Eligible self-employed individuals, including partners in partnerships with SE income, are entitled to claim qualified sick and family leave equivalent credits under the Families First Coronavirus Response Act. To be an eligible self-employed person, both the following must be true.
- You must have regularly carried on a trade or business within the meaning of section 1402.
- You would have been:
- Eligible to receive qualified sick leave wages under the Emergency Paid Sick Leave Act if they had been an employee of an employer (other than the taxpayer) and/or
- Eligible to receive qualified family leave wages under the Emergency Family and Medical Leave Expansion Act if they had been an employee of an employer (other than the taxpayer).
Each eligible self-employed individual must file a separate Form 7202 with their Federal individual income tax return. If a taxpayer is filing a joint tax return and both spouses are eligible self-employed individuals, each must attach a separate Form 7202 to their joint Federal income tax return.
Originally both credits could be claimed until December 31, 2020, but with the passing of the Consolidated Appropriations Act of 2021, the credits have been extended until March 31, 2021. In terms of this blog and reporting the credit on the 2020 tax return, the reference period will be April 1, 2020 through December 31, 2020. The time period of January 1, 2021 through March 31, 2021 would be reported on a 2021 tax return.
Form 7202 is a 2-part form with separate sections for claiming sick leave credits and family leave credits.
In Part I, taxpayers are eligible for a sick leave credit if during the period April 1, 2020 through December 31, 2020:
- They were subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- They were advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- They experienced symptoms of COVID-19 and sought a medical diagnosis.
- They cared for an individual who was subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- They cared for an individual who was advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- They cared for a son or daughter because the school or place of care for that child was closed or the childcare provider was unavailable due to COVID-19 precautions.
The number of days considered for the qualified sick leave equivalent cannot exceed 10 days. The credit calculation is based on earnings from self-employment (line 6, Schedule SE). Taxpayers can elect to use SE earnings from 2020 or 2019. The per-day limit on qualified sick wages due to personal COVID-related issues (bullets 1-3) is $511. The per-day limit on qualified sick wages due to care provided for another (bullets 4-6) is $200.
In Part II, taxpayers are eligible for a sick leave credit if during the period April 1, 2020 through December 31, 2020:
- They were unable to perform services as a self-employed individual because of certain coronavirus-related care provided to a son or daughter whose school or place of care is closed or whose childcare provider is unavailable for reasons related to COVID-19.
The maximum number of days that can be claimed is 50. The credit is limited to $200 per day.
If a day meets the requirements for both the Credit for Sick Leave for Certain Self-Employed Individuals in Part I and the Credit for Family Leave for Certain Self-Employed Individuals in Part II, you can only count the day once. The same day cannot be included for both credits.
Sick and family leave credits are reduced by sick and family leave wages received from an employer.
Documentation
Self-employed individuals should maintain documentation equivalent to that required by employers:
- The date or dates of leave
- A statement of the COVID-19 related reason for leave and written support for such reason; and
- A statement that the taxpayer is unable to work, including by means of telework, for such reason.
In the case of a leave based on a quarantine order or self-quarantine advice, the statement should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the taxpayer, that person’s name and relation to the taxpayer.
In the case of a leave request based on a school closing or child care provider unavailability, the statement should include the name and age of the child (or children) to be cared for, the name of the school (or summer camp, summer enrichment program, or another summer program) that has closed or place of care that is unavailable, and a representation that no other person provided care for the child during the period for which the taxpayer is claiming family medical leave.
Concerning the taxpayer’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances required the taxpayer to provide care.
If you are self-employed and have questions regarding sick and family leave credits, please reach out to your personal Sciarabba Walker contact or email us at info@swcllp.com.