Every employer must comply with the Families First Coronavirus Response Act, which gives two weeks of paid leave for COVID-related absences that occur between April 1 and December 31, 2020. The leave is funded by the federal government. The paid leave is reported on the employer’s quarterly Form 941 — so if you use an external payroll service you must inform them so that they file your tax form correctly.
First, review the requirements of the law, as posted here on April 1. Distribute the poster to all employees if you haven’t already, and remind them periodically.
Second, if you use QuickBooks, be sure to update your payroll (Employees – Get Payroll Updates) before preparing your Q2 941. If you have an employee who cannot work or telework for one of the six reasons, then you will need to add two payroll items to your QB file to record the leave and credit. Further instructions are linked here.
Third, you can either underpay your federal tax deposits in the amount of the paid leave plus employer’s share of Medicare, or wait until the end of the quarter, calculate the credit, and carry it over to the next quarter or request a refund.
It seems complicated, but the end goal is to make sure that workers have the paid leave that they need, and that small employers are not burdened with paying for it.
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On December 27, 2020, the President signed the Consolidated Appropriations Act (CAA), 2021, which extended employer tax credits for paid sick leave and expanded family and medical leave for employees until March 31, 2021.