President Biden signed the American Rescue Plan (ARP) on March 11, 2021. It provides for tax credits to qualified employers who voluntarily provide time off to employees for COVID-19 related absences. Participation in the program is voluntary, but it could be beneficial for employers and their employees. It provides paid time off for employees to get vaccinated and helps families dealing with COVID-19 exposure or reactions to vaccinations. We encourage businesses to review these programs to determine if they could be a right for you.
Previously, the Families First Coronavirus Response Act (FFCRA) required qualified employers to provide sick and family leave for several Covid-19 qualifying events. Those provisions expired on December 31, 2020. The legislation passed in December provided for voluntary continuation of the FFCRA provisions regarding paid time off for Covid-19 related sickness and family leave. Those benefits expired on March 31, 2021.
Who is eligible for the tax credit?
Private employers with fewer than 500 employees, tax-exempt organizations, public employers, and self-employed are covered.
Who is excluded?
Employees of the federal government and those corporations organized under acts of Congress are not eligible.
What is covered?
Paid sick leave of up to 2 weeks (80 hours) at 100% of an employee’s regular pay is allowed. If an employee worked less than full time, paid leave consistent with an employee’s regular work schedule is allowed. The original legislation provided five allowable reasons for sick pay. Those are still available and have been expanded to include the following: employees is awaiting results or diagnosis for COVID-19, the employer requested the employee seek diagnosis or testing, the employee is getting vaccinated, and the employee is having a reaction to the vaccination and is unable to work or telework.
Family Medical Leave is available for the reasons provided in the original legislation. The ARP added the following additional allowed reasons: the employee is awaiting results of COVID-19 test or diagnosis, the employer requested testing, the employee is getting vaccinated, and the employee is having a reaction to the vaccination. Paid family leave is at two-thirds pay of daily wages up to $200.
How does it work?
Employers claim the amount paid as a credit against their Form 941 obligations. If the amount paid exceeds the amount due, the employer may request advanced payment of employers’ credit due to COVID-19. For self-employed individuals, the credit may be claimed on their individual Form 1040. There are guidelines on what is to be included in the wages amount (wages, Medicare taxes, collective bargaining contributions, and other costs). Please see Instructions for Form 941 (Rev. March 2021) (irs.gov)
If you have questions on the ARP or the application of the legislation, please contact us at Loper Law LLC.
452 Government Street, Suite E
Mobile, Alabama 36602