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What is the Difference Between the FFCRA and CARES Act?
At APS, we have been receiving many questions around the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act. Many employers are confused about which regulations apply to the FFCRA and which ones apply to the CARES Act. We’re here to help clear the confusion around these two different pieces of legislation so employers can claim their credits and maintain compliance during the COVID-19 pandemic.
How APS is Helping Businesses
We are keeping a close eye on the ever-changing landscape of COVID-19, including the FFCRA and CARES Act. Here’s how APS has responded so far and how we’re helping businesses during this challenging time:
- We have created a COVID-19 Response Team to assist in processing payroll, as well as making it easier for our clients to utilize the credits and deferrals the IRS has created.
- We have developed and released FFCRA and CARES Act tracking and management offerings. These new features eliminate the need for employers to manually track paid sick and family leave under the FFCRA, as well as Social Security payment deferrals under the CARES Act.
- We are currently developing additional system functionality to make it easier for employers to manage all the requirements under the FFCRA and CARES Act.
What is the FFCRA?
On March 18, 2020, the Families First Coronavirus Response Act (FFCRA) was passed to help provide paid leave to employees who are affected by COVID-19 related incidents from April 1, 2020, through December 31, 2020.
The FFCRA provides refundable tax credits for required employers to help with COVID-19 related payroll costs. It also mandates certain employers to provide sick pay and paid family leave to employees who are on leave or unable to work due to Coronavirus. Furthermore, it provides an emergency Family and Medical Leave (FMLA) extension and additional paid sick leave requirements.
For certain circumstances related to COVID-19, employees will be eligible for:
- Up to two weeks of sick leave (full pay for self, 2/3 pay for family care) for illness, quarantine, or school closures
- Up to 12 weeks of FMLA leave for school closures (10 days unpaid and then up to 10 weeks at 2/3 pay)
What is the CARES Act?
The Coronavirus Aid, Relief, and Economic Security Act (CARES) is a financial stimulus package designed to help small businesses. Those who qualify may obtain a loan of up to $10 million to help offset the financial challenges created by the COVID-19 pandemic with eight weeks of covered costs forgiven.
The CARES Act includes options to either delay the employer portion of Social Security payroll tax payments or utilize different Small Business Administration loan options. Loan options include Economic Injury Disaster Loans (EIDLs) and Paycheck Protection Program loans.
Please Note: As of April 16th, 2020, the SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. We will provide additional updates as they are released.
What is the Difference Between the FFCRA and CARES Act?
The easiest way to differentiate between the FFCRA and CARES Act is to think about who they are designed to help. The FFCRA is employee-focused and provides guidelines for tracking paid sick leave related to COVID-19. The CARES Act is employer-focused to provide economic stimulus to businesses impacted by COVID-19.
What is the Difference Between the FFCRA and CARES Act Tax Credits?
Although these are different bills, there are tax credits associated with both. Let’s take a look at the credits available under the FFCRA and CARES Act and how they differ:
|FFCRA Tax Credit for Paid Sick & Family Leave||CARES Act Employee Retention Credit|
|Who is Eligible?||Businesses and tax-exempt organizations that have fewer than 500 employees.||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.
|What is the Credit Amount?||Equal to 100% of the amount of sick leave wages paid and can be claimed on a quarterly basis.|
- The credit is refundable if it exceeds the amount the employer owes in payroll tax.
- For employers who pay family leave wages under the FFCRA, a separate payroll tax provision allows a 100% credit against the employer's share of the payroll tax for each employee. The credit is refundable if it exceeds the amount the employer owes in payroll tax.
|50% of qualified wages (including certain health plan expenses) up to $10,000 per employee against applicable employment taxes.
- Includes wages paid from March 12, 2020, to December 31, 2020.
- Qualified Wages are dependent upon the number of full-time employees in 2019.
|How Do Employers Claim the Credit?||Eligible employers will report their total qualified leave wages for each quarter on their federal employment tax return Form 941.||Eligible employers will complete and submit the Federal Form 7200 to the IRS to obtain the employee retention credit under the CARES Act.|
|Can Employers Receive Both Credits under the FFCRA and CARES Act?||Yes, but not on the same wages.||Yes, but not on the same wages.|
|If an Employer Receives a PPP loan under the CARES Act Are They Eligible for This Credit?||Yes, however, wages tax credits received under the FFCRA for qualified wages are not eligible as payroll costs for the purposes of receiving loan forgiveness.||No.|
What About the Employer Social Security Deferral Option?
