In response to COVID-19, Congress gave tax breaks to employers for providing paid sick and family leave and retaining employees. These provisions will result in about $237.8 billion in foregone revenue for FYs 2021-2031, Congress estimates.
This report examines the IRS's implementation of these provisions, how many employers used them, and more. For example, about 1.5 million employers claimed $9.8 billion in tax credits for 2020 to help with the costs of paid leave. We made 5 recommendations to the IRS aimed at strengthening its reviews of tax credit claims.
Starting in March 2020, Congress passed several laws, including the CARES Act, to provide employers with tax relief in response to the economic burden brought on by the COVID-19 pandemic. Provisions in these laws established the paid sick and family leave credits (leave credits), the Employee Retention Credit (ERC), and payroll tax deferrals. IRS implemented these provisions while facing delays caused by facility closures and other challenges. As new laws were enacted, IRS continued to revise employment tax returns and guidance.
Leave credits and ERCs for 2020 totaled about $20.7 billion. Payroll tax deferrals totaled about $123.6 billion, as shown in the table. In addition, preliminary data indicate 2021 usage of leave credits and ERCs likely exceed 2020 usage.
Data on Leave Credits, Employee Retention Credits, and Payroll Tax Deferrals, 2020
Note: The tax credit dollar figures are as reported by...
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