The coronavirus pandemic left many hard-working Americans in a difficult place financially in 2020. Not only did people lose their jobs as a result of business shut-downs, but many self-employed workers found themselves struggling as well. Even those who remained employed often ran into trouble when they were forced to stay home and quarantine after a potential COVID exposure or care for somebody else in the household who had been diagnosed with COVID.
To help individuals and families offset lost wages under these circumstances, the Families First Coronavirus Response Act expanded emergency paid sick leave eligibility to many working Americans. This includes those who are self-employed. If you’re self-employed and had to take any time away from your work due to COVID in 2020, you could be eligible for a tax credit.
Specifically, these emergency paid sick leave credits allow self-employed workers to claim the equivalent of up to 10 working days of lost income.
Who is Eligible to Claim Emergency Paid Sick Leave?
Emergency paid sick leave through the Families First Coronavirus Response Act is available to part- and full-time employees at companies with fewer than 500 employees, as well as government employees and self-employed individuals. In order to claim lost income, you must have been rendered unable to work due to any of the following circumstances:
- you were required to quarantine due to COVID-related concerns
- you had symptoms of COVID and had to take time away from work to get tested/diagnosed (even if the test came back negative)
- you had to miss work to care for somebody else in your household who was quarantined or had COVID symptoms
What You Need to Know Before You File
If you think you may be eligible for this tax credit, there are some things you should know before you file. For starters, you’ll need to complete and submit IRS Form 7202 with your taxes for 2020. This form will walk you through how to calculate the amount of your credit.
For self-employed workers, your credit will typically be equal to the number of days you had to miss work multiplied by your average daily income. This number is calculated based on your gross income for the prior tax year divided by 260. For example, if you average an income of $250 per day and had to miss five days of work, your credit will be calculated at $1,250.
Keep in mind, also, that this credit is only available for the 2020 tax year. Any “sick days” or income lost under these circumstances beginning on January 1, 2021 is not eligible.
Feeling Overwhelmed By Self-Employed Taxes?
Emergency paid sick leave credits for self-employed workers can help to offset costs related to lost wages during the COVID pandemic. Still, if you’re feeling overwhelmed by Form 7202 or any other aspect of filing your taxes as a self-employed worker, it may be best to work with a professional. You can contact the Counting House Associates team anytime to get the help you need with your taxes!