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.
