The Internal Revenue Service (IRS) and the Treasury Department announced on April 21, 2021 that refundable tax credits under the American Rescue Plan Act are now available to small to midsize businesses. These refundable payroll tax credits reimburse the business for Covid-19 related costs such as providing paid sick and family leave and to receive/recovery from the Covid-19 vaccinations. This is another update that benefits businesses and allows employers to look out for the health of their employees.
SC&H’s Key Takeaways
Who is Eligible?
Amount of Tax Credits and How They Are Calculated
For paid sick leave wages, the tax credit is equal to wages paid for up to 2 weeks at 100 percent the employee’s regular wages for a max of $511 per day and a total of up to $5,110.
For paid family leave wages, the tax credit is equal to wages paid for up to 12 weeks at 2/3rds the employee’s regular wages for a max of $220 per day and a total of up to $12,000.
How to Claim the Tax Credits
To claim the paid leave tax credits, employers must complete Form 941, Employer’s Quarterly Federal Tax Return. Form 1040 must be filled out by self-employed individuals to claim similar credits. If the employer will not have enough federal employment taxes on deposit to cover the amount of the credits, they can request an Advance Payment of Employer Credits Due to COVID-19 (Form 7200).
To read more about the details on the paid leave tax credit, review the fact sheet on the IRS website.
Keep our Coronavirus Resource Center bookmarked for the latest and most timely information, or reach out to our Tax Services team if you have any questions.
