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There's a New Tax Credit for Paid Employee Leave

4/24/2018

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The new Tax Cuts and Jobs Act (TCJA) includes significant changes for individuals and businesses alike, enhancing some tax breaks and eliminating or reducing others. One new provision creates a new tax credit for employers who pay wages for family and medical leaves.

Currently, the new credit has a short shelf life, taking effect in 2018 and only lasting through 2019. However, there's a chance it will be extended by future legislation.

Eligible employers can claim a credit equal to a percentage of wages paid to qualifying employees on leave under the Family and Medical Leave Act (FMLA).

Here's how it works
The IRS has yet to issue official guidance, but here are some of the basics:
  • To qualify for the credit, the employer must provide at least two weeks leave at a rate of at least 50 percent of regular earnings.
  • The credit percentage ranges from 12.5 percent to 25 percent of the paid leave based on the amount of wages. For instance, the credit is equal to only 12.5 percent of the wages if the employer pays the minimum 50 percent of the regular pay rate, but gradually increases to a maximum of 25 percent if the employer pays the normal wages.
  • The credit is available only for wages paid to workers employed at the company for at least a year who are paid no more than $72,000 annually in 2017, adjusted for inflation in future years.
  • Family and medical leave must be offered to both full- and part-time workers.
  • Employers need to have a written policy that includes two weeks paid leave for family and medical leave at 50 percent or more of wages for full-time employees. And the amount must be prorated for part-time employees.
  • Leave that is paid for or required under state and local law shouldn't be considered when determining the amount of paid family and medical leave
provided by the employer.

No double dipping

Finally, if the employer claims the credit, they can't also deduct the wages as regular business expenses. Usually, the credit will be more valuable to employers than the deduction.
​
If you have questions about how this credit affects your situation, give us a call.

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

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Phone: (630) 320-3720

Monarch Accounting Group Inc
145 Tower Drive, Suite 10
Burr Ridge, IL 60527-7836
Email: [email protected]


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  • Home
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