On April 21, 2021, President Biden announced a paid leave tax credit for qualifying organizations with less than 500 employees, which is being funded by the American Rescue Plan. The credit is available for employers who are providing paid time off for employees to get their COVID-19 vaccination. The credit also covers employers providing paid time off for employees who take time to recover from the vaccination.
With the latest phase of the nation’s vaccination effort making everyone 16 years of age or older in all states and territories eligible to get vaccinated, the paid leave tax credit will help small businesses by allowing their employees to receive paid leave to get their shots.
Businesses with fewer than 500 employees will be able to claim a credit for up to 80 hours of paid sick leave per employee, for paid sick leave offered between April 1 and September 30, 2021 for employees getting their COVID-19 vaccination, and/or to recover from the shot. The credit will be capped at $511 per day, and $5,110 in total, per employee. Paid time off for an employee taking family leave is also eligible for the credit at two-thirds of the employee’s regular rate of pay, capped at $200 per day and $12,000 total over a twelve-week period.
The IRS has released a fact sheet with details on how the credit can be claimed on quarterly tax filings. Similar to the tax credits offered in 2020, eligible employers may also submit form 7200 to request an advance of the credits, to help cover some of the up-front costs of administering the paid leave for their employees.
For many employers, this new tax credit will be a huge benefit, with their employees now being able to receive paid time off while taking care of their health and protecting their families and communities. Although the credit can be a nice boost and incentive for businesses, some may still find it a challenge when it comes to the reporting and filing process. The pros at Valor Payroll Solutions can help your business take full advantage of the program. Contact us today!