Tax Credits Available for Employers To Provide Paid Leave for Employees Who Take Time off For COVID-19 Vaccinations

Under the American Rescue Plan Act of 2021 (ARP), small and midsize employers can begin taking advantage of refundable tax credits to reimburse them for the costs of providing leave taken by employees to receive or recover from COVID-19 vaccinations for wages paid from April 1, 2021, through September 30, 2021. For example, if an eligible employer offers a paid day off for an employee to get vaccinated, the employer is eligible for a tax credit based on the wages paid (up to certain limits).

Here’s what you need to know:

  • Eligible employers are those with fewer than 500 employees, including non-profits, certain governmental entities, and self-employed individuals.
  • Credits are available for wages paid for leave taken by employees who are not able to work or telework due to reasons related to COVID -19 including leave taken to receive a vaccination or to recover from conditions related to the vaccinations.
  • Credits can be taken immediately by retaining the federal employment taxes that otherwise would have been deposited, including federal income tax withheld, and both the employee and employer’s share of social security and Medicare taxes.
  • If amounts paid for leave are in excess of employment taxes otherwise owed, advances can be requested by filing IRS Form 7200.
  • There are different amounts and limits applicable, depending on the type of leave being provided.
  • The wages paid and credits are taken are reported and reconciled on Form 941, Employer’s Quarterly Federal Tax Return.
  • Self-employed individuals may claim comparable tax credits on their individual Form 1040.

More details are available on this fact sheet.

For more details about the Act, please contact us. We’re ready to assist you in taking full advantage of the COVID-19 relief it provides.

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