New American Rescue Plan FAQs from IRS

The IRS has announced it has posted two new, separate sets of frequently-asked-questions to assist families and small and midsized employers in claiming credits under the American Rescue Plan (ARP):

Child and dependent care credit – For 2021, the ARP increased the maximum amount of work-related expenses for qualifying care that may be taken into account in calculating the credit, increased the maximum percentage of those expenses for which the credit may be taken, modified how the credit is reduced for higher earners and made it refundable.

Paid sick and family leave credits – 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. Under the ARP, eligible employers, including businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers, may claim tax credits for qualified leave wages and certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits) paid with respect to leave taken by employees April 1, 2021, through Sept. 30, 2021.