up to $10,000 per employee, for a maximum credit of $5,000 per employee. However, the credit is not available to employers who receive a Paycheck Protection Program (“PPP”) loan (unless the employer repaid the PPP loan in full by May 18, 2020).

Section 1102 of the CARES Act established the Paycheck Protection Program (PPP), which was intended to provide employers with funds to continue operations and payment of wages during the COVID-19 pandemic. PPP loans are 100 percent forgivable if certain measures are met, such as spending at least 60 percent of the proceeds on payroll costs and maintaining specified staffing and wage levels. If a separate statement is provided and the employee receives a paper Form W-2, the statement must be included along with the Form W-2 sent to the employee.

• Many borrowers who received PPP loans have already completed their specified “covered period” and spent the PPP loan proceeds, and may be ready to submit the related forgiveness applications (SBA Form 3508, 3508EZ or 3508S).
• Section 1102 of the CARES Act established the Paycheck Protection Program (PPP), which was intended to provide employers with funds to continue operations and payment of wages during the COVID-19 pandemic.
• Section 2302 of the CARES Act enabled employers to defer payment of the employer share of the Social Security tax incurred beginning March 27, 2020, through December 31, 2020.
• However, employers that offer qualified leave in accordance with the FFCRA still qualify for tax credits to reimburse the cost of such leave.
• ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve.
• In addition, the aggregate number of days available to an individual is limited to 10 for 2020.
• Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan would have access to paid leave.

Nothing in the law diminishes any rights that employees may have under federal, state, or local laws; collective bargaining agreements, or an employer’s existing policy. Expanded FMLA leave is available only when an employee is unable to work (or telework) due to a need to care for a son or daughter under the age of 18 if the child’s school or child-care provider is closed due to public health emergency with respect to COVID-19 declared by a federal, state, or local authority. Depending when the loan was originated, borrowers may have eight or 24 weeks (the “covered period”) in which to spend the funds in accordance with the program. Applications for forgiveness are not required until 10 months after the expiration of a borrower’s covered period.

If you have self-employment income, you should refer to the instructions for your individual income tax return for more information.” Eligible private-sector employers are entitled to fully refundable tax credits toward employment taxes to cover the cost of FFCRA leave, including qualified sick and family leave wages, plus allocable qualified health-plan expenses. FFCRA wages are exempt from employer Social Security taxes but are subject to employer Medicare taxes. However, the tax credit is increased by the employer’s share of Medicare tax on qualified leave wages. Under the Act, all non-governmental employers with less than 500 employees are allowed a credit against employer Social Security tax liability equal to 100 percent of the qualified sick leave wages paid by the employer, subject to the limits discussed above. The credit is increased by specified health expenses (e.g., employer-paid health plan premiums), but limited to qualified health plan expenses that are excluded from employees’ income as coverage under an accident or health plan.

The credit only applies to qualifying wages paid in 2020 from March 13 through December 31. Pay dates after 2020 would not qualify for ERTC, even if otherwise-qualifying wages were earned (i.e., relevant hours were worked) in December. No action is required of ADP clients to discontinue accrual of otherwise-qualifying ERTC wages after 2020.