The American Rescue Plan (ARP) Act of 2021, otherwise known as the COVID-19 Stimulus Package, is a bill that has been gaining traction within the past year. The overall economic stimulus bill of $1.9 trillion is being allocated to numerous programs within numerous agencies. Under the ARP, employers are entitled to tax credits for their own employees who take time off related to COVID-19 vaccinations. This new policy will go into effect from April 1, 2021 through September 30, 2021.

Who is eligible?According to the IRS, the types of employers eligible for tax credits include: 

  1. any business, including a tax-exempt organization, with fewer than 500 employees, 
  2. governmental employer, other than the federal government and any agency or instrumentality of the federal government that is describe in Section 501(c)(1) of the Internal Revenue Code, and 
  3. self-employed individuals.

How much tax credit can you obtain?Depending on the type of business, the amount of tax credit you are entitled to, can differentiate. A business is entitled to the paid leave, time allowed away from work for which an employee is still continuing to receive normal pay, credits under the ARP, which are tax credits against the employer’s share of the Medicare tax. These tax credits cover: 

  • Paid sick leave wages – continued payment by employer for short-term health needs and preventive care.
  • Paid family leave wages – continued payment by employer for serious medical reasons that extend to ill family members, as well as when a parent has a new child.

The amount of these tax credits can increase, meaning more money saved, by a redistribution of numerous factors including: the employer’s health plan, the employees’ collective bargaining benefits (i.e., union members), as well as the employer’s share of social security and Medicare taxes paid on the wages.

What does that have to do with ME? For employers, this means that you are saving money due to tax credits that you would have otherwise been required to deposit in your quarterly federal tax return.

For employees, the American Rescue Plan (ARP) Act of 2021 ensures that you will still have the ability to go on paid sick leave or paid family leave when obtaining your COVID-19 vaccinations. This also extends to the days after you receive your vaccinations. 

This new policy ensures that employers and employees are being treated fairly. Since the federal government is providing the COVID vaccine to all people living in the U.S., the policy allows employees to feel stable in their jobs to go out and receive the vaccine and rest properly afterwards. Additionally, employers are given incentive, saving money, when their employees are on paid leave.

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