With the COVID-19 vaccination program well underway, the United States economy is starting to bounce back. However, employers still need help. That’s why the government passed the American Rescue Plan with more support for individuals and employers throughout 2021.
But what is the American Rescue Plan, and what does it mean for your business? Let’s explore what this bill offers business owners, including the new paid leave tax credit for employee vaccinations.
What Is the American Rescue Plan?
The American Rescue Plan is a $1.9 trillion economic stimulus bill signed into law in March 2021. This massive chunk of government spending covers a range of services, including $1,400 checks to qualifying individuals, extended unemployment insurance, lower health insurance premiums and a lot of small business support.
The amount of assistance was so massive and went out so quickly, it left many business owners and tax preparers scrambling to figure everything out. “I’ve never dealt with anything like the coronavirus legislation,” says Dr. Steven J. Weil, president of RMS Accounting. “Typically, Congress talks a lot but nothing gets done. This time, it was like firing out new laws with a machine gun.”
What Does It Mean for Businesses?
In addition to the support for individuals, the plan helps struggling businesses as well. First, the bill extends the paid leave tax credit from the Families First Coronavirus Response Act until September 30. So, if an employee needs to take time off because they get COVID-19 or need to quarantine, you get a credit to offset what you pay them in wages during this time.
This paid leave tax credit also covers employees who need to take time off to take care of a family member for COVID-19-related reasons. “Maybe a child’s teacher tests positive and the school is closed for two weeks, so an employee needs to stay home to take care of the kids,” explains Weil. Both of these credits do have “caps,” or maximum allowed payouts, so check out detailed information on the IRS website.
The American Rescue Plan built off this thinking and created a new benefit to offset the time employees take off to get the COVID-19 vaccine and recover from any post-vaccine symptoms.
However, Weil believes this benefit is too little too late. “We’re no longer at the point where people are waiting 14 hours in line to get a shot,” he says. “Now you could get it anywhere. For me as an employer to recoup the 30 minutes an employee takes off for a vaccine, it might be more effort than it’s worth.”
What Businesses Are Eligible?
This part is a little confusing, but the United States Department of Labor tried to make it as clear as possible:
- Businesses with fewer than 500 employees can apply for the paid leave tax credit programs, and they’re required to provide this paid leave to employees if they need it for COVID-19 reasons.
- Businesses with fewer than 50 employees can request an exemption from offering paid leave to employees due to school closings or child care. Owners would need to create a written document for their records explaining why it was necessary to take this exemption.
The tax credits are also available for self-employed independent contractors. Weil provides an example: “Let’s say Joe owns a construction business and gets exposed to the coronavirus. He might need to quarantine and during that time he’s not seeing clients. That’s the kind of thing this credit is for.”
How Do You Apply?
Business owners with payroll can submit any paid leave credits for vaccinations and sick/family leave on their Form 941 (the quarterly form where you report what you owe for employees to cover taxes for their Social Security and Medicare). Your refundable credits will reduce what you owe each quarter. Self-employed individuals can apply for the credits using Form 7202 to get the tax benefits in advance or as part of their next annual tax return.
If your business has been impacted by COVID-19 in any way whatsoever, Weil recommends speaking to a qualified tax preparer who knows the government programs. “I ask people, ‘Would you be willing to pay $1,500 for the chance to get a $30,000 tax benefit?’ That’s the kind of thing we’ve seen under this new legislation, but people need to know how to apply.”
Take his advice and reach out for guidance if you think your business might qualify for any of these special services. The federal government crafted them with small business owners just like you in mind. It’s time to rebuild.
For more advice and tips on taxes and regulations, check out The Bottom Line.