Tax Alert: Employer Credit for Paid Family and Medical Leave Extended

February 5, 2020

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The bipartisan spending bill, signed into law late last year, which extended the Work Opportunity Tax Credit (WOTC), the Federal Empowerment Zones Program (FEZ), and the Indian Employment Credit (IEC), also extended the Employer Credit for Paid Family and Medical Leave (FMLA).

The Paid FMLA credit was initially effective for wages paid in 2018 and 2019 only, but now wages paid this year are also eligible for the credit, and therefore the credit can be claimed on the 2018 (amended), 2019, or 2020 returns.

As a reminder, this program provides a credit of 12.5% – 25% of wages paid to employees out on FMLA (including wages paid by a third-party payer such as an insurance company for short-term disability), as long as employers meet certain requirements, such as having a written policy providing paid FMLA leave of at least two weeks at 50% or more of employee’s regular salary/wages, and making paid FMLA available to both part-time and full-time populations. Because First Advantages already collects and stores wage information, we can quickly and easily calculate this credit on your behalf.

One client that we’ve worked on this credit with was eligible for over $400,000 in credits for one year only. Given the potential value of this credit, we encourage you to reach out to your First Advantage Tax Account Consultant, or your company’s tax advisor or legal counsel to discuss whether or not your organization qualifies for this newly extended program.

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