Mar 07 COVID-19 Paid Leave Tax Credits for Self-Employed Individuals

Are you self-employed? If so, you may be eligible for a refundable tax credit of up to $511 per day.

Self-employed individuals, including partners who receive a guaranteed payment for services, are eligible for a refundable credit if they are unable to work due to COVID-19. This credit is equivalent to the qualified sick and family leave wage credit available to employers and can be as much as $511 per day.

The sick/family leave credit was first introduced in the Families First Coronavirus Response Act (FFCRA) and covers April 1, 2020, through March 31, 2021. The American Rescue Plan Act (ARP) provides a similar credit for April 1, 2021, through September 30, 2021, and includes vaccination as part of the eligible days taken off work. The credit under the ARP is independent of those under FFCRA. This means that a self-employed individual can receive the sick/family leave twice – once under the FFCRA for April 1, 2020, through March 31, 2021, and again under the ARP for April 1, 2021, through September 30, 2021.

To be eligible, the individual must regularly carry on a trade/ business or be a partner in a partnership carrying on a trade/business. The credit is claimed on Form 7202 and attached to Form 1040.

Under FFCRA, the taxpayer can receive a tax credit for up to 10 days total of sick leave. The amount of the credit will depend on the reason for the leave.

SICK LEAVE TAX CREDIT:

Self-employed individuals can receive a credit of 100% of their average daily self-employment income, up to a maximum of $511/day ($5,111 total) for days they are unable to work due to:

1. Having coronavirus symptoms and are seeking a medical diagnosis;
2. Being subject to a federal, state, or local quarantine or isolation order related to coronavirus, or
3. Have been advised to self-quarantine by a health care provider.

The ARP credit extends the benefit to include those who:

1. Were seeking or awaiting results of a diagnostic test for, or a medical diagnosis of COVID-19;
2. Were exposed to COVID-19 or were unable to work pending results of a COVID-19 test.
3. Were obtaining immunization for COVID-19 or were recovering from receiving immunization.
4. Were accompanying an individual to get immunization related to COVID-19.
5. Were caring for an individual who was recovering from immunization.

In addition, a taxpayer can receive a credit of 67% of their average daily self-employment income, up to a maximum of $200/day ($2,000 total) because:

1. They need to care for a child due to school or childcare closure or available due to coronavirus; or
2. The taxpayer is caring for someone who is subject to a federal, state, or local quarantine or isolation order related to coronavirus or who has been advised by a health care provider to self-quarantine due to concerns related to coronavirus.

FAMILY LEAVE TAX CREDIT

Taxpayers can receive a tax credit for up to 50 days of family leave. The credit is 67% of the average daily self-employment income, up to a maximum of $200/day ($10,000 total) for days unable to  work because:

1. They need to care for a child because the child’s school or childcare has been closed; or
2. Childcare is unavailable due to coronavirus.

If qualified, the taxpayer can take both up to a maximum of 60 combined days. In addition, if income is earned from both self-employment and a traditional job, paid sick or family leave taken from your job for coronavirus-related reasons may count against what you can claim as tax credits.

 

For more information, please reach out to a Sax professional at www.saxllp.com.