Employers Receive Tax Credits To Help Employees Get Vaccinated

As pandemic-related restrictions begin to ease and, in some cases, be lifted entirely, business owners across the country are eagerly anticipating a return to normalcy. In a recent White House announcement, President Biden urged employers across the country to encourage and assist employees in getting the vaccine, as well as to provide full paid time off to those who choose to do so. The President expects that by taking this action, businesses will be able to resume their pre-pandemic operations. As an incentive, under the American Rescue Plan, certain small and mid-sized businesses will be able to claim paid leave tax credits to offset the cost they would otherwise bear.
In the United States, three vaccinations are currently available, all of which have been granted an Emergency Use Authorization (EUA) by the US Food and Drug Administration (FDA). As of the publication of this article, the Pfizer-BioNTech vaccine is approved for use in people aged 16 and up, while the Moderna and Janssen (Johnson & Johnson) vaccines are only for people aged 18 and up. All three vaccine manufacturers are conducting clinical trials on children and adolescents to determine vaccine safety and efficacy. Dr. Anthony Fauci, speaking at an April 2 briefing, predicted that the United States would be able to safely vaccinate children of nearly any age by the end of 2021.
Small and mid-sized businesses will be able to claim refundable tax credits under the American Rescue Plan of 2021 to offset the cost of providing paid time off for COVID-19 vaccinations, as well as paid time off for an employee to recover from vaccine side effects if the employee is unable to work or telework while recovering. The tax credit is available to any business with fewer than 500 employees, including tax-exempt organizations. Similar credits are available to self-employed entrepreneurs who do not have employees.
Under the American Rescue Plan, Eligible businesses may claim refundable tax credits for up to 80 hours (up to ten days) per employee at the employee’s regular pay rate, up to a maximum of $511 per day in paid sick leave ($5,110 per employee in total). These credits are available for sick leave taken by employees to get vaccinated and to recover from side effects, including any illness, injury, disability, or other condition related to the vaccine. Qualified small and mid-size enterprises may also be eligible to claim tax credits for up to an extra 12 weeks of paid sick leave per employee, up to a total of $12,000, at two-thirds of the employee’s usual pay rate. This paid time off must be related to seeking care for COVID-19 symptoms, being tested for COVID-19, adhering to quarantine or isolation restrictions imposed by the government or medical professionals (or caring for someone else who is subject to these restrictions), or caring for a child whose childcare provider or school is closed due to the pandemic. Both tax credits are available for paid time off spent between April 1, 2021 and September 30, 2021.
You can claim tax credits when completing your quarterly federal employment tax return if your business qualifies (fewer than 500 employees) and offers employees paid time off under the American Rescue Plan. The credit is equivalent to the employee’s portion of Social Security and Medicare taxes on those wages, as well as qualified health plan expenses, collectively bargained contributions, and the employee’s portion of those wages’ Social Security and Medicare taxes. Instead of paying the entire amount of federal employment taxes your firm would normally owe, you can deduct the amount of the tax credit you are eligible for. If your tax credits total more than your federal employment taxes for the quarter, you can request an advance payment for the credits using IRS Form 7200 rather than waiting until early 2022 to file your year-end tax return for 2021. When completing their individual 1040 tax return for the year, self-employed business owners without workers can claim the COVID-19 paid time off credits. Running a business of any size is difficult, and it is critical to make decisions about employment and benefits that are beneficial to your company’s bottom line. These COVID-19 paid time off tax credits are intended to help company owners keep their operations running without losing money while also making it easier for their employees to get the vaccine if they desire to.

IRS Relief for Small Business

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The IRS (Internal Revenue Service) is offering penalty relief for any employer that fails to deposit employment taxes with the IRS by the correct date.

In Notice 2021-24, the IRS intensified prior guidance from 2020. The new notice offers relief for employers who are required to pay eligible sick leave wages and qualified family leave wages, along with qualified health plan expenses that can be allocated to those wages, as mandated by the Families First Coronavirus Response Act, which was amended by the COVID-related Tax Relief Act of 2020, along with the American Rescue Plan Act of 2021.

