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Good question. The general rule is that to claim the credit for your company’s first tax year that begins after December 31, 2017, you must have your written family and medical leave policy in place before you pay the family and medical leave for which the credit will be claimed.
But under a favorable transition rule for the first tax year beginning after December 31, 2017, your company’s written leave policy (or an amendment to an existing leave policy) will be considered in place as of the effective date of the policy (or amendment) rather than the later adoption date.
So if you make the effective date of the policy January 1, 2018, your company can claim the credit for qualifying family and medical leave payments made on or after that date. This transition rule is available if
Example. Your company uses the calendar year for tax purposes. Back in January, Eve took two weeks of unpaid family and medical leave for the period beginning on January 15, 2018.
On November 15, 2018, your company adopts a written policy that satisfies the family and medical leave policy requirements explained earlier and makes that policy effective retroactively as of January 1, 2018. On or before December 31, 2018, the company pays Eve for two weeks of leave at 50 percent of her normal pay, as specified by the new policy. Assuming all the other requirements for the family and medical leave credit are met, your company can claim the credit for the 2018 leave payments made to Eve.
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Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.