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On April 21, 2021, President Biden announced a tax credit for employers that would reimburse them for providing paid time off to employees to cover both getting vaccinated and any recovery time required due to vaccine side effects. The IRS followed up the President’s announcement with a new release offering details about the credit.

Under the authority of the American Rescue Plan Act of 2021 (ARP), employers that meet eligibility requirements can claim a refundable tax credit—the “ARP tax credit”—to cover sick leave between the period from April 1, 2021 through September 30, 2021.

To qualify, an organization must be either a small or midsize employer with fewer than 500 employees or a governmental employer (excluding the federal government and any agency not listed in section 501(c)(1) of the Internal Revenue Code).

The credit can be used to reimburse for paid time off required to allow employees to get vaccinated and recover from any vaccination side effects. The limit on the credit is coverage for up to 80 hours, or 10 workdays, at a daily rate of up to $511 per employee taking leave (not to exceed 100 percent of any employee’s regular pay rate).

Eligible employers should use Form 941, Employer’s Quarterly Federal Tax Return to report any paid sick leave. They are authorized to retain federal employment taxes equal to the paid sick leave amounts eligible for the ARP tax credit.

For more details, click here to read the full IRS release. As always, we encourage you to reach out to your HeimLantz tax advisor with any and all questions regarding this credit. 

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