An Update on Paid Leave Tax Credits

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And What the Update Means for Your Business

When the Families First Coronavirus Response Act (FFCRA) expired at the end of December 2020, the tax credits to reimburse employers for emergency paid leave were extended through March 31 of this year.

On March 11, President Biden signed into law the American Rescue Plan Act of 2021. This law extends the tax credits to September 30. This means any qualified employer that voluntarily continues to offer emergency paid leave under the FFRCA can continue to benefit from the tax credits until the end of September.

Major Updates to Paid Leave Tax Credits

  • The credit now covers 100 percent of qualifying wages for FFRCA leave provided between April 1, 2021 and September 30, 2021.
  • Qualifying reasons for taking leave now include time off for getting a COVID-19 vaccination or recovering from an injury, disability, illness, or condition related to receiving a vaccine.
  • The maximum tax credit increased to $200 per day per employee or $12,000 per employee in aggregate.
  • The employee does not need to take 10 days of unpaid leave to qualify.

What to know about continuing emergency paid sick leave:

  • If an employee used all of their FFCRA sick leave as of December 31, 2020, they are not eligible to receive additional FFCRA sick leave in 2021.
  • If an employee did not use the full two weeks of leave by December 31, 2020, they can use their remaining leave in 2021, and employers can receive the tax credits for this leave until September 30, 2021.

If you decide to continue offering emergency paid leave, you’ll need to know exactly how this policy interacts with your current FMLA policies.

What to know about continuing emergency paid family leave:

  • If your company’s FMLA policy says each employee’s 12-month FMLA period resets at the beginning of the year, the employee may be entitled to an additional 12 weeks with the last 10 weeks paid.
  • You can claim the tax credit on this leave until September 30, 2021.

For more information on expanded emergency FMLA benefits, you can consult the IRS website.