April 26, 2021

On April 21, the Internal Revenue Service and the Treasury Department issued a fact sheet detailing information about the tax credits available under the American Rescue Plan. The intent is to help small businesses and nonprofit organizations receive a tax credit for providing paid time off to employees receiving the vaccine and time needed for recovery from the vaccine. The full legislative text can be reviewed here: IR-2021-90 – Fact Sheet. Our team has provided highlights of these updates below: 

Employer Tax Credits Related to Paid Leave for Employees Receiving COVID-19 Vaccinations

• Eligible employers are defined as:
  • businesses and tax-exempt organizations with fewer than 500 employees
  • certain governmental employers, excluding the federal government and any agency of the federal government that is not a 501(c)(1)
  • self-employed individuals
• The tax credit is equal to the wages paid to employees for the day of the vaccine and for recovery time, up to two weeks (80 hours), limited to $511 per day and $5,110
• Credits are only eligible for sick and family leave from April 1, 2021 through September 30, 2021
• Paid leave credits are credits against the employer’s share of the Medicare tax
• Tax credits are refundable

How to Claim Credits 

• Eligible employers report total paid sick and family leave on Form 941
• Employers can reduce their payroll liability and deposits for the quarter, including:
  • federal income tax withheld from employees
  • employee’s share of social security and Medicare taxes
  • eligible employer’s share of social security and Medicare taxes up to the amount of credit for which they are eligible
• Eligible employers are able to request an advance via Form 7200 (Advance Payment of Employer Credits Due to COVID-19)
• Employers should consult with their payroll providers for appropriate reporting of sick and family leave wages paid
• Self-employed individuals claim credits on Form 1040 (U.S. Individual Income Tax Return)

We invite you to visit our COVID-19 Resource Center for past updates and additional information. Don’t hesitate to contact your BLS Team Member directly or via our contact form to see how these changes affect you or your organization.