Under the Families First Coronavirus Response Act (FFCRA), employers may be entitled to tax credits for wages paid to employees who took leave related to the COVID–19 pandemic—including time away for personal illness, the care of others, or vaccine recovery.
In March of 2021, the American Rescue Plan (ARP) expanded many of the provisions under FFCRA. The chart below addresses how the FFCRA was originally established and defined, as well as how it was adjusted.
Periods of Leave
FFCRA (prior): April 1, 2020 through March 31, 2021
ARP: April 1, 2021 through September 30, 2021
FFCRA (prior): Businesses and tax-exempt organizations with fewer than 500 employees that pay qualified sick leave or qualified family leave wages and self-employed individuals.
ARP: Expanded to include state and local governments, as well as certain tax-exempt federal government entities without regard to their number of employees.
Qualifying Paid Leave Definitions
Sick leave includes isolation order, quarantine, experiencing, and seeking diagnosis for COVID-19 symptoms and/or caring for someone else under COVID-19 diagnosis and childcare.
Family leave includes caring for a child when the school or other childcare facility/provider is unavailable due to COVID-19.
Sick leave is expanded to include COVID-19 vaccinations or testing, including caring for an individual who is recovering from any injury, disability, illness, or condition related to the immunization.
Family leave is expanded to address all qualifying reasons for paid sick leave.
Qualifying Wages for the Credits and Credit Limits
Sick leave wages are paid at the employee's regular rate of pay up to $511 a day and max aggregate of $5,110 for self-care OR 2/3 wages paid up to $200 per day and max aggregate of $2,000 for the care of someone else for 10 days (80 hours for a full-time employee) plus allocable health plan expenses and employer's share of Medicare taxes.
Family leave gives a credit for 2/3 of wages at the employee's regular rate of pay paid up to $200 per day for up to 10 weeks (up to a maximum of $10,000) plus allocable health plan expenses and employer's share of Medicare taxes.
Sick leave credits increased for the employer's share of both Social Security and Medicare taxes. A new 80-hour period for paid leave eligible for the credits for the period of leave an employee takes after March 31, 2021 and before October 1, 2021.
Family leave credits increased for the employer's share of both Social Security and Medicare taxes. The per employee limit is increased to $12,000 for up to 12 weeks and resets for periods of leave taken after March 31, 2021 and before October 1, 2021.
Employment Tax Against Which the Credit May Be Applied
FFCRA (prior): Employer share of Social Security tax.
ARP: Changed to employer share of Medicare tax for periods of leave taken after March 31, 2021.