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New Employer Tax Credit Available for Paid Family and Medical Leave

The IRS has issued guidance on a new business tax credit for tax years 2018 and 2019 for eligible employers who provide family and medical leave to their employees.  The credit is a percentage of the wages that an employer pays to their employees while they are on paid family or medical leave.

To claim the credit, an employer must have a written policy that satisfies certain requirements below:

  • Policy must cover all qualifying employees – employees that have been employed for a year or more and were not paid more than a specified amount during the preceding year (generally not more than $72,000 in 2017)
  • Policy must provide at least 2 weeks of annual paid family and medical leave for each full-time qualifying employee and a proportionate amount of leave for each part-time qualifying employee
  • Policy must provide 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, employer’s policy must provide “non-interference” protections. The policy must incorporate the rules that must be met in order for an employer to be eligible for the credit

Eligible employers who set up qualifying paid family leave programs or amend existing programs by 12/31/18 will be eligible to claim the employer credit – retroactive to the beginning of the employer’s 2018 tax year for the qualifying leave already provided.

For more detailed information, visit the IRS Notice 2018-71 with Q&A’s regarding this new tax credit here: https://www.irs.gov/pub/irs-drop/n-18-71.pdf

Kayleen Kane

kkane@stephanoslack.com

610-687-1600

October 2, 2018