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COVID tax credits create lifeline for many businesses

The pandemic has pushed many businesses to the brink, putting enormous pressure on owners like you who worry about everything from the health and security of your employees to the ability to simply keep your doors open in the face of rising community case counts.  

Fortunately, you might be eligible for tax credits and other benefits that could allow your employees to get vaccinated or recover from a COVID-19 illness safely, easing your stress over your bottom line and preventing your workers from fearing for a lost paycheck.  

Here’s a brief overview of some programs you could take advantage of as we keep moving forward. 

Determining who is eligible 

If you run a business with fewer than 500 employees, then you’re likely eligible for tax credits that can offset wages paid for leave taken by employees who aren’t able to work due to illness from COVID-19. These tax credits also allow your employees to get vaccinated and recover from any side effects. 

These tax credits are available for wages paid for leave from April 1, 2021, through September 30, 2021. 

Support for your payroll 

The refundable credits are equal to the sick leave wages paid for up to two weeks (80 hours) at 100 percent of the employee’s regular rate of pay, capped at $511 per day. The tax credit for paid family leave wages is equal to the family leave wages paid for up to 12 weeks, limited to $200 per day, at two-thirds of the employee's regular rate of pay. 

The paid leave credits under the American Rescue Plan Act are tax credits against the employer's share of the Medicare tax. The value of the tax credits can increase based on a variety of factors, including approved health plan expenses, contributions for certain collectively bargained benefits, and the employer's share of Social Security and Medicare taxes. 

Impact on your employees’ benefits 

Communicating with your employees about how testing and treatment impacts their existing health benefits is important. If you offer high-deductible health plans, they’re able to cover these costs without jeopardizing their status. For instance, if one of your employees has a high-deductible plan that covers these expenses, they’re still able to contribute toward a health savings account and won’t lose status because these costs are covered before their deductibles have been met. 

Connect with Padgett today 

Since the beginning of the pandemic, our network of CPAs, enrolled agents and tax professionals have been working closely with small businesses across the country to help guide them through the various hurdles of compliance and navigate an uncertain environment. At PADGETT BUSINESS SERVICES®, we're here to help you navigate what feels like an ever-changing landscape, so be sure to find an office near you and see how we can lend a hand! 

Do you have the support you need to manage your small business bookkeeping? Contact us to schedule an appointment to speak with a local small business advisor.

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