Good News! For employers offering FMLA to employees, there is opportunity to accept a tax credit this tax year introduced through the Tax Cuts and Jobs Act in December 2017. The FMLA tax credit offers reimbursement of a percentage of employee wages paid to an employee on FMLA leave in the form of a general business credit for employers. Before preparing your 2018 tax returns, ask your CPA about this new tax credit.
According to the IRS, in order for employers to receive the credit, the following applies:
- The tax credit applies to ALL employers, not only those covered by the FMLA, if the employer has provided paid leave for a FMLA qualifying event to an employee.
- The tax credit applies to all FMLA leave wages paid in 2018.
- The employer provided at least two weeks of paid time off for employees taking FMLA leave that would otherwise be unpaid leave under FMLA.
- The employer compensated their workers a minimum of 50 percent of their regular earnings for the week(s) taken as FMLA leave.
- The credit will cover 12.5% of the cost of the paid wages if the employee(s) received 50% of their regular earnings for that week they were out on FMLA leave.
- The credit percentage increases up to 25% if the employee(s) received 100% of their regular earnings for that week while out on FMLA leave.
- The employee must have earned less than $72,000 in December 2017.
- The tax credit is currently set to expire December 31, 2019.
The Family Medical Leave Act is legislation that was passed in January of 1993. FMLA is a federal law requiring employers with 50+ employee or full-time equivalent headcount to guarantee qualified employees up to 12 workweeks of unpaid, job-protected leave in a 12-month period. FMLA also requires that employers covered by the law maintain the health benefits for eligible workers just as if they were working. If you are unsure if you’re company is required by law to offer FMLA, contact Close HR for additional guidance.
What should employers do at this time?
- All employers should talk to your CPA now while the 2018 tax returns are being completed and ask if you can take advantage of this new FMLA Tax Credit, if applicable.
- All employers should review your paid leave policies currently in place and edit them, if necessary, in order to take advantage of this tax credit in 2019.
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For additional assistance regarding FMLA and the tax credit, contact Close HR Connections.