How companies know if they’re eligible, what to track & more

 

More companies are offering workers paid medical and family leave. Thanks to the Tax Cuts and Jobs Act, this could earn them a tax credit in the next two years.

 

The amount of the credit ranges from 12.5% if employees are paid half of their regular wages while on leave to 2.5% if they receive their full compensation during their leave.

 

However, paid leave programs have to follow specific standards to qualify for the credit, that’s currently in effect for tax years 2018 and 2019.

 

Since there’s no real guidance on the tax credit from the fed just yet, here’s what we know so far, based on the bill.

 

Requirements for credit

 

For starters, eligible employers must have written policy that lays out the terms of their paid leave programs and specifically protects workers from retaliation if they take paid leave.

 

An employer’s paid leave policy must offer a minimum of two weeks of paid leave to workers. While they’re on leave, employees must receive at least 50% of their normal rate of pay.

 

Only workers who make $72,000 a year or less can be counted when calculating the credit.

 

Paid leave must be available to both full-time and part-time workers can be offered prorated paid leave time based on their hours worked.

 

Also, paid family and medical leave must be offered separately from personal time, vacation, sick time or general paid time off. In addition, leave that’s required by a state or local mandate isn’t eligible for the tax credit.

 

Getting ready

 

To take advantage of this tax credit, employers need to have a system for tracking who’s eligible, based on criteria like wages earned and hours worked.

 

Since payroll has access to this data, it’s likely you’ll be called on to help.

 

In addition, it’s important to review and update paid leave policies if necessary, to make sure they align with the new guidelines for the tax credit. Any changes must be communicated to workers ASAP.

 

Cite bit.ly/taxcredit548