IRS Expands Employer Tax Credits for Providing Employees Paid Sick and Family Leave Due to COVID
The IRS has updated frequently asked questions (FAQs) on the paid sick and family leave tax credits available under the American Rescue Plan Act of 2021 (ARP). The paid sick and family leave tax credits reimburse eligible employers for the cost of providing paid sick and family leave for reasons related to COVID-19.
The revised FAQs make clear 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. The tax credits under the Tax Relief Act, cover 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 may claim the paid sick and family leave credits,
- How to file for and compute the applicable credit amounts, and
- How to receive advance payments for and refunds of the credits.
Under the ARP, eligible employers, including businesses and tax-exempt organizations with fewer than 500 employees, may claim the sick and family leave tax credits for qualified leave wages along certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits).