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IRS Issues Guidance to Employers to Claim Tax Credits for Voluntary Leave Related to COVID-19 and the Vaccine

May 5, 2021

By: Abby (Busler) Tilkens

As set forth in the American Rescue Plan Act of 2021 (ARP), employers and certain governmental employers are allowed to claim refundable tax credits that reimburse them if they choose to provide paid sick and family leave due to COVID-19, including leave taken to receive and/or recover from COVID-19 vaccines.  The Internal Revenue Service (IRS) recently issued a fact sheet further explaining how employers may claim those tax credits.  The ARP tax credits are available from April 1, 2021, through September 30, 2021.

The IRS defines eligible employers for the ARP tax credits as follows:

  • Any business, including a tax-exempt organization, with fewer than 500 employees;
  • A governmental employer, other than the federal government; and
  • Any agency or instrumentality of the federal government that is not an organization described in section 501(c)(1) of the Internal Revenue Code.

Employers that choose to provide this leave may claim tax credits for any wages paid for leave taken by employees who are unable to work or telework due to reasons related to COVID-19, including leave taken to receive COVID-19 vaccinations.  Employees may also take leave to recover from any injury, disability, illness, or condition related to the vaccinations.

The expansion of eligible employers receiving tax credits is certainly enticing for employers to continue providing COVID-19 related paid time off for their employees.  Eligible employers may encourage their employees to get vaccinated and even provide a paid day off.  The employer would then receive a tax credit equal to the wages paid to employees for that day. Providing paid leave for COVID-19 vaccines and any vaccine related side effects may help encourage additional Wisconsinites to receive the vaccine.  As noted above, the time period began April 1, 2021, and continues through September 30, 2021.  Davis|Kuelthau will update you if this time period is extended or any other future tax credits are offered to employers.

For resources addressing considerations for implementing vaccination programs within your company, visit our Vaccinations resource page located here.

If you have questions regarding this information, please contact your Davis|Kuelthau, s.c. attorney, the author linked above, or the related practice group chair here.