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 </figure>IRSWASHINGTON – The Internal Revenue Service today posted two new, separate sets of frequently-asked-questions (FAQs) to assist <a href="https://www.irs.gov/newsroom/child-and-dependent-care-tax-credit-faqs">families</a> and <a href="https://www.irs.gov/newsroom/tax-credits-for-paid-leave-under-the-american-rescue-plan-act-of-2021-for-leave-after-march-31-2021">small and mid-sized employers</a> in claiming credits under the American Rescue Plan (ARP).Both the child and dependent care credit as well as the paid sick and
 family leave credit were enhanced under the ARP, enacted in March to 
assist families and small businesses with the fallout of the COVID-19 
pandemic and recovery underway. The two sets of FAQs provide information
 on eligibility, computing the credit amounts, and how to claim these 
important tax benefits. An overview of these tax credits follows:<h2>Child and dependent care credit</h2>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.For 2021, eligible taxpayers can claim qualifying work-related expenses up to:<ul>
 <li>$8,000 for one qualifying person, up from $3,000 in prior years, or</li><li>$16,000 for two or more qualifying persons, up from $6,000 in prior years.</li>
 </ul>Taxpayers are also required to have earnings; the amount of 
qualifying work-related expenses claimed cannot exceed the taxpayer's 
earnings.Combined with the increase to 50% in the maximum credit rate, 
taxpayers with the maximum amount of qualifying work-related expenses 
would receive a credit of $4,000 for one qualifying person, or $8,000 
for two or more qualifying persons. When calculating the credit, a 
taxpayer must subtract employer-provided dependent care benefits, such 
as those provided through a flexible spending account, from total 
work-related expenses.A qualifying person generally is a dependent under the age of 13, or a
 dependent of any age or spouse who is incapable of self-care and who 
lives with the taxpayer for more than half of the year.As in prior years, the more a taxpayer earns, the lower the 
percentage of work-related expenses that are taken into account in 
determining the credit. However, under the new law, more taxpayers will 
qualify for the new maximum 50% credit rate. That's because the ARP 
increased to $125,000 the adjusted gross income level at which the 
credit rate starts to be reduced. Above $125,000, the 50% credit 
percentage goes down as income rises. Taxpayers with adjusted gross 
income over $438,000 are not eligible for the credit.The credit is fully refundable for the first time in 2021. This means
 an eligible taxpayer can receive it, even if they owe no federal income
 tax. To be eligible for the refundable credit, a taxpayer (or the 
taxpayer's spouse if filing a joint return) must reside in the United 
States for more than half of the year. However, special rules apply to 
military personnel stationed outside of the United States.To claim the credit for 2021, taxpayers will need to complete Form 2441, Child and Dependent Care Expenses,
 and include the form when filing their tax returns in 2022. In 
completing the form to claim the 2021 credit, those claiming the credit 
will need to provide a valid taxpayer identification number (TIN) for 
each qualifying person. Generally, this is the Social Security number 
for the qualifying person. For more information about completing the 
form and claiming the credit, see the instructions to Form 2441. In 
addition, those claiming the credit are required to identify all persons
 or organizations that provided care for the qualifying person. This 
requires providing the care provider's name, address, and TIN.<h2>Paid sick and family leave credits</h2>The paid sick and family leave credits reimburse eligible employers 
for the cost of providing paid sick and family leave to their employees 
for reasons related to COVID-19, including leave taken by employees to 
receive or recover from COVID-19 vaccinations. Self-employed individuals
 are eligible for similar tax credits.The paid sick and family leave tax credits under the ARP are similar 
to those put in place by the Families First Coronavirus Response Act 
(FFCRA), as extended and amended by the COVID-related Tax Relief Act of 
2020, under which certain employers could receive tax credits for 
providing paid leave to employees that met the requirements of the 
Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave
 Expansion Act (as added by FFCRA). The ARP amends and extends these 
credits, and provides that leave wages paid to an employee who is 
seeking or awaiting the results of a test for, or diagnosis of, 
COVID-19, or is obtaining immunizations related to COVID-19 or 
recovering from immunization, are leave wages that can be eligible for 
the credits. Additionally, under the ARP, eligible employers may now 
claim the credit for paid family leave wages for all the same reasons 
that they can claim the credit for paid sick leave wages.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 
beginning on April 1, 2021, through September 30, 2021.The ARP keeps the daily wage thresholds that previously existed for 
these credits under the FFCRA. The aggregate cap on qualified sick leave
 wages remains at two weeks (up to a maximum of 80 hours), and this 
aggregate cap reset with respect to leave taken by employees beginning 
on April 1, 2021. The aggregate cap on qualified family leave wages 
increases to $12,000 from $10,000, and this aggregate cap reset with 
respect to leave taken by employees beginning on April 1, 2021.The paid leave credits under the ARP are tax credits against the 
employer's share of Medicare tax. The tax credits are refundable, which 
means that the employer is entitled to payment of the full amount of the
 credits to the extent it exceeds the employer's share of Medicare tax.In anticipation of the credits to be claimed on the applicable 
federal employment tax return, eligible employers can keep the federal 
employment taxes that they otherwise would have deposited, including 
federal income tax withheld from employees, the employees' share of 
social security and Medicare taxes, and the employer's share of social 
security and Medicare taxes with respect to all employees up to the 
amount of the credit for which they are eligible. If the eligible 
employer does not have enough federal employment taxes on deposit to 
cover the amount of the anticipated credits, the eligible employer may 
request an advance of the credit by filing Form 7200, Advance Payment of
 Employer Credits Due to COVID-19.Self-employed individuals may claim comparable credits on the Form 1040, U.S. Individual Income Tax Return.See the <a href="https://www.irs.gov/newsroom/irs-offers-overview-of-tax-provisions-in-american-rescue-plan-retroactive-tax-benefits-help-many-people-now-preparing-2020-returns">tax provisions</a> of the American Rescue Plan for more information. See <a href="https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments">other provisions</a> designed to help taxpayers recovering from the impact of the COVID-19 pandemic. Also, see <a href="https://www.irs.gov/newsroom/coronavirus-relief-and-economic-impact-payments-frequently-asked-questions">FAQs</a> on these and other provisions.

New FAQs available to help families, small business with COVID stimulus aid