Need a reason to help your employees get the COVID-19 vaccine? Here’s a good one! Your firm can receive a tax credit.
That’s right! If your company has fewer than 500 people, it can claim refundable tax credits as part of the American Rescue Plan Act of 2021.
The ARP gives small and midsize employers and nonprofits a tax credit for paid time off taken by employees who aren’t able to work due to COVID-19 related reasons, including getting vaccinated or recovering from any injury, disability, illness or condition related to the vaccine.
The tax credits are available for paid time off from April 1, 2021, through Sept. 30, 2021.
How it’s calculated
Under the ARP, paid leave credits are tax credits against the employer’s share of the Medicare tax and are refundable. So, according to IRS, your firm’s entitled to “the full amount of the credits, if it exceeds the employer’s share of the Medicare tax.”
For paid sick leave, the tax credit is equal to the sick leave wages paid for COVID-19 related reasons for up to two weeks (80 hours).
It does have limits. They’re $511 per day and $5,110 in the aggregate, at 100% of the employee’s regular pay.
For paid family leave, it’s equal to the family leave wages paid for up
to 12 weeks. The limits are $200 per day and $12,000 in the aggregate, at two-thirds the employee’s regular pay.
Claim the credit
To claim your firm’s tax credit report your:
- total paid sick and family leave wages
- eligible health plan expenses
- collectively bargained contributions, and
- the firm’s share of social security and Medicare taxes on the paid leave wages for each quarter on their federal employment tax return (Form 941, Employer’s Quarterly Federal Tax Return).
