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The American Rescue Plan - Payroll Tax Credit Extensions

President Biden signed the American Rescue Plan Act into law on March 11, 2021. The law extends certain payroll tax credits originally included in the Families First Coronavirus Response Act and the CARES Act.

Paid Sick Leave and Paid Family and Medical Leave

Payroll tax credits for wages paid to employees for qualified sick leave and qualified family and medical leave have been extended to September 30, 2021, with the following significant changes:

  • The 10 day limit on paid sick leave resets April 1, 2021.
  • Qualifying wages paid for family and medical leave increase from $10,000 per employee to $12,000 per employee.
  • The following were added as additional eligible wages paid to employees:
    • Time off to obtain a COVID-19 vaccine,
    • Time off to request a test or COVID-19 diagnosis as requested by an employer, or
    • Time off to recover from an injury, illness, or condition related to receiving a COVID-19 vaccine.
  • The additional changes to the credits apply to qualified wages paid between April 1, 2021 and September 30, 2021.
  • The requirement to provide sick and family leave to employees expired December 31, 2020. Providing sick and family leave to employees is voluntary for 2021.

Employee Retention Credit

Check out our related blog post here.

The application of the sick and family leave credits and the employee retention credit must be coordinated with other programs to avoid double benefit from the use of duplicate wages.

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