On April 21, 2021, the IRS released a fact sheet that provides details concerning the tax credits permitted by the American Rescue Plan Act of 2021 (ARPA) when paid leave is provided for reasons relating to receiving the COVID-19 vaccine.

The ARPA allows employers and tax-exempt organizations with fewer than 500 employees and certain governmental employers to receive tax credits as reimbursement for the cost of providing paid sick and family leave for certain reasons due to COVID-19, which now includes leave taken by employees to receive or recover from COVID-19 vaccinations. These tax credits are available for eligible employers who choose to provide paid sick and family leave from April 1, 2021, through September 30, 2021.

The fact sheet provides an overview of who is eligible for the tax credits, when leave applies, and how employers can claim such credits. Specifically, the IRS reiterates that the ARPA tax credits are applied against an employer's share of the Medicare tax and can be claimed quarterly on the federal employment tax return (generally Form 941). If the credit amount exceeds the employer's share of the Medicare tax, employers are entitled to a refund. (This process is similar to claiming paid leave FFCRA tax credits.)

Employers opting to provide paid sick and family leave through September 30, 2021, should be aware of the guidance provided in the fact sheet and work with their tax advisers to claim the credits. For more information on the paid leave and tax credits provided under the ARPA, see our prior Compliance Corner article from the March 16, 2021, edition, Congress Passes the American Rescue Plan Act of 2021.

IRS Fact Sheet »
IR 2021-90 Press Release »