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FUTA tax on COVID payments


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I have a client that had to pay an employee to quarantine.  This is exempt on the 941 plus he gets the amount that he paid back as a credit, as I understand this.  But how does this work on 940 taxes?  I can't find anything in the instructions for the 940 about COVID at all.  It looks to me like if he paid the employee $49,000 for the year plus $1000 for the week she was in quarantine, the wages subject to FUTA would be $7,000 (the maximum) and he would pay $42 in FUTA tax.  QuickBooks is figuring the wages as $6000 subject to FUTA, or $36 in FUTA tax as far as I can tell.  I don't trust QuickBooks, or any software, to always be right but I am looking for some kind of cite about how this actually works on FUTA taxes.  I thought if any of you have already looked, you might be able to refer me to the right source.  In the meantime, I will be looking myself.  TIA.

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Copied from the IRS FAQs:

 

55. Should Eligible Employers withhold federal employment taxes on qualified leave wages paid to employees? (updated November 25, 2020)

Yes.  Qualified leave wages are wages subject to withholding of federal income tax and the employee’s share of social security and Medicare taxes.  Qualified leave wages are also considered wages for purposes of other benefits that the Eligible Employer provides, such as contributions to 401(k) plans.

In other language, the FFCRA specifically says that double dipping is not allowed.

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Made me recheck my own software.  Thankfully, no issues.  I likely used different methods, which is to include all payments as taxable, and specifically exclude when required (programmer speak...).  I would guess the software in question failed to add the amount for 940.  Might want to check 941, 943, 944, state quarterly, and any other items where it needs to be wages, and places where it needs to be handled for credits.

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