The District of Columbia (D.C.) has enacted a paid family leave tax requiring certain employers to pay a quarterly tax based on their covered employees’ wages. The new tax, established by the Universal Paid Leave Amendment Act of 2016 (Act), is mandatory for covered employers and elective in nature for self-employed individuals.
The Act provides paid leave benefits for qualifying family leave events, qualifying medical leave events and qualifying parental leave events. Qualifying family leave events are the diagnosis or occurrence of a serious health condition of a family member of a covered individual. The Act provides benefits up to six workweeks within a 52-workweek period for qualifying family leave events. Qualifying medical leave events are defined as the diagnosis or occurrence of a serious health condition of a covered individual. The Act provides benefits up to two workweeks within a 52-workweek period for qualifying medical leave events. Finally, qualifying parental leave events are events associated with the birth of a child of a covered individual, the placement of a child with a covered individual through adoption or foster care, or the placement of a child with a covered individual for whom the covered individual legally assumes and discharges parental responsibility. The Act provides benefits up to eight workweeks in a 52-workweek period for qualifying parental leave events.
The Act’s benefits are calculated based on the eligible individual’s average weekly wages up to a maximum of $1,000 per week. D.C. will begin administering paid leave benefits on July 1, 2020.
Covered employers are assessed a quarterly tax of 0.62% of the wages of its covered employees. Self-employed individuals who opt into the Act are assessed a quarterly tax of 0.62% of total gross earnings from all of the self-employed businesses for which the individual performs at least 50% of his or her work in D.C. For covered employers, required payments to the paid leave program will commence on July 1, 2019, based on wages from April 1, 2019, to June 30, 2019. The due date of quarterly wage reports and payments is the last day of the month following the close of each calendar quarter (the first deadline is July 31, 2019). For self-employed individuals that opt into the Act, the first required payment will commence on Oct. 1, 2019, based on the individual’s performance during the period of July 1, 2019 to Sept. 30, 2019 (the final deadline for the first payment is Oct. 31, 2019).
Both self-employed individuals who opt in and covered employers should submit quarterly wage reports and payments to the Department of Employment Services (DOES) through the online portal which can be accessed via the DOES website.
Below are some additional highlights from the Act.
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax advice, if any, contained in this communication was not intended or written to be used by any taxpayer for the purpose of avoiding penalties.