Last week, President Biden announced that leave taken by employees to receive or recover from the COVID-19 vaccination between April 1, 2021, and September 30, 2021, may qualify for a payroll tax credit under the American Rescue Plan Act of 2021.

Businesses and nonprofits with fewer than 500 employees are entitled to a tax credit for wages paid to employees for leave taken due to not being able to work due to COVID-19 or related reasons. It is now clarified that these reasons include leave taken to receive and recover from COVID-19 vaccinations. Self-employed individuals are eligible for similar tax credits.

Every employee should get paid leave to get a shot, and businesses should know that they can provide it without a hit to their bottom line. There’s no excuse for not getting it done.

President Joe Biden, in a speech at the White House

For the Q2 and Q3 of 2021, the credit is equal to up to two weeks (80 hours) of sick leave wages paid for COVID-19 related reasons and is limited to:

  • $511 per day and $5,110 in aggregate, at 100% of the employee’s regular pay rate if the employee was sick or quarantining, awaiting the results of a COVID test, obtaining or recovering from a vaccine, or
  • $200 per day and $2,000 in aggregate, at two-thirds of an employee’s regular pay rate if the employee was taking time to care for someone quarantining or to provide care due to COVID-19 school or childcare provider closures.

The credit is reported and claimed for each quarter on their federal employment tax return Form 941 – Employer’s Quarterly Federal Tax Return.

In IRS Notice 2021-24, guidance was extended to allow penalty relief for employers that choose to reduce their federal employment tax deposits in anticipation of the COVID-19 related employment tax credits. This relief applies when certain conditions are met for the following credits:

  • Paid Sick and Family Leave Credits
  • Employee Retention Credit
  • Continuation Coverage Premium Assistance

BMF Advisors are here to help with any questions and to discuss how your business can claim this credit.

About the Authors

John E. Jenkins
CPA
Partner, Taxation Services
Melissa G. Dunham
CPA, MTax, MBA
Senior Manager, Taxation Services

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