BLS Insights

Tax Credits Now Available for Providing Paid Leave to Employees Receiving COVID-19 Vaccines

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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.

About the Author

Kathy Dean, CPA

Tax & Small Business

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