Tax credits for certain employers providing paid leave to employees receiving COVID-19 vaccines

Eligible employers can claim a tax credit for providing paid time-off for each employee receiving the vaccine

Eligible employers can claim a tax credit for providing paid time-off

The IRS today issued a “fact sheet” with information about tax credits available for “small employers” that provide paid leave for employees receiving COVID-19 vaccinations.

The additional details—provided by the fact sheet, FS-2021-09—set out certain basic information about employers that are eligible for the tax credits and provides information about how these employers may claim the credit for leave paid to employees related to COVID-19 vaccinations.

Eligible employers—including businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers—can claim a tax credit for providing paid time-off for each employee receiving the vaccine and for any time needed to recover from the vaccine. A related IRS release (IR-2021-90) provides as an example, if an eligible employer offers employees a paid day off in order to get vaccinated, the employer can receive a tax credit equal to the wages paid to employees for that day (up to certain limits).

Background

The “American Rescue Plan Act of 2021” (Pub. L. No. 117-2) signed by the president on March 11, 2021, allows small and midsize employers and certain governmental employers to claim refundable tax credits that reimburse them for the cost of providing paid sick and family leave to their employees due to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations. 

  • Self-employed individuals are eligible for similar tax credits.
  • The tax credits are available to eligible employers that pay sick and family leave for leave from April 1, 2021, through September 30, 2021. 
  • The paid-leave credits under the March 2021 legislation are tax credits against the employer’s share of the Medicare tax. 
  • The tax credits are refundable; thus, the employer is entitled to payment of the full amount of the credits if it exceeds the employer’s share of the Medicare tax. 

 

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