The IRS is offering tax credits for businesses affected by COVID-19. These credits offer eligible businesses reimbursement for paid sick leave and family leave taken related to the COVID-19 situation, as well as incentives to keep employees on their payroll during this difficult time.
Paid Family Leave Credit
Eligible employers can receive a refundable paid family leave tax credit for required leave provided to employees who are unable to work or telework because they’re caring for someone with COVID-19, caring for a child whose school or place of care is closed, or childcare is unavailable due to COVID-19.
Per the IRS website, employers are entitled to a sick leave credit for up to 80 hours limited to 2/3 of employee’s regular pay or up to $200 per day, but no more than $2,000 per employee in total, plus related health care costs.
Eligible employers can claim tax credits for leave taken from April 1, 2020 – Dec. 31, 2020, on Form 941 or Form 7200 for an advance credit.
Paid Sick Leave Credit
The paid sick leave tax credit is available to eligible employers can receive a refundable tax credit that reimburses them the cost of providing required paid sick leave to employees unable to work or telework due to:
Employers are entitled to a sick leave credit of up to 80 hours, a maximum of $511 per day, but no more than $5,110 per employee in total, plus related health care costs.
Employee Retention Credit
An employee retention tax credit is available to eligible employers who keep employees on their payroll during this time. Eligible employers can claim this refundable tax credit for 50 percent of up to $10,000 in wages, including related health care costs. The maximum credit is $5,000 per employee. It can be applied against certain employment taxes.
Employers can claim the credit for qualified wages paid between March 13, 2020 and Dec. 31, 2020, on Form 941 or submit Form 7200 for an advance credit.
The credit is available to all eligible employers regardless of size, including tax-exempt organizations. There are two exceptions: federal, state and local government entities and their agencies, and businesses that take small business interruption loans.
Visit the New Employer Tax Credits page at IRS.gov for more information.