Eligible employers can claim tax credits for giving workers paid leave to receive COVID-19 shots

The IRS recently provided further details relating to the Emergency Paid Sick Leave (EPSL) tax credit and the Emergency Family and Medical Leave (EFML) tax credit under the American Rescue Plan Act of 2021 (ARPA). These tax credits are designed to assist small businesses in providing paid time off for employees to receive COVID-19 vaccinations. The IRS also issued guidance (Fact Sheet 2021-09) on how employers can claim these credits.

Who is an eligible employer?

An eligible employer is any business, including a tax-exempt organization, with fewer than 500 employees. An eligible employer also includes nonfederal governmental and nonfederal section 501(c)(1) organizations or agencies.

Tax credits extended by ARPA

Eligible employers that pay EPSL and/or EFML wages from April 1, 2021, to Sept. 30, 2021, not counting any leave taken prior to April 1, may take the tax credits on those wages. The following applies only to the period from April 1 through Sept. 30:

• The EPSL was effectively renewed by allowing employers to provide up to 80 additional hours of EPSL to employees (providing an additional benefit of up to $5,110).
• The benefit available under the EFML was increased by eliminating the requirement that the first two weeks of the 12-week EFML period be unpaid (providing an additional benefit of up to $2,000).

For example, if an eligible employer offers employees a paid day off in order to be vaccinated, the employer can receive a tax credit equal to the wages paid to employees for that day up to the above limits.

Qualifying paid leave reasons expanded by ARPA

For the period starting April 1, 2021, the ARPA expanded qualifying reasons for the EPSL and the EFML to include payments made to an employee:

1. Receiving a COVID-19 vaccination,
2. Recovering from side effects or injuries related to the COVID-19 vaccination, or
3. Seeking or waiting for results of a COVID-19 test, if the employee has either been exposed to COVID-19 or the employer requested the COVID-19 test.

Claiming the tax credits

The tax credits are available to eligible employers that pay sick and family leave wages from April 1, 2021, through Sept. 30, 2021.