COVID-19 Paid Leave Tax Credit

Small business owners have been burdened by the pandemic in ways that were not originally contemplated. It’s one thing to have to close their doors, but so many residual financial burdens are still being felt as Covid-19 remains present. One such burden is the high amount of sick and family leave employees affected by Covid-19 are having to take this year. The American Rescue Plan Act of 2021 was passed to ameliorate the economic impacts of the Covid-19 pandemic. Specific provisions of the Act provide financial relief to qualifying small businesses that pay sick and family leave to employees who cannot work because of Covid-19, either from sickness, quarantine, or a need to recover from receiving a Covid-19 vaccination shot.

Businesses with fewer than 500 employees can qualify for this tax benefit. It applies to wages paid from April 1st through September 30th of 2021 that was earned by employees using sick or family leave because of Covid-19. The Act provides relief in the form of a tax credit which will reimburse the employer for the wages it paid to employees through sick or family leave due to Covid-19. The tax credit is calculated against the employer’s Medicare tax owed. Even if the tax credit exceeds the Medicare taxes owed, the employer will be refunded the excess. The capper employee is set at 2 weeks of work, with a pay rate of no more than $511 daily.

Employers seeking to take advantage of this tax credit must file the employee wages quarterly on their federal employment tax returns. The professionals at The Center for Financial, Legal, and Tax Planning, Inc. are more than knowledgeable with regards to the American Rescue Plan Act of 2021 and the tax credits it offers. Please contact us at (618) 997-3436 for more information.