Section 2302 of the CARES Act allows employers to postpone deposits of their share of the Social Security tax on employee wages paid as of the enactment date through and including December 31, 2020. Employers are allowed to deposit 50% of the deferred tax amount on or before December 31, 2021, with the remaining 50% due by December 31, 2022.
The provisions of this Act apply to the employer portion of the Social Security tax (6.2%). It does NOT include Medicare tax or other employment taxes. According to recent guidance provided by the IRS, employers who have received a PPP loan, but whose loan has not yet been forgiven, may defer deposit and payment of the employer portion of Social Security taxes through the date the lender issues a decision to forgive the PPP loan. Once an employer receives a decision from its lender that its PPP loan is forgiven, the employer is no longer eligible to defer payment of taxes due after that date.
FFCRA & CARES ACT WEBINAR
Check out our webinar on the FFCRA and CARES Act that answers common questions many employers have and helps clear the confusion.
Frequently Asked Questions
The complexity of the FFCRA and CARES Act has left employers with many additional questions. While some guidance has been released and more is forthcoming, we have compiled a list of the most frequently asked questions we have received from APS customers to help clear some confusion.
If you still have unanswered questions, or for detailed information regarding the FFCRA, CARES Act, or other tax-related matters, it’s best to consult with your CPA or other trusted business advisor.
Can I use an hourly income type to pay my salary employees for COVID-19 leave?
It depends on your payroll provider. The APS system supports this as long as it is set up to pay salary employees and employers have entered an hourly rate on the employee’s Rates & Deductions tab. Payroll admins will still want to override the employee salary to $0 during the payroll batch and enter the number of applicable hours in the hourly income column.
Do part-time employees get paid for 80 hours, which may cover more than 2 weeks?
Part-time employees are eligible for the number of hours they average in two weeks.
Is the FFCRA retroactive?
The FFCRA went into effect April 1, 2020.
How do we activate the new APS COVID-19 income types in our instance?
APS now provides four different COVID-19 income types employers may use to track and manage FFCRA tax credits:
- COVID19 - None: Used for tracking leave related to COVID-19 that does not fall into the parameters of an income eligible for credit.
- COVID19 - Quarantine: Used if an employee is unable to work because of quarantine or self-quarantine (NOT shelter-in-place) or has COVID-19 symptoms and is seeking a medical diagnosis
- COVID19 - Care for Others: Used if an employee is unable to work because of caring for someone with COVID-19; or is caring for a child because the child’s school or child care facility is closed; or the child care provider is unavailable due to the Coronavirus.
- COVID19 - Child Care: Used for the tracking emergency FMLA expansion leave if an employee is unable to work because of caring for a child because the child’s school or child care facility is closed, or the child care provider is unavaialble due to the Coronavirus.
APS customers will need submit a request to their Account Team to add these income types.
When are FFCRA income types in APS effective?
The FFCRA went into effect April 1, 2020 and covers qualified leave through December 31, 2020.
How can I use APS text notifications during this time?
APS customers can use the Employee Notification Center to text employees with any information they would like to send.
If we don't have any employees using COVID-19 incomes in APS, do we need to still approve them in our instance?
It is best practice to approve all income items, so they are ready to use; however, APS customers are only required to approve them if they need to process them through payroll.
For salaried employees who worked part of the week (prior to April 1st) and then were off part of the week, do we need to adjust downward the base salary by the amount of the COVID-19 salary or will it automatically calculate?
Depending on your payroll provider, you may need to make adjustments to the employee’s salary if they do not need to be paid their full salary. APS will not automatically reduce the salary by the amount entered for a COVID-19 income.
What is the difference between the COVID19 – Care for Others and COVID19 – Child Care income types in APS?
The COVID19 – Care for Others income is set to cap the tax credit at $2000 annually whereas the COVID19 – Child Care income is set to cap it at $10,000 annually. Care for Others should be used for the FFCRA Emergency Paid Sick Leave and Child Care should be used for the FMLA emergency expansion.
