By: Olivia M. Seneca, MBA
The Internal Revenue Service recently announced the release of Form 7202 for eligible self-employed individuals to claim sick and family leave tax credits under the Families First Coronavirus Response Act (FFCRA). Today we will discuss how qualified self-employed taxpayers can claim tax credits under FFCRA.
The Department of Labor issued the temporary provision under the Families First Coronavirus Response Act on April 1, 2020. The FFCRA requires covered employers to provide eligible employees with expanded sick or family and medical leave for reasons related to COVID-19.
You can read more about the details of the FFCRA at our COVID-19 Tax Resource Center.
In short, covered employers are certain public and private employers with fewer than 500 employees. Eligible employees are employees of covered employers that have been employed for at least 30 days. Time granted to eligible employees are based upon full-time or part-time status at the time of requested leave.
The FFCRA provides that employees are eligible for the following:
- Two weeks (10 days) of paid sick leave at the regular rate of pay due to medical diagnosis, COVID-19 symptoms, or if an employee needs to quarantine.
- Two weeks (10 days) of paid sick leave at two-thirds the regular rate of pay due to being unable to work, to care for another, subject to quarantine, or a child whose school or care provider is unavailable for reasons related to COVID-19.
- Up to an additional 10 weeks (50 days) of paid expanded family and medical leave at two-thirds the regular rate of pay where the employee is unable to work to care for a child whose school or care provider is unavailable for reasons related to COVID-19.
Small businesses with fewer than 50 employees may qualify for an exemption from the requirement to provide leave if the requirements will jeopardize the business as a going concern.
Self-employed individuals also qualify for sick and family leave credits under FFCRA, however they must file Form 7202 to claim the benefit.
Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals was created so self-employed taxpayers can utilize tax credits under the FFCRA. To be eligible to file self-employed individuals must:
- Conduct a trade or business that qualifies as self-employment income
- Be eligible to receive qualified sick or family leave wages under the Emergency Paid Sick Leave Act as if the taxpayer were an employee of an employer other than themselves
NOTE - Taxpayers who file jointly, where both spouses have eligible self-employment income, must each attach a separate Form 7202 to their Form 1040. Full instructions for Form 7202 can be found here.
FFCRA Tax Credit Details
Credit for Eligible Employers for Sick and Family Leave
The maximum refundable tax credit for sick and family leave is $15,110 per taxpayer, $30,220 for married couples. To receive the maximum credit a taxpayer would need to qualify for the maximum amount of days for sick (10) and family leave (50) and have self-employment income more than $132,860 ($511*260), and not have received compensation for qualified sick or family leave under FFCRA from an employer. Once the applicable credits have been calculated on Form 7202 they are included on Form 1040 Schedule 3, line 12b.
Important Note: Any FFCRA credit(s) due to a self-employed individual are reduced by qualified sick or family leave under FFCRA received from a third-party employer. Reference Form W2 Box 14 and Form 7202 Instructions for more information.
We will continue following developments and guidance surrounding The Families First Coronavirus Response Act and provide updates as they become available via our COVID-19 Tax Resource Center.