American Rescue Plan Act of 2021

The American Rescue Plan Act (ARPA) was just signed into law last week. This article will only discuss two items from this new law, the FFCRA updates and the employee retention credit through CARES.

The Families First Coronavirus Response Act (FFCRA) initially began last year on 4/1/2020. This law required employers to notify employees of potential paid time off when they had COVID symptoms, when they couldn’t work due to lack of childcare, and a few other reasons. FFCRA expired on 12/31/2020 but was then extended to 3/31/2021. The extension removed the employer mandate requiring notification to employees and payment for COVID-related time off. However, the tax credit was still available to those companies who chose to continue offering the pay to employees.

ARPA has extended FFCRA to 9/30/2021. In addition, while not mandated, companies will continue receiving the tax credit if they pay employees for FFCRA time off. The most interesting aspect of this new law was the reset of hours for the time off. This means if an employee had previously received the allowed 80 hours of FFCRA sick pay, the clock starts over as of 4/1/2021, and the previously paid time doesn’t count against the employee’s new 80-hour max. This extension allows FFCRA pay for more reasons than before, too.

The employee retention credit through Coronavirus Aid, Relief, and Economic Security (CARES) Act has been extended through 12/31/2021, thanks to ARPA. The employee retention credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after 3/12/2020 and before 1/1/2021. In order to claim the new employee retention credit, eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns, which will be Form 941 for most employers, beginning with the second quarter. The credit is taken against the employer’s share of Social Security tax but the excess is refundable under normal procedures.

We have some experience with FFCRA pay but very little with the employee retention credit. Since we’re not tax professionals, please talk with your CPA about both tax credits to ensure you are documenting and requesting the credits appropriately.

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