Are there current programs for organizations over 500 employees?
The Employee Retention Credit is available to many businesses, regardless of size. Check out the IRS website for more information.
I want my employees to be able to request time off for COVID-19 leave. How do I set that up?
This depends on your payroll provider. APS customers can submit this request to their dedicated Account Team. There are two options:
- Adjust the incomes to be available for employees to request, or
- Set up accrual plans for each income (this option is helpful because you can name the accrual plans in a more employee-friendly way).
Is the FFCRA tax credit applied every payroll, or do I need to file for it quarterly with the IRS?
The tax credit is applied to each payroll. APS customers will see the FFCRA Tax Credit on the Cash Requirement statement after each payroll is finalized. You will not need to file anything additional with the IRS.
Will both the tax credit and the amount paid to the employee be capped?
In the APS system, only the tax credit will be capped at the applicable amounts when you use the COVID-19 incomes.
Once an employee reaches their 80 hours, will APS not let us use the income item for that specific employee?
No – you may still use the income item for as long as you need. APS will only cap the tax credit at the applicable aggregate amounts.
Does the 500 employees include multi-FEIN ownership?
See question #2 here. The DOL maintains that a corporation is typically considered to be a single employer and employees are all counted toward the 500-employee threshold.
Is the sick leave paid out to the employee by the employer or is that going to be a credit covered by the government?
Employees’ sick leave is paid for by their employer, and the employer will receive a dollar-for-dollar tax credit up to the applicable limits.
Does any of this information change for restaurants or is it the same?
Restaurants are covered employers if they fall under the 500-employee threshold, just like any other privately-held business. Some of the SBA loan options may differentiate when a restaurant has more than 500 employees total, but not more than 500 employees at any one location.
How do I know if my business qualifies for relief under the PPP?
If an employee qualifies for FFCRA leave and regular wage exceeds the daily limit, can the employer pay regular wages in addition to FFCRA wages?
Absolutely. APS provides an income type in our system to capture the difference - COVID19 - NONE. What is entered with this income will not be eligible for a tax credit.
What income code should be used in APS for an employee using emergency FMLA (EMFLA) and wants to use the emergency paid sick leave (EPSL) for the first two weeks (80 Hours)?
APS customers should use COVID19 – Quarantine or COVID19 – Care for Others (depending on the reason) for the EPSL and then use COVID19 – Child Care for the EFMLA.
Which APS COVID income would be used for a person caring for a child whose school is closed?
APS customers should use COVID19 – Care for Others for the Emergency Paid Sick Leave and then use COVID19 – Child Care for the FMLA expansion, if applicable.
If an employee was ordered to self-quarantine prior to April 1, do they qualify for paid sick leave?
Yes, but only for leave taken beginning April 1, 2020. Prior to that, other leave options may be used (PTO, Sick, etc.)
What is the impact for self-employed individuals?
The IRS has a section just for Self-Employed Individuals. See questions 60-66 here.
Are employees required to provide documentation in support of leave taken under the FFCRA?
If you intend to claim a tax credit under the FFCRA for your payment of the sick leave or expanded family and medical leave wages, you should retain appropriate documentation in your records.
A written request for leave from the employee should include the following (and you can’t require that it include more):
- The employee’s name;
- The date or dates for which leave is requested;
- A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
- A statement that the employee is unable to work, including by means of telework, for such reason.
In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
For a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than 14 during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
It’s worth noting that the FFCRA makes emergency FMLA available to an employee who is “unable to work (or telework) due to a need for leave to care for the son or daughter 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.” In the case of a child over the age of 14, to claim the tax credit, the IRS is asking that employers collect a statement from the employee noting that a special circumstance exists requiring them to provide care. For questions about tax credit documentation, we recommend consulting with a qualified tax professional.
Does the FFCRA apply to me if I have more than 500 employees? How do I count them?
No, if you employ more than 500 employees, the FFCRA does not apply to your organization. It applies only to organizations that employ fewer than 500 full-time and part-time employees within the United States.
When counting your employees, be sure to include employees on leave, temporary employees who are jointly employed by you and another employer, and day laborers supplied by a temporary agency. You do not need to include workers who are properly classified as independent contractors.
You can read more about counting employees for purposes of the FFCRA on the DOL’s Q&A page.