A new form is available for self-employed individuals to claim sick and family leave tax credits under the Families First Coronavirus Response Act (FFCRA). The FFCRA, passed in March 2020, allows eligible self-employed individuals who, due to COVID-19, are unable to work or telework for reasons relating to their own health or to care for a family member to claim refundable tax credits to offset their federal income tax.
Self-employed individuals who are eligible for the credits determine their qualified sick and family leave equivalent tax credits by using a new IRS form, Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. The tax credits are equal to either their qualified sick leave or family leave equivalent amount, depending on circumstances.
For leave taken between April 1, 2020, and December 31, 2020, taxpayers can claim the credit on 2020 tax returns (on Form 1040). They can also claim the credit next year when filing their 2021 tax return (Form 1040) for leave taken between January 1, 2021, and March 31, 2021.
Filing Form 7202
Eligible self-employed individuals are those who:
- Conduct a trade or business that qualifies as self-employment income, and
- Are eligible to receive qualified sick or family leave wages under the Emergency Paid Sick Leave Act or Emergency Family and Medical Leave Expansion Act as if the taxpayer was an employee.
As always, taxpayers must maintain appropriate documentation establishing their eligibility for the credits as an eligible self-employed individual. Please don’t hesitate to call if you need assistance calculating the credit, determining if you are eligible, or have any other tax questions.