Refundable Payroll Tax Credits Still Available

When President Biden signed the American Rescue Plan Act of 2021 in the spring, two refundable payroll tax credits were extended and expanded: the Families First Coronavirus Response Act (FFCRA) and the COBRA Premium Assistance Credit.

In 2020, the FFCRA was mandated for all employers with less than 500 employees to provide paid family and sick leave for employees.  In January 2021, paid leave became optional, but the credit is still available for employers providing leave.

The FFCRA was extended to last through the end of 2021 and expanded to promote vaccination and testing by creating two additional reasons for covered leave:

1 – Leave for employees receiving the COVID-19 vaccine or recovering from any side effects or illness related to the vaccine

2 – Leave for employees who are awaiting the results of a diagnostic test or medical diagnosis related to COVID

Another credit available for employers is for COBRA premium assistance for periods beginning after April 1, 2021 and before September 30, 2021.  This credit is available for individuals who have been involuntarily terminated or had reduced work hours who choose continuation of health care under COBRA.  The employer receives a refundable tax credit in the amount of premiums paid on behalf of the employee against its share of Medicare tax.  Premiums exceeding the Medicare tax are refunded.

These credits can be used in advance by adjusting the federal withholding tax deposits and reporting the credit claimed on Form 941, Employer’s Quarterly Federal Tax Return.  If the expected tax credit exceeds deposits available, an employer may file Form 7200 to request an advance of the tax credit – however, Form 941 must still be filed. An employer can also file an amended 941-X to claim the credit if the original Form 941 did not account for them.   

Take advantage of these credits while you can!