In an effort to enhance accessibility to COVID-19 vaccinations for all Americans, the Biden Administration has clarified an important point about paid leave related to COVID and the American Rescue Plan Act of 2021 (ARP).
Employers with fewer than 500 employees can claim refundable tax credits on wages paid to employees who take leave not only to recover from COVID-19, but also for time taken to receive or recover from COVID-19 vaccinations. The tax credits are available for paid leave taken by employees beginning on April 1, 2021, through September 30, 2021.
How to Determine the Amount of the Paid Leave Credit
The refundable tax credit is applied against the employer's share of the Medicare tax. The amount of the credit is equal to the wages paid for COVID-19 related reasons for up to two weeks (80 hours), limited to $511 per day and $5,110 in the aggregate, at 100% of the employee's regular rate of pay.
For example, if an eligible employer offers employees a paid day off so they can get vaccinated, the employer may receive a tax credit equal to the wages paid to employees for that day (subject to the limitations outlined above).
How Employers Can Claim the Paid Leave Credit
Eligible employers should retain the federal employment taxes they otherwise would have deposited, including federal income tax withheld from employees, employees' share of social security and Medicare taxes, and the eligible employer's share of social security and Medicare taxes with respect to all employees up to the amount of the credit for which they are eligible. If the employer does not have enough federal employment taxes set aside for deposit, the employer may request an advance of the credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Contact Cynthia Pedersen at firstname.lastname@example.org or a member of your service team to discuss this topic further. You can also review the IRS fact sheet, which helps clarify the available tax credits for employers.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.