The American Rescue Plan Act of 2021 (ARP) 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. These tax credits are available to employers that pay sick and family leave from April 1, 2021, through September 30, 2021.
In April, businesses could receive paid leave tax credits for providing leave for employees receiving or recovering from the vaccine. Today’s expanded guidance gives employers further opportunity to support their employees’ families and communities as well.
The IRS updated frequently asked questions (FAQs) on the paid sick and family leave tax credits under American Rescue Plan (ARP) clarifying that eligible employers can claim the credits for providing leave to employees who accompany a family or household member, or certain other individuals, to get a COVID-19 immunization or to care for them while recovering from a COVID-19 immunization.
The paid sick and family leave credits reimburse eligible employers for the cost of providing paid sick and family leave for COVID-19 related reasons including COVID-19 immunizations. This also applies to the comparable credits for self-employed individuals.
The paid sick and family leave tax credits under the ARP are similar to those under the Families First Coronavirus Response Act (FFCRA), as amended and extended by the COVID-related Tax Relief Act of 2020 (Tax Relief Act), when certain employers could receive tax credits for providing paid sick or family leave that met the requirements of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act (as added by FFCRA). The tax credits under the FFCRA, as amended and extended by the Tax Relief Act, covered leave taken beginning April 1, 2020, through March 31, 2021.
The ARP amends and extends these credits to leave taken beginning April 1, 2021, through Sept. 30, 2021.
The FAQs include information on how employers can claim the credits, how to file for and compute the amounts, and how to receive advance payments and refunds for them for them.
Under the ARP, eligible employers, including businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers, can claim tax credits for qualified leave wages and certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits). Self-employed individuals can claim comparable credits on their Form 1040, U.S. Individual Income Tax Returns.
Determining the Amount of the Tax Credit for Qualified Sick Leave Wages
Determining the Amount of the Tax Credit for Qualified Family Leave Wages
Determining the Amount of Allocable Collectively Bargained Contributions
Specific Provisions Related to Self-Employed Individuals
Read the IRS Information Release
Additional Resources:
Tax Credits for Paid Leave Under the American Rescue Plan Act of 2021 for Leave After March 31, 2021
Treasury Press Release: To Enable More Vaccinations, Treasury Expands Paid Leave Tax Credit