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State Unemployment for Shareholders, & How Employers under 500 Employees Pay for 2 Weeks Sick Leave

Updated: Apr 6, 2020

As we’ve previously explained starting April 2 employees will be able to receive up to 80 hours of paid sick leave and expanded paid child care leave when employees’ children’s schools are closed or child care providers are unavailable.

The Treasury department still has not released detailed guidelines on this – such as whether it would include owners of small business corporations as eligible employees.

However, from a State standpoint, shareholder employees already are included in the unemployment insurance pool if they otherwise qualify as being unemployed, partially or completely. We have not been informed of any new State guidelines or provisions that would deny that.

To pay for the 80 hours of potential leave pay for employees, employer’s will not have to pay in the Federal payroll tax that normally is paid in when payroll is processed, or when the quarterly reports are submitted. Health insurance costs are included in the credit.

If those amounts aren’t enough to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.

It appears that credit to employers would include the payroll tax portion only (not the withheld social security, medicare and federal income tax), and would start for payroll in the second quarter of 2020. We haven’t seen definite guidelines on that yet.

Some States have allowed for delays in the payment of the state portion of payroll taxes without penalty, but as of this date no State has issued any type of credit.

We will provide more information as guidelines are released.

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