On Wednesday, President Biden announced a tax credit available to small and mid-size employers that offers paid time off for their employees to receive COVID vaccines. The tax credit is being funded through an existing program authorized in last month's American Rescue Plan Act of 2021. Administration officials cited talks with businesses as well as polling data that showed employees would be highly persuaded to get vaccinated if their employers provided paid time off to receive the shot.

Also on Wednesday, the Treasury and the IRS released guidance (including a one page snapshot) with more details about the credit, which is available to businesses and not-for-profits with fewer than 500 employees. For the 2nd and 3rd quarters of 2021, businesses may take tax credits for wages up to 80 hours of paid sick leave in an amount equal to either:

  • The employee's regular wage, capped at $511 per day, up to a total of $5,110, if the employee was obtaining or recovering from a vaccine, sick or quarantining, or awaiting the results of a COVID test, OR
  • Two-thirds of the employee's regular wage, capped at $200 per day, up to a total of $2,000, if the employee was taking time to care for someone who is quarantining or to provide care due to COVID school or child care provider closures.

Employers can claim the tax credit for employees taking leave from April 1, 2021 through September 30, 2021 on their quarterly tax filings (Form 941). In anticipation of claiming the credit on Form 941, employers can keep the federal employment taxes they otherwise would have deposited, including federal income tax withheld from employees, the employees' share of social security and Medicare taxes, and the employer's share of social security and Medicare taxes, for all employees up to the amount of credit eligible.

If you have any questions about this credit or how to claim it, please contact your Kreischer Miller relationship professional or any member of our Tax Strategies team. For additional news and resources, visit our COVID-19 Resource Center here.

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.