USA IRS : New credits benefit employers who provide paid family and medical leave

By | October 7, 2018
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(Last Updated On: October 8, 2018)

New credits benefit employers who provide paid family and medical leave

Eligible employers who provide their employees paid family and medical leave during the tax years 2018 and 2019 may qualify for a new tax credit for business.

This new credit employer for family and medical leave is part of the law tax reform approved in December 2017. Here are some facts about credit is to help employers to find out whether they may be able to claim it .

To be eligible, an employer must:

  • Have a written policy that meets several requirements, as detailed in the Notice 2018-71 (in English). Provide:
    • At least two weeks of paid family and medical leave to full-time employees.
    • A prorated amount of paid leave to part-time employees.
  • Provide pay for the license that is at least 50 percent of the wages normally paid to that employee.

The credit applies to these dates:

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

The amount of credit:

  • Credit is generally equal to 12.5 to 25 percent of paid family and medical leave for employees who qualify.

This is the type of license you qualify:

  • The license can be for any or all of the reasons specified in the Law on Family and Medical Leave:
    • Birth of the son of an employee.
    • Child care.
    • Placing a child with the employee for adoption or foster care.
    • To care for a spouse, child or parent of an employee who has a serious health condition.
    • A serious health condition that makes the employee unable to perform the duties of his position.
    • Any requirement to qualify because of the spouse, child or parent of a covered employee who is on active duty – or has been notified of an impending call or order to active duty cover – in the armed forces.
    • To care for a service member who is employee’s spouse, child, parent or next of kin.
  • However, paid leave by a state or local government, or is required to be provided by the state or local law, does not count toward 50 percent.

Some employers are eligible to claim the credit retroactively to the beginning of the tax year:

  • Typically, employers can only claim the credit based on an eligible license taken after your new or amended policy comes into force.
  • Read the 2018-71 Notice (in English) for a description of the special rules for when an employer can claim retroactive credit.

To claim the credit employers must:

  • Attach Form 8994 to your tax returns. The IRS expects to have available later this new form in 2018.

The Notice sets forth rules and limitations that apply:

  • For example, only paid family and medical leave provided to employees whose compensation last year was at or below a certain amount qualifies for the credit.
    • Generally, for the tax year 2018, the 2017 employee compensation by the employer must be $ 72,000 or less.

More information:

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