The Consolidated Appropriations Act, 2021 extends the credit for coronavirus related paid sick and family leave, originally part of the Families First Coronavirus Response Act, through March 31, 2021. The Families First Coronavirus Response Act provides paid sick leave and expands family and medical leave for COVID-19 related reasons and creates the refundable paid sick leave credit and the paid childcare leave credit for eligible employers.
Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Families First Coronavirus Response Act. Eligible employers can claim these credits based on the qualifying leave they provide between April 1, 2020 and March 31, 2021. Equivalent credits are available to self-employed individuals based on similar circumstances.
Employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis.
An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional 10 weeks of expanded paid family and medical leave at 2/3 the employee’s pay.
Paid Sick Leave Credit
For an employee who is unable to work because of self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day for a total of 10 days, up to an aggregate of $5,110.
For an employee who is caring for someone with Coronavirus, 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, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day for a total of 10 days, up to an aggregate of $2,000.
Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Prompt Payment for the Cost of Providing Leave
Under IRS guidance, eligible employers who pay qualifying sick or childcare leave can retain an amount of the payroll taxes equal to the amount of qualifying sick and childcare leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees. If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, employers can file a request for an accelerated payment from the IRS.
Please reach out to our team about the extension of the Paid Sick Leave Credit and other relief under the Consolidated Appropriations Act, 2021. We are here to help navigate during these challenging times.
Details Included in New Legislation
In general, the ordinary and necessary food and beverage expenses of operating your business are deductible. However, the deduction is limited to 50% of the otherwise allowable expense. The new legislation adds an exception to the 50% limit for expenses for food or beverages provided by a restaurant. This rule applies to expenses paid or incurred in calendar years 2021 and 2022.
The use of the word “by” (rather than “in”) a restaurant makes it clear that the new rule isn’t limited to meals eaten on the restaurant’s premises. Takeout and delivery meals provided by a restaurant are also fully deductible.
Rules for Deducting Business Meals
It’s important to note that, other than lifting the 50% limit for restaurant meals, the legislation doesn’t change the rules for deducting business meals. All the other existing requirements continue to apply. Thus, to be deductible:
- The food and beverages can’t be lavish or extravagant under the circumstances
- You or one of your employees must be present when the food or beverages are served
- This is defined as a current or prospective customer, client, supplier, employee, agent, partner or professional adviser with whom you could reasonably expect to engage or deal in your business
If food or beverages are provided at an entertainment activity, either they must be purchased separately from the entertainment or their cost must be stated on a separate bill, invoice or receipt. This is required because the entertainment, unlike the food and beverages, is nondeductible.
We are Here to Help
Please reach out to our team if you would like more information about deducting business meals or have questions regarding other aspects of the new legislation.