Under the Families First Coronavirus Response Act (FFCRA), eligible employers are entitled to tax credits for wages paid for certain leave taken by employees related to the COVID–19 pandemic to recover from any injury, disability, illness, or condition related to the vaccinations. The chart below addresses when changes were made by the American Rescue Plan Act (ARPA). The FFCRA, as amended and extended by the Tax Relief Act of 2020 (the Tax Relief Act), provided eligible small and midsize employers the ability to claim refundable tax credits related to the COVID-19 pandemic that reimburse the costs of providing qualified sick and family leave wages to employees for periods of leave beginning April 1, 2020, through March 31, 2021. The ARPA provides similar credits for wages paid for periods of leave beginning April 1, 2021, through September 30, 2021. If the business did not claim a sick or family leave credit on its original employment tax return, an adjusted return such as the Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund PDF, may be filed for a prior quarter as long as the period in which to file an adjusted return has not expired. See "Is There a Deadline for Filing Form 941-X" in the Form 941-X instructions for more information. Note: Leave taken before October 1, 2021 and paid, but not claimed on the return can be claimed on Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund PDF. If you filed Form 941-X to claim the Employee Retention Credit, Sick & Family Leave, or COBRA, the amount of income or deductions reported on your income tax return (e.g., Forms 1040, 1065, 1120, etc.) may be affected by the amount of your credit, and you may need to file an amended return. For additional information, please refer to the following resources: Notice 2021-20, Guidance on the Employee Retention Credit under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act, question 60. Notice 2021-49, Guidance on the Employee Retention Credit under Section 3134 of the Code and Miscellaneous Issues Related to the Employee Retention Credit, Section IV.C. Notice 2021-31, Premium Assistance for COBRA Benefits, question 70. Tax Credits for Paid Leave Under the Families First Coronavirus Response Act for Leave Prior to April 1, 2021, FAQ 49. Tax Credits for Paid Leave Under the American Rescue Plan Act of 2021 for Leave After March 31, 2021, FAQ 70. If leave was taken and not paid in a prior quarter, but the business went back and paid the employee after September 30, 2021, then the credit can be reported on the 4th quarter Form 941, Employer's Quarterly Federal Tax Return, for the period paid. Self-employed individuals may claim comparable credits on the Form 1040, U.S. Individual Income Tax Return PDF. More information Correcting Employment Taxes. Tax Credits for Paid Leave Under the American Rescue Plan Act of 2021 for Leave After March 31, 2021 FFCRA and as amended and extended by the Tax Relief Act ARP Periods of leave for which employers may claim credits April 1, 2020 through March 31, 2021 April 1, 2021 through September 30, 2021 Eligible entities Businesses and tax-exempt organizations with fewer than 500 employees that pay qualified sick leave or qualified family leave wages and self-employed individuals. Expanded to include state and local governments, as well as certain tax exempt federal government entities (without regard to number of employees). Employment Tax Against which the credit may be applied Employer share of Social Security tax (or so much of the RRTA Tier 1 tax rate as is attributable to the eligible employer share of social security tax). Changed to employer share of Medicare tax (or so much of the RRTA Tier 1 tax rate as is attributable to the eligible employer share of Medicare tax) for periods of leave taken after March 31, 2021. Qualifying paid leave definitions Sick leave: Includes isolation order/quarantine/experiencing COVID-19 symptoms and seeking medical diagnosis and/or caring for someone else under COVID-19 diagnosis and childcare. Family leave: Caring for a child when the school or other childcare facility/provider is unavailable due to COVID-19. Sick leave: ARP expanded to include COVID-19 vaccinations or sickness related to immunizations or COVID- 19 testing waiting periods, and to accompanying an individual to obtain immunizations related to COVID-19 or caring for an individual who is recovering from any injury, disability, illness, or condition related to the immunization. Family leave: ARP expanded to address all qualifying reasons for paid sick leave. Qualifying wages for the credits and credit limits. Sick leave: Wages paid at the employee's regular rate of pay (or the greatest applicable minimum wage if greater) up to $511 a day and max aggregate of $5,110 for self-care OR 2/3 wages paid up to $200 per day and max aggregate of $2,000 for the care of someone else for 10 days (80 hours for a full-time employee) plus allocable health plan expenses and employer's share of Medicare taxes. Family leave: Credit for 2/3 of wages at the employee's regular rate of pay paid up to $200 per day for up to 10 weeks (up to a maximum of $10,000) plus allocable health plan expenses and employer's share of Medicare taxes. Sick leave: Credit also increased for certain collectively bargained contributions (up to the maximum daily and aggregate limits) and the employer's share of both Social Security and Medicare taxes imposed on wages. A new 80 - hour period for paid leave eligible for the credits for the period of leave an employee takes after March 31, 2021 and before October 1, 2021. Family leave: Credits also increased for certain collectively bargained contributions (up to the maximum daily and aggregate limits) and the employer's share of both Social Security and Medicare taxes imposed on the wages, in addition to the allocable qualified health plan expenses. The per employee limit is increased to $12,000 for up to 12 weeks and resets for periods of leave taken after March 31, 2021 and before October 1, 2021.
