Tax

Employer Credit for Family and Medical Leave

Thanks to the passage of the Tax Cuts and Jobs Act last year, there’s a new tax benefit for employers: the employer credit for paid family and medical leave. As the name implies, employers may claim the credit based on wages paid to qualifying employees while they are on family and medical leave.

Here are seven facts about this credit and how it benefits employers:

1. To claim the credit, employers must have a written policy that meets certain requirements such as:

• Providing at least two weeks of paid family and medical leave annually to all qualifying employees who work full time. This can be prorated for employees who work part-time.
• Providing paid leave that is not less than 50 percent of the wages normally paid to the employee.

2. A qualifying employee is any employee who has been employed for one year or more, and for the preceding year, had compensation that did not exceed a certain amount. To be a qualifying employee in 2019, an employee must have earned no more than $72,000 in compensation in the preceding year. Looking ahead, to be a qualifying employee in 2020, an employee must have earned no more than $75,000 in compensation in the preceding year.

3. “Family and medical leave” as defined for this particular credit, is leave that is taken for one or more of the following reasons:

• Birth of an employee’s child and to care for the child.
• Placement of a child with the employee for adoption or foster care.
• To care for the employee’s spouse, child, or parent who has a serious health condition.
• A serious health condition that makes the employee unable to perform the functions of his or her position.
• Any qualifying event due to an employee’s spouse, child, or parent being on covered active duty – or being called to duty – in the Armed Forces.
• To care for a service member who is the employee’s spouse, child, parent, or next of kin.

4. The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year.

5. To be eligible for the credit, an employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Any wages taken into account in determining any other general business credit may not be used toward this credit.

6. The credit is generally effective for wages paid in taxable years of the employer beginning after December 31, 2017. It is not available for wages paid in taxable years beginning after December 31, 2019, i.e., starting January 1, 2020.

7. To claim the credit, employers file two forms with their tax return: Form 8994, Credit for Paid Family and Medical Leave and Form 3800, General Business Credit.

For more information about the employer credit for family and medical leave, please contact the office.

• By Leon Clinton
• October 23, 2019

Be Prepared When Natural Disasters Strike

While September and October are prime time for Atlantic hurricanes, natural disasters of any kind can strike at any time. As such, it’s a good idea for taxpayers to think about – and plan ahead for – what they can do to be prepared.

Here are four tips to help taxpayers be prepared:

1. Update emergency plans. Because a disaster can strike any time, taxpayers should review emergency plans annually. Personal and business situations change over time, as do preparedness needs. When employers hire new employees or when a company or organization changes functions, they should update plans accordingly. They should also tell employees about the changes. Individuals and businesses should make plans ahead of time and be sure to practice them.

2. Create electronic copies of key documents. Taxpayers should keep a duplicate set of key documents in a safe place, such as in a waterproof container and away from the original set. Key documents include bank statements, tax returns, identification documents, and insurance policies.

Doing so is easier now that many financial institutions provide statements and documents electronically, and financial information is available on the Internet. Even if the original documents are provided only on paper, these can be scanned into a computer. This way, the taxpayer can download them to a storage device like an external hard drive or USB flash drive.

3. Document valuables and equipment. It’s a good idea for a taxpayer to photograph or videotape the contents of their home, especially items of higher value. Documenting these items ahead of time will make it easier to claim any available insurance and tax benefits after the disaster strikes.

4. Payroll service providers should check fiduciary bonds.Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. The IRS also encourages employers to create an EFTPS.gov account where they can monitor their payroll tax deposits and sign up for email alerts.

• By Leon Clinton
• October 20, 2019

File 2018 Tax Returns by Oct. 15 Extension Deadline

Time is running short for taxpayers who requested an extra six months to file their 2019 tax return. As a reminder, Tuesday, October 15, 2019, is the extension deadline for most taxpayers. For taxpayers who have not yet filed, here are a few tips to keep in mind about the extension deadline and taxes:

1. Taxpayers can still e-file returns. Filing electronically is the easiest, safest and most accurate way to file taxes.

2. For taxpayers owed a refund, the fastest way to get it is to combine direct deposit and e-file.

3. Taxpayers who owe taxes should consider using IRS Direct Pay, a simple, quick and free way to pay from a checking or savings account using a computer or mobile device. There are also other online payment options. Please call the office if you need details about other payment options.

4. Members of the military and those serving in a combat zone generally get more time to file. Military members typically have until at least 180 days after leaving a combat zone to both file returns and pay any tax due.

5. Taxpayers should always keep a copy of tax returns for their records. Keeping copies of tax returns can help taxpayers prepare future tax returns or assist with amending a prior year’s return.

• By Leon Clinton
• October 17, 2019