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Do You Know About the Tax Credit for Providing Paid Leave to Employees for COVID-19 Vaccinations?

COVID-19 cases have been declining to their lowest levels in the U.S. since the pandemic began a year ago. Much of the decline is attributable to the fact that more and more people are getting vaccinated. According to information published by the CDC, about 62.3% of adults have received at least one vaccination.

Many people experience a variety of symptoms after getting vaccinated, such as fever, chills and other flu-like symptoms, forcing them to take time off from work to recover.

To compensate employers for paying employees who cannot work or telework due to leave taken to receive COVID_19 vaccinations or to recover from any illness or injury relating to the vaccinations, President Biden’s  American Rescue Plan Act of 2021 (ARPA) provides tax credits to eligible employers. Small and midsize employers and nonprofits with fewer than 500 employees are eligible to claim this credit.

According to the IRS fact sheet, the credit is a refundable tax credit intended to compensate employers providing paid time off to employees to get vaccinated and to recover from the vaccination(s). The paid sick leave credit is equivalent to up to 80 hours of work, or 10 work days, at up to $511 per day, or $5,110 in the aggregate. This also extends to those taking paid family leave to care for family members who get vaccinated or who are recovering from vaccination, for up to twelve weeks and $200 per day, or $12,000 total.

Eligible employers can claim the credit for leave taken between April 1, 2021 and September 30, 2021. The credit is claimed on Form 941, the Employer’s Quarterly Federal Tax Return. Eligible employers that pay such sick or family leave may retain federal employment taxes (including federal income tax withheld from employees, the employees’ share of social security and Medicare taxes and eligible employer’s share of social security and Medicare taxes with respect to all employees) equal to the amount of such sick or family leave paid. If the employment taxes are insufficient to cover the amount of sick and family leave paid, the eligible employer may request advance payment of credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Author: Sudha Vishwanath, Tax Manager | svishwanath@withum.com

If you need more information on claiming this tax credit, please reach out to a member of the Withum Tax Services Group.

Business Tax Services

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