01 Sep 2021 Tax Credits for Paid Leave – Updated Guidance
Authored by: W. Dale Westenskow, CPA, Haynie & Company Partner
Paid sick and family leave tax credits
Eligible employers can claim the credits for providing leave to employees to accompany a family or household member or certain other individuals to obtain immunization relating to COVID-19. The credit is also available for employees who care for a family or household member or certain other individuals recovering from the immunization.
The paid sick and family leave credits reimburse eligible employers for the cost of providing paid sick and family leave for reasons related to COVID-19. This includes leave taken by employees to care for certain individuals to obtain immunization relating to COVID-19 or to recover from immunization relating to COVID-19. This new reason for paid sick or family leave also applies for the comparable credits for self-employed individuals.
The paid sick and family leave tax credits under the American Rescue Plan (ARP) are similar to those put in place by the Families First Coronavirus Response Act (FFCRA) and Tax Relief Act of 2020 (Tax Relief Act). Under the prior Acts, certain employers could receive tax credits for providing paid sick or family leave that met the requirements. These tax credits 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 September 30, 2021.
Eligible employers may claim the paid sick and family leave credits; they may also receive advance payments for, and refunds of, the credits. Under the ARP, eligible employers may claim tax credits for qualified leave wages and certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits). Eligible employers include businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers.
Self-employed individuals may claim comparable credits on Form 1040, U.S. Individual Income Tax Return.
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