The Internal Revenue Service (IRS) and the Treasury Department recently released further details about the tax credits available under the American Rescue Plan to help small businesses. This clearly outlined how business owners can benefit from tax credits to be able to provide paid leave for employees receiving COVID-19 vaccinations. Want to know if you’re eligible? Keep reading.

According to the IRS, the American Rescue Plan Act of 2021 (ARP) allows small and midsize employers, and certain governmental employers, to claim refundable tax credits. These serve as reimbursement for the cost of providing paid sick and family leave to their employees due to COVID-19. This includes leave taken by employees to receive or recover from COVID-19 vaccinations. Self-employed individuals are eligible for similar tax credits.

Am I Eligible For Tax Credits?

If you’re a small business, chances are, you are automatically eligible to apply for and receive tax credits to help pay your staff while they’re being vaccinated. This tax credit offered through the IRS is available for small businesses and startups with fewer than 500 employees.

Companies can now allow their employees paid time off to go get their vaccines, as well as time to recover, as needed. An employer can receive reimbursement of the equivalent of a day’s pay given to staff members who get time off to get their vaccine. This, however, has a maximum capacity. So, it also depends on the amount.

How To Claim

This sick and family leave program runs from April 1, 2021, to September 30, 2021. This means employers can apply for and claim these credits for employees who have taken leave during this period. The payment of the qualified leave wages can be made after the end of this period and be eligible for the credits as long as the wages are for leave that an employee took between the stipulated period.

Eligible applicants must retain records and documentation related to and supporting each employee’s leave to substantiate the claim for the credits, and retain the Forms 941, Employer’s Quarterly Federal Tax Return PDF, and 7200, Advance of Employer Credits Due To COVID-19 PDF, and any other applicable filings made to the IRS requesting the credit.

The paid leave credits under the ARP are tax credits against the employer’s share of the Medicare tax. The tax credits are refundable, which means that the employer is entitled to payment of the full amount of the credits if it exceeds the employer’s share of the Medicare tax.

Before employers claim any credits on their employment tax return, they should review IRS guidance and the FAQs at IRS.gov to make sure: they are eligible to claim the credit; they are completing the forms and claiming the credits correctly, and they don’t claim a credit that exceeds the limits.

Final Thoughts

In response to COVID-19, IRS has rolled out tax reliefs to assist small business owners to navigate the economic effects. The adjustments and extension of the tax credit program also include employer retention.

For more in-depth details on this and all other tax-related topics, you can stay tuned to the IRS information page. But, we know that you might be too busy to keep up, and sometimes the language is not so easy to understand, and we get it. So, we’ll definitely continue to share updates with you as we get them. For all types of tax and bookkeeping assistance for your business, feel free to connect with us. We’d be happy to help.

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