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New IRS Form: Sick and Family Leave Tax Credits for the Self-Employed

New tax credits will now be available to self-employed individuals who need to take family and sick leave. The recent Families First Coronavirus Response Act or FFCRA makes this provision available.
The Internal Revenue Service (IRS) has introduced a form to help claim the tax credits.

Form 7202

The new IRS Form 7202 (Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals) can help eligible self-employed individuals determine tax credits for qualified family and sick leave. Eligible self-employed taxpayers can claim the tax credits on their 1040 forms for 2020 for leave taken between April 1 and December 31, 2020. For leave taken from January 1 to March 31, 2021, self-employed individuals must claim the credits on their 2021 1040 form.

What Is the FFCRA?

In March 2020, Congress passed the FFCRA, or Families First Coronavirus Response Act. This legislation allows eligible self-employed individuals to claim refundable tax credits if they cannot work remotely or cannot work for health reasons. These reasons may relate either to their own health or to the health of a family member.

Who Can Claim This Tax Credit?

In order to claim this tax credit, individuals must conduct either a business or trade that qualifies as self-employment income. They must also be eligible to receive qualified family leave or sick leave wages under the terms of the Emergency Paid Sick Leave Act, which treats self-employed taxpayers as employees. Taxpayers must maintain sufficient documentation that establishes their eligibility to receive these new tax credits.

How Do I Claim the New Tax Credit?

The IRS has provided instructions on its website to help eligible individuals claim this tax credit. The website has information for claimants to complete the 7202 form, including all the details required to calculate the amounts for qualified family and sick leave equivalents.
For questions or more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).

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