On April 21, 2021, the IRS and the US Treasury Department published a fact sheet on the tax credits available under American Rescue Plan Act (ARPA) to employers who provide paid leave to employees who get COVID-19 vaccinations. ARPA extends tax credits previously established under the Families First Coronavirus Response Act (FFCRA) to reimburse employers for the cost of voluntarily providing paid sick and family leave to employees due to COVID-19. For a complete discussion of the ARPA and FFCRA leaves, please see Lake Effect's prior blog. The new fact sheet confirms the following:
- Employers eligible for the tax credits are those with fewer than 500 employees, including governmental employers, other than the federal government and federal agencies.
- Eligible employers may receive tax credits for wages paid for leave taken by employees to receive COVID-19 vaccinations or recover from any illness or condition related to such vaccinations.
- As set forth in Lake Effect’s prior blog on FFCRA tax credits, the credits cover 100% of the costs of qualified sick and family leave wages, the employer’s share of social security and Medicare taxes on those wages, and any qualified health plan expenses allocable to those wages.
- Eligible employers may claim tax credits for sick and family leave paid to employees to receive or recover from COVID-19 vaccinations from April 1, 2021 to September 30, 2021.
- Employers may use IRS Form 941 to claim the tax credits and can keep the federal employment taxes that they otherwise would have deposited up to the full amount of the credit for which they are eligible. Employers may also request an advance of the credits by filing IRS Form 7200.
- Self-employed individuals may claim comparable tax credits on their Individual IRS Form 1040.
Employers should work closely with their tax advisors to understand the tax implications of COVID-related paid sick and family leaves, including those covering vaccinations. We are closely monitoring developments relating to COVID-19 and the workplace. Keep watching for blogs and emails from your Lake Effect team for important legal updates and HR best practices. The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to help. Contact us at firstname.lastname@example.org or 1-844-333-5253.