Specific employers can claim tax credits that will reimburse them for the cost of providing paid sick pay due to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations.
The ARP tax credits are available to eligible employers that pay sick and family leave for leave from April 1, 2021, through September 30, 2021.
An eligible employer is any business, including a tax-exempt organization, with fewer than 500 employees. An eligible employer also includes a governmental employer, other than the federal government and any agency or instrumentality of the federal government that is not an organization described in section 501(c)(1) of the Internal Revenue Code. Self-employed individuals are eligible for similar tax credits.
Which tax credits can be claimed:
Eligible employers are entitled to tax credits for wages paid for leave taken by employees who are not able to work or telework due to reasons related to COVID-19, including leave taken to receive COVID–19 vaccinations or to recover from any injury, disability, illness or condition related to the vaccinations.
Tax credits and how they are calculated:
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. See more…
Claiming the credit:
Eligible employers report their total paid sick and family leave wages (plus the eligible health plan expenses and collectively bargained contributions and the eligible employer’s share of social security and Medicare taxes on the paid leave wages) for each quarter on their federal employment tax return, usually Form 941, Employer’s Quarterly Federal Tax Return PDF.
The Form 941 instructions PDF explain how to reflect the reduced liabilities for the quarter related to the deposit schedule.
Self-employed individuals may claim comparable tax credits on their individual Form 1040, U.S. Individual Income Tax Return