Determining the Amount of the Tax Credit for Qualified Sick Leave Wages

 

Note that the American Rescue Plan Act of 2021, enacted March 11, 2021, amended and extended the tax credits (and the availability of advance payments of the tax credits) for paid sick and family leave for wages paid with respect to the period beginning April 1, 2021, and ending on September 30, 2021. These FAQs do not currently reflect the changes made by the American Rescue Plan Act; however, please continue to check IRS.gov for any updates related to the change in law.

20. What is included in “qualified sick leave wages”?  (Updated January 28, 2021)

Qualified sick leave wages are wages (as defined in section 3121(a) of the Internal Revenue Code (the “Code”), determined without regard to section 3121(b)(1)-(22) of the Code and section 7005(a) of the FFCRA) and compensation (as defined in section 3231(e) of the Code, determined without regard to the exclusions under section 3231(e)(1) of the Code, and without regard to section 7005(a) of the FFCRA) that Eligible Employers pay eligible employees for periods of leave during which they are unable to work or telework because the employee:

  1. is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  2. has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  4. is caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  5. is caring for a child of such employee if the school or place of care of the child has been closed (including the closure of a summer camp, summer enrichment program, or other summer program), or the child care provider of such child is unavailable due to COVID-19 precautions; or
  6. is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor. 

20a. Do “qualified sick leave wages” include taxes imposed on or withheld from the wages? (Updated January 28, 2021)

Qualified sick leave wages for purposes of the credit are calculated without regard to federal taxes imposed on or withheld from the wages, including the employee's share of social security taxes, the employee's and employer's shares of Medicare tax, and federal income taxes required to be withheld.

Note: The FFCRA exempts qualified sick leave wages from the Eligible Employer’s share of Social Security tax.

21. How much credit may an Eligible Employer receive for qualified sick leave wages that it pays?

An Eligible Employer may claim a fully refundable tax credit equal to 100 percent of the qualified sick leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified sick leave wages) it pays.

For more information about how to determine the amount of sick leave wages for which an Eligible Employer may receive credit, see "How does an Eligible Employer determine the amounts of the qualified sick leave wages it pays under the EPSLA?"

22. How does an Eligible Employer determine the amounts of the qualified sick leave wages it pays under the EPSLA? (Updated January 28, 2021)

The amounts that an Eligible Employer pays for qualified sick leave wages vary depending on the reason for which the employee is unable to work or telework, the duration of the employee’s absence, the employee’s hours, and the employee’s regular rate of pay (or, if higher, the federal minimum wage or any applicable State or local minimum wage).

22a. What is the rate of pay for qualified sick leave wages if an employee is unable to work or telework due to his or her own health needs? (Updated January 28, 2021)

If an employee is unable to work or telework because he or she:

  1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
  3. is experiencing symptoms of COVID-19 and seeking a medical diagnosis;

the Eligible Employer pays qualified sick leave wages for up to two weeks (up to 80 hours) at a rate for each hour of the greatest of the following:

  1.  the employee's regular rate of pay (as determined under section 7(e) of the Fair Labor Standards Act of 1938);
  2. the minimum wage rate in effect under section 6(a)(1) of the Fair Labor Standards Act of 1938; or
  3. the minimum wage rate in effect for the employee in the applicable State or locality, whichever is greater, in which the employee is employed.

The maximum amount of qualified sick leave wages paid for these reasons is up to $511 per day and $5,110 in the aggregate.

For more information, see the Department of Labor's Families First Coronavirus Response Act: Questions and Answers.

22b. What is the rate of pay for qualified sick leave wages if an employee is unable to work or telework because he or she needs to care for others? (Updated January 28, 2021)

If an employee is unable to work or telework because he or she: 

  1. is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  2. is caring for a child of such employee if the school or place of care of the child has been closed, or the child care provider of such child is unavailable due to COVID-19 precautions; or
  3. is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor;

the Eligible Employer pays qualified sick leave wages for up to two weeks (up to 80 hours) at a rate for each hour of 2/3 of the greatest of the following:

  1. the employee's regular rate of pay (as determined under section 7(e) of the Fair Labor Standards Act of 1938);
  2. the minimum wage rate in effect under section 6(a)(1) of the Fair Labor Standards Act of 1938; or
  3. the minimum wage rate in effect for the employee in the applicable State or locality, whichever is greater, in which the employee is employed.

The maximum amount of qualified sick leave wages paid due to the need to care for others as described above is up to $200 per day and $2,000 in the aggregate.

For more information, see the Department of Labor's Families First Coronavirus Response Act: Questions and Answers.

22c. How are employees’ hours determined for purposes of the qualified paid sick leave requirements? (Updated January 28, 2021)

Full-time employees can receive up to 80 hours of paid sick leave between April 1, 2020, and March 31, 2021.  Part-time employees can receive the number of hours of paid sick leave that the employee works, on average, in a two-week period, or if the employee’s normal scheduled hours are unknown or variable, under other alternative determinations, as provided by Department of Labor guidance.

For more information, including how to determine whether an employee is full-time or part-time and how to determine the number of hours to be paid to employees who can receive paid sick leave, see the Department of Labor's Families First Coronavirus Response Act: Questions and Answers.

23. Are amounts other than qualified sick leave wages included in the tax credit for required sick leave? (Updated January 28, 2021)

Yes.  The credit also includes the amount of allocable qualified health expenses and the amount of the Eligible Employer’s share of Medicare tax imposed on the qualified sick leave wages.   

Note: The amount of the Eligible Employer’s share of Medicare tax is based only on the qualified sick leave wages, not on the any qualified health plan expenses allocable to those wages.  Qualified sick leave wages are not subject to the employer’s share of social security tax.  For more information about the additions to the tax credit for allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax, see “Determining the Amount of Allocable Qualified Health Plan Expenses,” and “Determining the Amount of the Increase to the Credits for the Eligible Employer's Share of Medicare Tax.”

24. Is a similar tax credit available to self-employed individuals? (Updated January 28, 2021)

Yes. The FFCRA also provides a comparable credit for self-employed individuals carrying on any trade or business within the meaning of section 1402 of the Internal Revenue Code if the self-employed individual would be eligible to receive paid sick leave under the EPSLA if the individual were an employee of an employer (other than him or herself).

For more information, see "Specific Provisions Related to Self-Employed Individuals."