Does your business offer employees paid family and medical leave? If so, then a new general business credit may be available to you. The IRS has announced that eligible employers who provide paid family and medical leave to their employees may qualify for a new business credit for tax years 2018 and 2019.
In addition, eligible employers who set up qualifying paid family leave programs or amend existing programs by Dec. 31, 2018, will be eligible to claim the employer credit for paid family and medical leave retroactive to the beginning of the employer’s 2018 tax year, for qualifying leave already provided.
Here is a list of fast facts:
To claim the credit, employers must have a written policy that meets certain requirements:
• The paid leave must be not less than 50% of the wages normally paid to the employee.
A qualifying employee is any employee who:
• For 2018, the employee must not have earned more than $72,000 in 2017.
For purposes of this credit, “family and medical leave” is leave for one or more of the following reasons:
• Birth of an employee’s child and to care for the newborn.
• Placement of a child with the employee for adoption or foster care.
• To care for the employee’s spouse, child, or parent who has a serious health condition.
• A serious health condition that makes the employee unable to perform the functions of his or her position.
• Any qualifying event due to an employee’s spouse, child, or parent being on covered active duty – or being called to duty – in the Armed Forces.
• To care for a service member who is the employee’s spouse, child, parent, or next of kin.
If an employer provides paid vacation leave, personal leave, or medical or sick leave (other than leave specifically for one or more of the purposes stated above), that paid leave is not considered family and medical leave. In addition, any leave paid by a State or local government or required by State or local law will not be taken into account in determining the amount of employer-provided paid family and medical leave.
The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year. The minimum percentage is 12.5% and is increased by 0.25% for each percentage point by which the amount paid to a qualifying employee exceeds 50% of the employee’s wages, with a maximum of 25%. In certain cases, an additional limit may apply.
An employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Any wages taken into account in determining any other general business credit may not be used toward this credit.
The credit is generally effective for wages paid in taxable years of the employer beginning after December 31, 2017. It is not available for wages paid in taxable years beginning after December 31, 2019.
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