We wanted to make you aware of a valuable new tax credit made possible by the Tax Cuts and Jobs Act (TCJA). The credit is available to employers that provide paid family and medical leave to their employees. The amount of the credit is generally 12.5% of wages paid to an employee on leave. However, you must pay at least 50% of the wages normally paid to the employee while he or she is out on qualifying leave. The credit is increased by 0.25% (but not above 25%) for each percentage point the rate of pay is more than 50% of normal wages. So, if the leave payment rate is the same as the employee’s normal rate, a maximum credit of 25% will apply.

You must satisfy several requirements to take advantage of the credit. These include the following:

• You must have a written policy in place that provides at least two weeks of annual paid family and medical leave to qualifying full-time employees. (This is prorated for qualifying part-time employees.) Also, your policy must provide that qualifying employees on leave will be compensated at least 50% of their normal wages.
• The credit only covers wages paid to qualifying employees. These are individuals who have been employed for one year or more and didn’t have prior-year compensation exceeding a threshold amount. For 2018, this amount is $72,000. This means that employees who were paid more than $72,000 in 2017 aren’t qualifying employees in 2018.
• Wages must be paid for qualifying family and medical leave. This generally includes leave for the birth, adoption, or fostering of a child; care for a spouse, child, or parent with a serious health condition; an employee’s serious health condition; and qualifying needs of a spouse, child, or parent who is a covered veteran or member of the Armed Forces. Vacation leave, personal leave, and medical or sick leave (other than specifically defined as qualifying leave) don’t qualify for the credit.

The maximum length of paid family and medical leave that can qualify for the credit is 12 weeks per employee, per tax year. Also, the total credit attributable to one employee can’t exceed the employee’s normal hourly rate for each hour (or fraction of an hour) of actual work performed multiplied by the number of hours (or fraction of an hour) family and medical leave is taken. The wages for an employee who isn’t paid an hourly wage rate are prorated to an hourly wage rate to determine the credit limit.

Assuming all of these requirements are met, the new employer credit for paid family and medical leave is a win-win situation. However, it’s only available for two years (unless extended by Congress). It’s important that you act now by reviewing your current leave policy and instituting a new policy if necessary. We can help you with that. Please contact us if you have questions or want more information on the new credit.

With hurricane season in progress, we would like to remind individuals and businesses to safeguard their records against natural disasters with four simple steps.

• Create a Backup Set of Records Electronically

Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set.

Keeping a backup set of records –– including, for example, bank statements, tax returns, insurance policies, etc. –– is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can save them to the cloud, download them to a backup storage device, like an external hard drive or USB flash drive, or burn them to a CD or DVD.

• Document Valuables

Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. It may be a good idea to compile a room-by-room list of belongings.

A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.

• Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

• Check on Fiduciary Bonds

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

We are Ready to Help

Don’t wait until disaster strikes. If you have questions about safeguarding your records, speak to one of our team members today. We can help individuals and businesses prepare for disaster-related issues.