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IRS Offers Tax Credits to Small Businesses Impacted by COVID-19

by Jane Sooby |

The Internal Revenue Service (IRS) is offering at least three types of tax credit as part of COVID-19 relief, including Credit for Sick and Family Leave, the Employee Retention Credit, and Paid Leave Credit for Vaccines. 

The American Rescue Plan Act of 2021 (ARP) allows small and midsize employers and certain governmental employers to claim refundable tax credits that reimburse them for the cost of providing paid sick and family leave to their employees due to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations. 

The ARP tax credits are available to eligible employers who paid sick and family leave for leave from April 1 through September 30, 2021. An eligible employer is any business, including a tax-exempt organization, with fewer than 500 employees. Employers of H-2A visa holders are eligible to claim these credits. More information on eligibility is available through the IRS website or by speaking with your tax preparer.

The Employee Retention Credit offers eligible employers a refundable tax credit against the employers’ share of Social Security tax equal to 70 percent of the qualified wages they paid to employees from December 31, 2020, through June 30, 2021. Eligible employers are those businesses with operations that have been partially or fully suspended by governmental orders due to COVID-19, or businesses that have a significant decline in gross receipts compared to 2019.

See the IRS website for more information.

For an overview of COVID-19–related tax relief, including Advance Child Tax credits, visit the IRS Coronavirus Tax Relief website or talk with your tax preparer.

For more information on employer tax credits, see the IRS website or talk with your tax preparer.

Text based on information posted online by the Internal Revenue Service.