Your Business May Qualify To Claim Valuable Tax Credit

The Employer Credit for Family and Medical Leave may reduce the amount of taxes your business owes.

Workers Who Receive Paid and Unpaid Leave

According to the latest data available (March 2018) from the Bureau of Labor Statistics, 17 percent of all civilian workers had access to paid family leave, and 89 percent had access to unpaid family leave. This leave includes maternity and paternity leave. The leave also may be available to care for a newborn child, an adopted child, a sick child, or a sick adult relative. Access to family leave varied by establishment size.

Sixteen percent of private industry workers had access to paid family leave, and 88 percent had access to unpaid family leave. Eleven percent of workers in the smallest establishments (1 to 49 workers) had access to paid family leave, and 80 percent had access to unpaid family leave. Twenty-five percent of workers in the largest establishments (500 workers or more) had access to paid family leave, and 94 percent had access to unpaid family leave.

In comparison, 25 percent of state and local government workers had access to paid family leave while 94 percent had access to unpaid family leave. The percentages for small establishments were 25 percent and 93 percent, respectively. For the largest establishments, the percentages were 25 percent and 95 percent, respectively.

Employer Credit for Family and Medical Leave

Employers who provide paid family and medical leave to their employees might qualify for a credit that can reduce the taxes they owe. It’s called the Employer Credit for Family and Medical Leave.

Here are some facts about the credit to help employers find out if they might be able to claim it.

To Be Eligible, An Employer Must:

Have a written policy that meets several requirements.
Provide:
- At least two weeks of paid family and medical leave to full-time employees.
- A prorated amount of paid leave for part-time employees.
- Pay for leave that is at least 50 percent of the wages normally paid to employees.

Credit Applicable Dates

The credit is available for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2020.

Credit Amount

The credit is generally equal to 12.5 to 25 percent of paid family and medical leave for qualifying employees. The percentage is based on how much employers pay each employee for family and medical leave.

Qualifying Leave

The leave can be for any or all the reasons specified in the Family and Medical Leave Act (FMLA):

Birth of an employee’s child.
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 their job.
Any qualifying emergency due to an employee’s spouse, child, or parent being on covered active duty in the Armed Forces. This includes the taxpayer being notified of an impending order to covered active duty.
To care for a service member who is the employee’s spouse, child, parent, or next of kin.

Claiming the Credit

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

If you are a business owner and would like to know more about this credit, contact your tax professional.

Bayshore CPA’s, P.A. are your local Certified Public Accountants

and Tax Resolution Specialists conveniently located

in Mooresville, North Carolina

Statistical Source:

Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Access to paid and unpaid family leave in 2018 on the Internet at https://www.bls.gov/opub/ted/2019/access-to-paid-and-unpaid-family-leave-in-2018.htm (visited September 04, 2019).