This article originally appeared on Fox News on March 16, 2020.
In an effort to address the coronavirus crisis the House passed the Families First Coronavirus Response Act on Friday.
The vote was bipartisan and President Trump is supportive.
Among other things, the bill provides paid medical leave for the employees of small businesses (500 or fewer employees) impacted by the coronavirus, with the federal government reimbursing employers for those costs.
Almost immediately, there was an adverse reaction from America’s small business community. Their concerns were understandable but, as it turns out, largely unwarranted.
Because of the coronavirus, small businesses are suffering from dramatic sales declines, supply chain disruptions and vanishing cash flow.
At first blush, the House bill appeared to mandate that they use what little cash they have to cover paid medical leave – with government reimbursing those costs sometime down the road. Many believed the reimbursement would come only after this mandate drove them out of business leaving their employees without jobs or benefits and dragging the economy further towards recession.
We shared their concerns and began looking into how this bill would work should it become law. We had discussions with legislators and Treasury Department officials.
We read Secretary Mnuchin’s written statement and saw his Fox News interview. While there are still important details to work out, we believe that the Trump administration is aware of and determined to satisfactorily resolve any issues in the best interests of employees, small business, and the economy.
Let’s start with how employers who are cash strapped because of the coronavirus can pay their affected employees medical leave. The government will reimburse those costs, but the government is slow, often too slow. So, in order to mitigate the cash flow impact on employers, we believe the IRS will issue guidance essentially as follows.
Every two weeks, employers are currently required to pay into an escrow account the amount they owe the IRS for withholding and payroll taxes which are due at the end of the quarter. Rather than depositing these funds, the IRS will permit employers who are short on cash to use those monies to cover medical leave payments. The IRS and the employer will reconcile the amounts at the end of each quarter, but the funds will be available every two weeks.
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