The Tax Cuts and Jobs Act added into law a general business credit for employers who provide paid family and medical leave to their employees. The credit equals 12.5% of the amount of wages paid to qualifying employees during any period in which the employees are on Family and Medical Leave.
The IRS has recently issued questions and answers on this credit to provide guidance with regard to an employer’s ability to take the credit.
Briefly, to claim the credit, an employer must have a written policy that satisfies four requirements:
- The policy must cover all qualifying employees which is for 2018 all employees who have been employed for a year or more and were paid not more than $72,000 in 2017.
- The policy must provide at least two weeks of annual paid family and medical leave for each full-time qualifying employee and at least a proportionate amount of leave for each part-time qualifying employee.
- The policy must provide for payment of at least 50% of the qualifying employee’s wages while the employee is on leave.
- If an employer employs qualifying employees who are not covered by title I of the FMLA, the employer’s written policy must include language providing “non-interference” protections as described in Section A of IRS Notice 2018-71.
The IRS Notice applies to tax years 2018 and 2019. If you have questions pertaining to your ability to utilize and take this credit, please feel free to call our office.
~ Debby Jacobs, CPA