Do you provide paid family or medical leave to your employees? Have you thought about it? If you don’t, now would be a great time to start! The IRS has announced that eligible employers who provide family and medical leave may qualify for a new business tax credit for years 2018 and 2019!
The tax credit will be available to eligible employers who offer paid family leave and paid medical leave to their employees. The new employer credit is part of the Tax Cuts and Jobs Act that was passed in December 2017. To be eligible, an employer must have a written policy that meets several requirements.
First the policy must cover all qualifying employees. Qualifying employees are employees that have been employed for a year or more and were not paid more than a specified amount during the preceding year. For determining if someone is a qualifying employee in 2018, that employee must have not been paid more than $72,000 in 2017. Second, 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. Thirdly, the policy must provide for payment of at least 50% of the qualifying employees’ wages while the employee is on leave. Fourth, if the employer hires employees that are not covered by title I of the Family Medical Leave Act, then the employers written policies must include a “non-interference” protection.
The credit is available for both 2018 and 2019 tax years. The credit is generally equal to 12.5 to 25 percent of paid family and medical leave for qualifying employees. Furthermore, employers that meet the requirements for paid family leave programs, or who have modified their existing programs, may be eligible to claim the credit by December 31, 2018. Leave paid by a state or local government, or that is required to be provided by state or local law, does not count toward the 50%.
To claim the credit employers will need to attach Form 8994 to their return. The IRS expects to have the new form available later in 2018. You can read more about the new credit and its rules, here. If you need help determining which tax credits are best for your small business, Polston Tax can help. Our team of small business accounting and tax professionals can help you decide which credits fit your financial information the best. Call us today at 844-841-9857 or click below to schedule a free consultation.