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June 7, 2021

Many employers aren’t capitalizing on new vaccine PTO tax credit

Many business owners are encouraging their employees to get vaccinated for Covid-19. An increasing number of companies are showing interest in vaccine mandates.

But many employers aren’t pursuing newly available tax credits for providing paid time off for workers to be vaccinated, despite there being potentially thousands of dollars at stake per employee.

According to guidance from the Department of the Treasury, employers can take tax credits for up to 80 hours of paid sick leave equal to the employee’s regular wage, capped at $511 per day up to $5,110, for employees who were sick or quarantining, awaiting the results of a Covid-19 test, or obtaining or recovering from a vaccine.

The tax credits apply to businesses with fewer than 500 employees — a group the White House estimates accounts for nearly half of the nation’s private-sector employees.

But Troy Taylor, a senior tax manager for accounting firm Dixon Hughes Goodman LLP, said he hasn’t heard of many employers going through the process.

“We’re just not hearing a lot of buzz on it,” said Taylor, who is based in Fort Worth, Texas.

Taylor said many employers simply aren’t aware of the option for tax credits for providing paid time off for the vaccine. Some are also reluctant to ask employees about their vaccination status, which presents another impediment to securing the credit.

As more companies become aware of the tax credit option, Taylor believes they will start to have conversations about the credit when approached by employees who are planning to take time off for the vaccine.

“The employer will have to decide if they actually want to go through the process of claiming the credit. Is two days’ sick time worth going through that process?” Taylor said.

The paid-leave credits are refundable credits against the company’s share of Medicare tax. That means employers are entitled to payment of the full amount of credits that exceed its share of the Medicare tax. Businesses can claim the credit quarterly through Sept. 30 of this year.

Taylor expects many employers will likely give paid time off without actually taking the credits. Many did so prior to the credits being announced in April.

For companies that do pursue the credit, Taylor suggests coding the time to a different payroll code that’s easily tracked.

“That way, you don’t have to go back in time and figure out who took time off to get the vaccine or who actually had Covid-19,” Taylor said. “It just makes the process a whole lot easier.”

Companies should also document the details around paid time off for the vaccine, in case of an audit down the line.

“Three years from now, you’ve probably forgotten everything that you did in the second quarter of 2021, so make sure you document it well,” Taylor said.

Even if companies haven’t pursued the credit — or the many other credits and programs tied to Covid-19 — Taylor said it’s a good idea to have a conversation about the possibilities that might exist.

“My philosophy is leave no stone unturned and at least talk to your tax provider to evaluate all of these credits that are available,” Taylor said. “Just make sure you’re not leaving money on the table and missing out on credits that you could be potentially eligible for. It’s worth that 30-minute phone call.”

Source: Washington Business Journal