As employers are getting ready to file their second quarter tax statements, they may wish to refer to new Frequently Asked Questions posted by the IRS. The IRS released FAQs to help employers with claiming credits for leave taken by employees for certain paid sick and family leave reasons.
The American Rescue Plan Act allows eligible employers to claim refundable tax credits as reimbursement for the cost of providing sick and family leave payments to employees who receive up to 10 days of paid sick leave or 12 weeks of paid family leave between April 1, 2021 and September 30, 2021 for the employee’s own health needs or to care for family members. The tax credits under the ARPA are similar to those under the Families First Coronavirus Response Act (FFCRA) through which employers could receive tax credits for providing paid leave to employees that met the requirements of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act. The ARPA extends these credits from April 1, 2021 through September 31, 2021 and expands the reasons for offering paid leave. Employers are not required to provide leave, but if an employer voluntarily provides paid sick and family leave wages that would have satisfied the requirements of the FFCRA, the employer may take a tax credit for the cost of providing the leave.
The IRS’ Frequently Asked Questions provides guidance for claiming the tax credit. Specifically, the FAQs address:
- What is an Eligible Employer?
- Determining the Amount of the Tax Credit for Qualified Sick Leave Wages
- Determining the Amount of the Tax Credit for Qualified Family Leave Wages
- Determining the Amount of Allocable Qualified Health Plan Expenses
- Determining the Amount of Allocable Collectively Bargained Contributions
- How to Claim the Credits
- How Should an Eligible Employer Substantiate Eligibility for Tax Credits for Qualified Leave Wages?
- Periods of Time for Which Credits are Available
- Special Issues for Employers: Taxation and Deductibility of Tax Credits
- Special Issues for Employers: Interaction of the American Rescue Plan Act of 2021 Tax Credits with Other Tax Credits
- Special Issues for Employers: Use of Third-Party Payers
- Special Issues for Employers: Other Issues
- Special Issues for Employees
- Specific Provisions Related to Self-Employed Individuals
