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New IRS FAQs on tax credits for qualified leave

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Tax Hot Topics newsletter The IRS recently posted informal guidance on its website in the form of 123 Frequently Asked Questions (FAQs) on the refundable tax credits enacted as part of the American Rescue Plan Act of 2021 (ARPA).

The credits are generally available to employers with fewer than 500 employees and certain governmental employers for qualified sick and family leave wages (“qualified leave wages”) paid with respect to leave taken by employees beginning on April 1, 2021, through Sept. 30, 2021.

The ARPA amended and extended the tax credits available to eligible employers under the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (“Expanded FMLA”), which were enacted on March 18, 2020, as part of the Families First Coronavirus Response Act (FFCRA).

Although the requirement that eligible employers provide leave under the EPSLA and the Expanded FMLA does not apply after Dec. 31, 2020, the tax credits under Sections 3131 through 3133, as added by ARPA, are available for qualified leave wages an eligible employer provides with respect to leave taken by employees from April 1, 2021, through Sept. 30, 2021, if the leave would have satisfied the requirements of the EPSLA and the Expanded FMLA, as amended for purposes of the ARPA.

The COVID-related Tax Relief Act of 2020 (“the Relief Act”), which was signed into law on Dec. 27, 2020, similarly extended the tax credits available to eligible employers for paid sick and family leave that would have satisfied the requirements of the EPSLA or the Expanded FMLA, as amended for purposes of the Relief Act, for qualified leave wages paid with respect to leave taken by employers beginning Jan. 1, 2021, through March 31, 2021. The IRS previously posted a separate set of FAQs addressing the tax credits that may be claimed for qualified leave wages paid for leave taken before April 1, 2021, under the FFCRA and the Relief Act.

Contact:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

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