Last week President Trump signed the Consolidated Appropriations Act of 2021 into law. This emergency stimulus package is designed to deliver COVID-19-related aid to Americans including voluntary paid sick leave, unemployment benefits, direct economic payments to individuals, and much more.
We will touch on four key points of the new stimulus package as they relate to household employers.
1. Voluntary paid sick leave
The Families First Coronavirus Response Act (FFCRA) was not explicitly extended by the new stimulus package so household employers are no longer required to provide federal paid leave for qualified reasons related to the pandemic as of December 31, 2020. There is, however, a provision in the law that allows employers who voluntarily choose to provide their employees leave for qualified reasons to continue to receive federal tax credits for that leave through March 31, 2021.
The new law does not change the FFCRA’s original limits on the number of leave days and amount of wages eligible for tax credits. Only unused FFCRA paid leave from 2020 can be taken in 2021.
Household employees can take up to 80 hours of paid sick leave for their own COVID-19-related health needs or for the care of others. They can also receive an additional 10 weeks of paid family leave to care for a child whose school or place of care was closed, or child care provider was closed or unavailable, due to COVID-19. If an employee used up their allotment of paid leave in 2020, they do not receive additional leave in 2021. A worker can carry over unused leave into the new year if allowed by their employer.
As with the original FFCRA, household employees would be eligible for this voluntary paid sick leave benefit and families will be able to receive a dollar-for-dollar tax credit to cover the cost of their employee’s paid leave.
Keep in mind that some states and local jurisdictions have passed their own paid sick leave laws related to the pandemic that could extend benefits for household employees into 2021.
2. Unemployment benefits funding and extension
The new stimulus package includes funding for unemployment benefits for out-of-work Americans including household employees. Specifically, it allows unemployed Americans to receive $300 per week in federal funding in addition to the existing unemployment aid they may be collecting from their state if those state-level benefits have not already run out. The added benefit will be available through March 14, 2021.
The additional unemployment benefits and extensions would provide aid for 11 weeks from their expiration at the end of December 2020 through at least March 14, 2021.
Initial COVID-19 relief for unemployment benefits was introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted in March 2020 at the onset of the COVID-19 pandemic. The CARES Act provided funding for states to waive any waiting week requirements for unemployment income (UI) benefits during the health crisis and to provide an additional $600 per week to all individuals receiving UI benefits for weeks of unemployment ending before July 31, 2020.
As with the CARES Act, nannies and other household workers are eligible to receive the additional unemployment funds provided they have been paid legally. When their job is “on the books,” families are paying federal and state unemployment taxes (along with their share of Social Security and Medicare), making their employees eligible for those benefits. A nanny paid “under the table” could still file for unemployment if they lost their job but they may be denied benefits and will expose the family to fines and penalties for failing to pay employer taxes.
3. Direct economic income payments
The new stimulus package includes another round of economic impact payments – commonly referred to as stimulus checks. The CARES Act provided the first round of stimulus checks for eligible Americans and this bill follows the same eligibility guidelines. However, the amount of the stimulus check is less this time around. Instead of being eligible for a $1,200 payment, qualifying taxpayers are eligible for a payment of $600 per individual or $1,200 per married couple. Parents will also be eligible to receive $600 for each qualifying child.
Tax filers with an adjusted gross income of up to $75,000 for individuals and up to $150,000 for married couples filing joint returns are eligible to receive the full payment.
You may want to make your household employee aware that they may be eligible for this second stimulus check. Some checks and direct deposits have already been delivered. They can use the Get My Payment tool from the IRS to check the status of their payment. More information on economic impact payments.
4. Temporary special rules for dependent care FSAs
The new stimulus package provides temporary special rules for dependent care flexible spending accounts (FSAs) that may give you additional time to use these funds. Many families who hire a nanny for in-home childcare use a dependent care FSA to offset the cost for a portion of their caregiver’s wages.
Because of the COVID-19 pandemic, you may be more likely to have unused amounts in your dependent care FSAs. For plan years ending in 2020 and 2021, the new stimulus allows your employer to:
- Permit you to carry over unused amounts remaining in these FSAs to the next plan year.
- Extend the grace period to 12 months after the end of such plan year.
- Permit employees who cease plan participation during 2020 or 2021 to continue to receive reimbursements from unused amounts through the end of the plan year in which their participation ended.
The new stimulus also includes a special carry forward rule for dependent care FSAs where the dependent aged out during the pandemic. For purposes of determining dependent care assistance that may be paid or reimbursed, the maximum age is increased from 13 to 14 years of age.
You are also able to elect to prospectively modify the amount of your FSA contributions for plan years ending in 2021, even if you have not experienced a change in status. However, the applicable dollar limitations will continue to apply.
Check with your employer’s human resources department for additional details.
GTM can help
We can handle FFCRA paid sick leave, tax credits, unemployment taxes, and more so you don’t have to worry about a thing. Nanny taxes and payroll can be that easy. Get a complimentary, no-obligation consultation with one of our household employment experts. We’ll lay out everything GTM Payroll will do for you and you can ask any questions you have about household employment.
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