Family Medical Leave Act Tax Credit Services
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TCC always keeps us informed of the latest information and how we can use it to our advantage.”
– VP, HR, Fortune 100 technology
Why Supporting Employees Matters
FMLA Tax Credit Background
The Family and Medical Leave Act Tax Credit was launched as part of the December 2017 Tax Cuts and Jobs Act. Beginning in 2018, employers can offset a percentage of the wages disbursed for paid FMLA leaves. After one year of employment, employees earning up to the designated earnings threshold can generate a tax credit for their employer.
Employee Eligibility and Timeline
For employees to qualify for the 2018 credit, their income must have been no more than $72,000 in 2017. Both full- and part-time employees can qualify. The credits has been extended to run through the end of 2020.
In order for employers to qualify for the tax credit, the business must have a documented FMLA paid leave policy. That policy must provide full-time workers with at least two weeks of paid leave each year. Part-time employees should receive pro-rated compensation according to the number of hours worked. The wages paid for this leave must not be less than 50% of normal wages.
Employers that meet the requirements are entitled to claim 12.5% of FMLA wages paid as a general business tax credit. For every percentage point that the paid leave compensation surpasses the 50% of normal wages threshold, employers can increase their benefit by 0.25%. As with most general business tax credits, unused portions of the credit will carry forward.
The announcement of this new federal tax credit has prompted companies to re-examine their paid-leave policies. TCC brings a consultative approach to assisting clients in identifying the cost/benefit of generating this credit. That calculation needs to account for each of the stakeholders. As the number of interested parties increases, the complexities of a seemingly straightforward benefit can surface. Our approach takes into account the numerous departments involved: tax, payroll, HR, benefits, IT and finance.
The amount of data and documentation involved in SUT exemption claims can be arduous. TCC takes that burden on ourselves, managing the document gathering, conducting site visits and following up with taxing authorities. Our team includes former state auditors, engineers and statisticians – all of whom contribute to a well-supported deliverable. TCC has the experience to identify the real issues and help our clients create a sustainable, repeatable, scalable process going forward.
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TCC delivers tax incentive and human resources technology-enabled services.
We specialize in solutions for the Work Opportunity Tax Credit (WOTC), income and employment verification, research & development tax credits, sales and use tax incentives and other federal and state tax incentives.