The IRS guidance targets to help businesses who were hurt by the COVID-19 pandemic through the coronavirus relief packages passed by Congress since last year, including the CARES Act, the Consolidated Appropriations Act, and most recently the American Rescue Plan Act. The guidance helps employers benefit from some of the tax credits available to them under those laws — such as for paid sick leave, family leave, and the Employee Retention Credit — while they continue to pay employees during the pandemic with some of the payroll taxes they otherwise would have needed to deposit with the IRS.

The notice also offers relief for some employers for whom COBRA continuation coverage premiums weren’t paid by former employees who were eligible for assistance with coverage under the American Rescue Plan Act.

In a statement from the IRS, “This relief ensures that such employers may pay qualified sick leave wages and qualified family leaves wages, qualified wages, and COBRA continuation coverage premiums using Employment Taxes that would otherwise be required to be deposited without incurring a failure to deposit penalty.”

The assistance also provides some relief for employers who experienced a full or partial closure order due to COVID-19 or who suffered a decline in business.

Overall, many businesses will experience a plethora of benefits from the IRS’s new guidance and the various coronavirus relief packages passed by Congress.

As always feel free to reach out to us so that we can make sure you are the best positioned on all of the above. Feel free to reach out to us and let’s set up a time for a review – call us at SWVA Tax & Accounting at 540-250-3198.

Three 2021 Tax Season Differences

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Tax season is around the corner, as a taxpayer you need to know what changes affect you this tax season. Since 2020 wasn’t exactly a “normal” year, you should not expect tax season to be either. SWVA Tax & Accounting wants to share information relevant to accounting and taxes to stay current. Here are three changes this tax season you need to know:

  1. The IRS recently announced it will start accepting 2020 tax returns on Friday, February 12, 2021. Typically, tax season starts in January but has been pushed back to February. The IRS is testing and programing a new system that follows new tax law changes made by Consolidated Appropriations Act, 2021 (CAA 2021), P.L 116-260, which was made into law on December 27, 2020. These changes also take into consideration the second 2020 stimulus payments made to taxpayers. It’s estimated the IRS will process more than 150 million tax returns this year. Make sure you have the needed documents to file as:
  • 2020 return
  • Year-end Forms W-2
  • Forms 1099
  • Forms 1095-A
  • Any other tax information your accountant may need

SWVA Tax & Accounting is here to help you with all your tax needs click here to get started today!

  1. Knowing the exact amounts of your 2020 stimulus payments is information your accountant needs. The two stimulus payments you received in 2020 are not considered taxable income by the IRS. But for example, if you owe back payments in child support, your stimulus payments may go towards back payments. Or you have a negative bank balance, the bank can use part of your stimulus payments to satisfy the negative balance. Tell your accountant how much your stimulus payment was and if it went towards paying any debts. Regardless, concealing how much you received in stimulus money from your accountant could delay refund payments or get you in trouble with the IRS.
  2. A celebrated part of 2021 is the COVID -19 vaccine is available and people are getting vaccinated. The not-so-good part is only a small fraction of the population has received the COVID-19 vaccine. What does this mean for you and SWVA Tax & Accounting? We must leverage technology so we can minimize personal contact while operating a business. At SWVA Tax & Accounting you can upload all your tax documents necessary for your 2020 tax filing. All you need to do is click here it’s a safe and simple process. We recommended you create a profile to make it easier for you. You can always send SWVA Tax & Accounting a message if you have questions regarding your tax preparation. Be sure your contact information is current so SWVA Tax & Accounting can reach you. If you have to submit your paper tax forms please call 540-250-3198 to let them know.

Continue to stay healthy and safe so you can be your best this year. SWVA Tax & Accounting is here to help you with all your tax needs. From bookkeeping to filing your taxes, trust us to get the job done right the first time. Call us at 540-250-3198 to schedule an appointment or book online. You run the business, we’ll run the numbers.