Updated Employer Tax Credits
COVID-related Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 are economic stimulus bills passed by Congress and are intended to speed up the US recovery from the economic and health effects of the COVID-19 pandemic. Both acts provide for businesses that have been severely impacted by the pandemic by allowing employer tax credits. However, the Acts are revised and updated almost weekly, so below are two important, recently updated provisions.
Credits for Paid Vaccine Recovery and Sick/Family Leave
The COVID-Related Tax Relief Act of 2020 amended and extended the tax credits for paid sick and family leave under sections 7001-7005 of the Families First Coronavirus Response Act. The Act allows small and midsize employers to claim refundable tax credits that reimburse them for the cost of providing paid sick and family leave to their employees due to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations. The ARP tax credits are available to eligible employers that pay sick and family leave for leave from April 1, 2021, through September 30, 2021. For the most current information on paid leave to employees receiving COVID-19 vaccines see the IRS fact sheet.
Employee Retention Credit:
This provision extends coronavirus tax credit for employers who keep workers on payroll. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 amended and extended the employee retention credit (and the availability of certain advance payments of the tax credits) under section 2301 of the CARES Act.
With this new legislation, eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021 meaning the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.
Also, retroactive to the enactment of the CARES Act, the law now allows employers who received Paycheck Protection Program (PPP) loans to claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.
How We Can Help
USA Payroll is committed to keeping you up to date with all revisions and updates associated with COVID-related legislation. We have dedicated staff that monitors federal and state legislation and regulation changes that affect taxes, payroll, and other HR related issues. Check back with us regularly for additional updates.