Taylor earned a man-of-the-match accolade in a 1-0 home victory against Birmingham in March, underlining his £1.5 million price tag.
However, the 26-year-old - who struggled during his first campaign in Suffolk - went on to play against Middlesbrough the following week but has made just one substitute appearance since.
McCarthy claims the former Peterborough forward's absence has been due to injury, but insists Taylor must continue to work hard if he is to secure a regular first-team starting berth.
"He's had diarrhoea and sickness for three days," McCarthy told the Green'Un. "He reported to us that he was ill last Friday, so that's why he wasn't at Blackburn.
"Other than that he's alright; he's trained okay. He's got to keep going though, hasn't he?
"Listen, how old is he? 23, 24? He's still got 10 years of a career to play. You have to keep going because will get knock-backs. You don't just pack up and stop playing, you have to keep going."
Taylor's omission from the Ipswich squad is set to end on Tuesday as the Tractor Boys travel to the John Smith's Stadium to take on Huddersfield in the Championship.
"For anybody who has been out of the team, the only way to get back in is to do their best," he added. "He trained yesterday and he'll be travelling today."
Anthony Wordsworth has been drafted into the squad of late - making three starts out of the last four - and McCarthy has told Taylor to use the midfielder as his inspiration.
"I had that discussion with Tayls," said. "I said to him, did he see Woody coming in and playing those games and playing as well as he did? Well, the answer to that was, no, he didn't.
"I said, well that tells you how football changes so quickly. You've got to keep your standards up."
When quizzed on Taylor's future at Portman Road, the Blues manager kept his cards close to his chest.
"I don't know what I'll be doing in the summer yet," McCarthy added. "He's still under contract and whatever my decision is, I'm not going to tell you [the media]."