The Families First Coronavirus Response Act (FFCRA) and the Paycheck Protection Program (PPP) are two government initiatives to provide relief to businesses and employees affected by the COVID-19 pandemic. The FFCRA provides small and midsize employers refundable tax credits that reimburse them for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. On the other hand, the PPP provides loans to small businesses to help them cover payroll and other expenses. Let’s dive deeper into FFCRA vs PPP.
While the FFCRA and the PPP are designed to help businesses and employees affected by the pandemic, they have different eligibility requirements and benefits. The FFCRA is aimed at businesses with fewer than 500 employees and provides tax credits to reimburse them for providing paid leave to employees affected by COVID-19. Conversely, the PPP provides loans to small businesses with fewer than 500 employees to help them cover payroll and other expenses.
Employers who are eligible for both the FFCRA and the PPP may need to consider how the two programs interact with each other. For example, the payroll tax credit and deferral provisions of the FFCRA and the CARES Act intersect differently with the PPP loans. There are several factors a business should consider in determining which course of action is best for it. These factors include, among other things, the type and amount of loans available under the CARES Act and the employee retention requirements under the PPP.
Understanding FFCRA vs PPP
The Families First Coronavirus Response Act (FFCRA) and the Paycheck Protection Program (PPP) are two of the most significant pieces of legislation passed by the US government to help employers and employees cope with the economic fallout of the COVID-19 pandemic.
Key Provisions of FFCRA
The FFCRA requires certain employers to provide paid sick leave and family leave to employees unable to work or telework due to COVID-19 related reasons. The Act applies to private employers with fewer than 500 employees and certain public employers.
Under the FFCRA, eligible employees can receive up to two weeks of paid sick leave at their regular rate of pay if they are unable to work due to COVID-19 related reasons and up to 12 weeks of paid family leave at two-thirds of their regular rate of pay to care for a child whose school or place of care is closed due to COVID-19.
Employers who provide paid sick leave and family leave under the FFCRA are eligible for refundable tax credits to offset the required leave cost. The tax credits equal 100% of the qualified sick leave wages and family leave wages paid by the employer, plus certain qualified health plan expenses and the employer’s share of Medicare taxes on those wages.
Paycheck Protection Program Overview
The PPP is a loan program to help small businesses keep their employees on payroll during the COVID-19 pandemic. The Small Business Administration (SBA) administers the program and provides loans to eligible small businesses to cover payroll costs, rent, utilities, and other specified expenses.
To be eligible for a PPP loan, a small business must have been in operation on February 15, 2020, have fewer than 500 employees, and be able to demonstrate a need for the loan due to the economic impact of COVID-19. PPP loans are forgivable if the funds are used for eligible expenses, such as payroll costs, rent, utilities, and mortgage interest, and at least 60% of the loan proceeds are used for payroll costs.
Lenders who participate in the PPP are responsible for processing loan applications and disbursing loan funds. The SBA guarantees the loans and will forgive the loans if the borrower meets certain criteria, such as maintaining employee and compensation levels.
In conclusion, the FFCRA and PPP are two important pieces of legislation that provide relief to employers and employees affected by the COVID-19 pandemic. Employers should consult with the Department of Labor and their lenders to determine their eligibility for tax credits and loans under these programs.
Eligibility and Benefits
FFCRA Eligibility and Tax Credits
The Families First Coronavirus Response Act (FFCRA) provides eligible employers with refundable tax credits to reimburse them for providing paid sick and family leave wages to their employees for leave related to COVID-19. Eligible employers are those with fewer than 500 employees, including self-employed individuals, who must provide paid leave under the FFCRA.
To claim the FFCRA tax credits, eligible employers can retain the federal employment taxes they would otherwise deposit, including federal income tax withheld, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes. If the federal employment taxes are insufficient to cover the cost of qualified sick and family leave wages, eligible employers can request an advance refund with the IRS.
PPP Loan Eligibility and Usage
The Paycheck Protection Program (PPP) provides eligible small businesses with loans to cover payroll costs, rent, utilities, and other eligible expenses. Eligible businesses include fewer than 500 employees, self-employed individuals, independent contractors, and sole proprietors.
PPP loans can cover payroll costs, including salary, wages, and tips, up to $100,000 per employee. The loan amount is calculated based on the average monthly payroll costs for the previous year multiplied by 2.5. PPP loan recipients can also claim the FFCRA tax credits, but the payroll costs included in the loan will not include the wages and expenses required for sick and family leave under the FFCRA.
In summary, eligible employers can claim the FFCRA tax credits and apply for PPP loans to cover payroll costs and other eligible expenses. However, the loan amount will not include the wages and expenses required for sick and family leave under the FFCRA. Eligible employers need to understand their eligibility and usage requirements for both programs to maximize their benefits.
Employee Retention Credit With Federal Tax Credits SETC
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Frequently Asked Questions
What are the differences between FFCRA and PPP loans?
The Families First Coronavirus Response Act (FFCRA) and the Paycheck Protection Program (PPP) are two separate pieces of legislation aimed at addressing the financial impact of the COVID-19 pandemic on businesses. FFCRA provides eligible employers with tax credits to cover the cost of providing paid leave to employees affected by COVID-19. Conversely, PPP provides eligible small businesses with loans to cover payroll and other expenses.
Can an employer benefit from both FFCRA credits and PPP loans simultaneously?
Yes, an employer can benefit from FFCRA credits and PPP loans simultaneously. However, an employer cannot use FFCRA credits to cover the same wages used to calculate PPP loan forgiveness.
What are the eligibility requirements for FFCRA leave versus PPP loan forgiveness?
To be eligible for FFCRA leave, an employee must work for an employer with fewer than 500 employees and meet certain other criteria. To be eligible for PPP loan forgiveness, a small business must use the loan proceeds for eligible expenses, including payroll, rent, and utilities, and meet certain other criteria.
How has the expiration of FFCRA impacted businesses’ ability to apply for PPP?
The expiration of FFCRA on December 31, 2020, has not impacted businesses’ ability to apply for PPP. However, businesses previously eligible for FFCRA tax credits may need to adjust their payroll calculations to ensure they are not using the same wages for both FFCRA credits and PPP loan forgiveness.
In what ways does the CARES Act encompass PPP, and is it distinct from FFCRA provisions?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act encompasses PPP, providing funding for the program and expanding eligibility requirements. While FFCRA is also part of the CARES Act, it is distinct from PPP provisions and serves a different purpose.
Are there any extensions or new funding for PPP loans available in 2023?
Currently, no extensions or new funding for PPP loans are available in 2023. However, businesses that have already received PPP loans may be eligible for loan forgiveness and should consult with their lender for more information.