Business owners across the country are eagerly anticipating a return to normalcy as pandemic-related restrictions begin to ease and are, in some cases, lifted entirely. In a recent announcement from the White House, President Biden called on employers across the country to encourage and help employees get the vaccine, and to offer full paid time off to workers who choose to do so. The President hopes that this step will pave the way for businesses to resume pre-pandemic operations. As an incentive, certain small- and mid-sized businesses will be able to claim paid leave tax credits under the American Rescue Plan to offset the cost the company would otherwise bear.
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What age groups are currently allowed to get a COVID-19 vaccine?
There are currently three vaccinations available in the U.S., all of which have received Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA). As of the date of this article, the Pfizer-BioNTech is authorized for use with individuals age 16 and older, while the Moderna and Janssen (Johnson & Johnson) vaccines are approved for people who are at least 18 years old.
All three vaccine manufacturers are in various stages of clinical trials, testing vaccine safety and efficacy on children and adolescents. At an April 2 briefing, Dr. Anthony Fauci estimated that the U.S. may be ready to safely vaccinate children of nearly any age by the end of 2021.
Which businesses qualify for the tax credit?
Under the American Rescue Plan of 2021, small- and mid-sized businesses will be able to claim refundable tax credits to offset the cost of providing their employees with paid time off to receive COVID-19 vaccinations, as well as paid time off needed for an employee to recover from vaccine side effects if the employee is unable to work or telework while recovering.
Any business with fewer than 500 employees is eligible for the tax credit, including tax-exempt organizations. Self-employed entrepreneurs without employees are also eligible for similar credits.
What does the tax credit cover?
Eligible businesses may claim refundable tax credits under the American Rescue Plan for up to 80 hours (up to ten days) per employee at the employee’s regular pay rate, up to a maximum of $511 per day in paid sick leave ($5,110 per employee in total). These credits are available for sick leave taken by employees to get vaccinated and to recover from side effects, including any illness, injury, disability, or other condition related to the vaccine.
In addition, qualified small- and mid-size businesses may be able to claim tax credits for an additional 12 weeks per employee for paid sick leave, limited to $200 per day/$12,000 total, at two-thirds of the employee’s regular pay rate. This paid time off must be related to seeking care for COVID-19 symptoms, being tested for COVID-19, complying with government or medical professionals’ quarantine or isolation restrictions (or to care for someone else who is subject to these restrictions), or caring for a child whose child care provider or school is closed due to the pandemic.
Both of these tax credits can be claimed for qualified paid time off taken any time between April 1, 2021 and September 30, 2021
How do employers claim the paid sick leave credit on their quarterly tax filings?
If your business is qualified (fewer than 500 employees) and you offer employees paid time off under the American Rescue Plan, you can claim tax credits when filing your quarterly federal employment tax return.
The credit amount is equal to the paid sick and family leave wages, as well as eligible health plan expenses, collectively bargained contributions, and the employee’s share of Social Security and Medicare taxes on those wages. You can subtract the amount of the tax credit you are eligible for instead of paying the full amount of federal employment taxes your business would otherwise owe.
If your tax credits are equal to more than your federal employment taxes for the quarter, you can use IRS Form 7200 to request an advance payment for the credits, rather than waiting until you file your year-end tax return for 2021 in early 2022. Self-employed business owners without employees may claim the COVID-19 paid time off credits when filing their individual 1040 tax return for the year.
Running a business of any size can be complex and it is important to make employment and benefit-related decisions that make sense for your company’s bottom line. These COVID-19 paid time off tax credits are designed to ensure business owners can continue operations without losing money, while making it easier for their workers to obtain the vaccine if they choose to do so.
Still have questions about the COVID-19 vaccine tax credits or any other tax questions related to your business? Tax Legal Help is available so you can file confidently.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.