Congress passed the Families First Coronavirus Response Act way back in mid-March. This created a tax credit for Covid-Related Sick Leave and Family Leave (starting April 1st). Most of the attention was on employees and employers; however, these credits were also made available to self-employed individuals to be claimed on one's 2020 income tax return.
To claim the credit, we will need to know the number of days you were unable to work due to either being sick/quarantined between April 1st and Dec 31st OR days you could not work due to child care/school being closed because of Covid. There are (of course) specific (and complicated) requirements including a) no other adult was available to provide childcare (so it can't be claimed by both parents on same day) and b) there is actual work being turned down (vs. work not being available at all--in which case unemployment should/could have been claimed).
Read on for details of the credit and then see this FAQ for answers to inevitable questions you may have.
How to Claim the Credit for Qualified Sick Leave:
You are eligible for the Credit if one of the following inhibits your ability to work/earn money in your self-employed business:
-
you are subject to a federal, state, or local quarantine or isolation order related to COVID-19---this is NOT the same as a stay at home order, but rather needs to be a full quarantine/isolation order;
-
you have been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
-
you are experiencing symptoms of COVID-19 and seeking a medical diagnosis;
-
you are caring for an individual who (i) is subject to a federal, state, or local quarantine or isolation order related to COVID-19, or (ii) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
-
you are caring for his or her son or daughter if the child’s school or place of care has been closed, or the child care provider is unavailable, due to COVID-19 precautions--this FAQ makes it clear that if your child's school gave a choice to go to school or do distant learning, you do NOT qualify;
The qualified sick leave equivalent amount is equal to:
-
the lesser of $511 or 100 percent of the individual’s average daily self-employment income for the tax year for paid sick time described in 1, 2, or 3, above, maximum 10 days credit; or
- the lesser of $200 or 67 percent of the individual’s average daily self-employment income for the tax year for paid sick time described in 4 or 5, above, maximum 10 weeks credit.
Potentially, this credit could be worth $5110 PLUS $10,000 if you qualify for the maximum pay for the maximum days. A sad shortfall of this law (in our opinion) is that this credit is based on 2020 average daily earnings (total earnings divided by 260 "work days"). If you ARE sick or spending a lot of time not working due to child care duties--as well as a myriad of other negative impacting factors to income this year--it will likely lower your average daily earnings and therefore also lower this credit (vs. if they had made it based on "normal" prior year income like some other programs), but it is still worth tracking if it applies to you!
Make sure to keep track of the following to provide to us with your tax info this coming tax season:
- Date and number of days affected between April 1st and December 31st;
- Proof of Doctor or gov't orders to quarantine (self-imposed isolation due to possible exposure isn't good enough--need doctor or gov't order) and/or records that you were going to doctor/testing appointments;
- Name of child/family member affected;
- Name of the School/child care provider and dates closed (if claiming 4 or 5 above); and
- Statement that no other adult was available to provide childcare
- Documentation that work was available but you couldn't perform it: there needs to be an actual loss of available work. You shouldn't double-up on days that you collected unemployment and you also shouldn't claim it if you were still able to tele-work/earn money while in quarantine.
See Specific Provisions Related to Self-Employed Individuals for additional info and FAQs.
|
