IRS Releases ARPA Sick and Family Leave Credit FAQs

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The IRS has released an extensive series of FAQs regarding the American Rescue Plan Act of 2021’s (ARP Act or ARPA, PL 117-2) sick and family leave credits. The FAQs contain numerous examples of how to calculate the amount of the credits.

Under ARPA, refundable tax credits are available to Eligible Employers providing paid sick and family leave wages that otherwise would have satisfied the requirements of the EPSLA and Expanded FMLA, as amended for purposes of ARPA, paid with respect to leave taken by employees beginning on April 1, 2021, through September 30, 2021. ARPA codified these credits in Code Sec. 3131 through Code Sec. 3133.

These tax credits are increased by the Eligible Employer’s cost of maintaining health insurance coverage allocable to the qualified leave wages (“allocable qualified health plan expenses”) and certain amounts paid under collectively bargained agreements by the Eligible Employer that are properly allocable to the qualified leave wages (“certain collectively bargained contributions”). Under Code Sec. 3133, the tax credits are also increased by the employer’s share of social security and Medicare taxes imposed on the qualified leave wages.

The FAQs include information on how eligible employers may claim the paid sick and family leave credits, including how to file for and compute the applicable credit amounts, and how to receive advance payments for and refunds of the credits.

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.