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.

End of Year Tax Tips for You

tax-tips

It’s been an unusual year with challenges that businesses and individuals never thought they would have to face. 2020 will certainly be a year we will not forget and COVID-19 has made businesses and individuals rethink their finances. November is more than half-way over with the end-of-year coming fast. End-of-year tax planning is more important now than ever. Here are a few tax considerations both businesses and individuals can do for their end-of-year planning:

Business-related end-of-year tax planning:

  1. The CARES ACT allows businesses to use current losses against past income for a faster refund. With President Trump’s disaster declaration, any business in America is eligible for refunds from losses that are COVID-19 related. These losses range from inventory, supplies, and the closing of a physical location. To be eligible, the losses must be directly related to COVID-19, and the business owner must be able to prove it.
  2. The CARES ACT will allow businesses to defer paying the usual 6.2% of social security taxes for the remaining year. A small business can defer half of the amount due by December 31, 2021 with the other half due December 31, 2022. This opportunity gives small businesses a chance to invest but should do so with caution. Nobody should make an investment this time of year and then pay end-of-year taxes.
  3. The CARES ACT is helpful legislation that can benefit small business owners. Why not use it to your advantage to benefit the most? We recommend setting up an appointment with an accountant to navigate the CARES ACT. SWVA Tax & Accounting can help you with this and more!

  Individual related end of year tax planning:

  1. If you have a medical flexible spending account, use it before the new year. You can spend your left-over money on 1. Glasses and contacts lenses 2. Pay deductibles or co-pays related to medical appointments, especially specialists that you have been putting off all year. 3. Stock up on any medicines you need for the coming year. You may need to talk with your doctor to change the amount that has been prescribed to you.
  2. Add to your retirement account while you still can. You can lower your taxable income by contributing to your retirement plans such as a 401(k), 403(b), IRA, and SEP. You can make contributions to your 401(k) and 403(B) until December 31. You can contribute to your IRA until April 15, 2021.
  3. If you have unwanted clothing and household items you can donate them to charity, but do it before January 1, 2021. Make sure you get a receipt from the organization you donate to. The deduction is limited to the fair market value you could have sold it at a yard sale.

Now is the time to do those last-minute tax preparation steps, so you can have a successful 2021. SWVA Tax & Accounting is here for you year-round. Pick up the phone and call SWVA Tax & Accounting now so you can plan for a better year ahead. Call 540-250-3198 today or schedule an appointment with SWVA Tax & Accounting or book online by clicking here. We’ll run the numbers, while you run the business.

Payroll Tax | What it means for your small business

Payroll-Tax

Effective Sept 1st through December 31st, President Trump in a presidential executive order deferred the payroll tax. The order allows for employers to defer withholding on affected employees’ compensation during the last months of 2020 and then, in turn, begin a collection of those deferred tax amounts from January 1st to April 30th of 2021.

Eligible employees include any employee whose pretax wages and compensation during any biweekly pay period are generally less than $4,000. The order defines the wages as follows:

Wages as defined in [Sec.] 3121(a) or compensation as defined in [Sec.] 3231(e) paid to an employee on a pay date during the period that begins Sept. 1st and ends on December 31st, 2020, but only if the amount of such wages or compensation paid for a bi-weekly pay period is less than the threshold amount of $4,000, or the equivalent threshold amount with respect to other pay periods.

Of course, any wages that fall outside of the classification of wages and compensation for Sections 3121 (a) or 3231 (e) aren’t included in the determination of wages that are applicable.

A key thing to consider is that this is pay period dependent. Meaning that only pay periods in which the compensation is under the threshold may be excluded from withholding.

For example,

John Smith Employee | Pay periods

Sept 18th Gross $3,892.00 excluded

Oct 2nd Gross $4,010.00 not excluded

Oct 16th Gross $3,989.00 excluded

The key is the number of earnings in the bi-weekly pay period, meaning each pay-period must be treated independently.

There is some concern for some employees that the repayment period in January through April of 2021 could cause financial hardship if they are living “paycheck to paycheck”. The key to remember is that it OPTIONAL, you are not required as a business to participate.

A key date in the program is also May 1st, 2021 at which point any unpaid deferred payroll taxes are open to interest, penalties, and additions, as accrued.

If you have any further questions on this, as always, reach out to SWVA Tax & Accounting for advice. We are glad to help our business owners understand these situations and answer any questions you may have.