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- Self-employed people may qualify for up to $15,110 in refundable tax credits for sick and family leave.
- You can qualify for these credits even if you have a day job on top of your self-employment income.
- You could end up with a check or ACH deposit from the government in the form of a tax refund.
- Visit Personal Finance Insider for more stories.
As a self-employed person, tax season is usually stressful. Not only do you have to keep documentation for every last penny you earn and spend on your business, but you have to hope that you estimated your quarterly taxes properly throughout the year. Otherwise, you might owe.
This year, I was a little less stressed about tax season, even though I'm self-employed. 2020 was a slow year for my business, and I felt confident that not only would I not owe any money, I may even receive a refund.
As I made my way through the tax code for a very atypical tax season, I was shocked to stumble across a refundable credit that boosted my refund by nearly $9,000.
Even better news? If you're self-employed, odds are high that you qualify for this new tax credit, too.
What you need to know about Credits for Sick and Family Leave for the Self-Employed
IRS Form 7202 allows you to file for Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. Essentially, if you worked for an employer this year, you might have been eligible for paid sick and family leave due to the coronavirus. But if you're self-employed, you didn't get those same benefits.
The federal government decided to make up for this through two refundable tax credits, which can total up to $15,110.
Who qualifies to file Form 7202?
In order to file Form 7202, you must have self-employment income. Sole proprietors, those who operate an LLC, those who are in a business partnership, and others who typically have to file a Schedule C along with a Schedule SE qualify as having self-employment income. Those who have their businesses set up as an S Corp and pay themselves as employees do not.
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Michele Cagan, CPA and member of Insider's tax review board, says she is more worried about people who do qualify for the credit not claiming it than she is about the proportionately small number of people who may not qualify.
"You might have self-employment income and don't realize it," Cagan says. "If you get issued a 1099 because you drive for Uber or DoorDash, you could qualify. Or if you started freelancing in 2020 because you got laid off, you'd be eligible."
How much money can I get back?
The maximum credit you could potentially qualify for is $15,110. However, Form 7202 includes two separate credits, each with their own criteria.
Credit for sick leave
To claim credit for sick leave on Part I of Form 7202, you will need documentation proving that you missed days of work because of COVID-19. Acceptable reasons for missing work include:
- Federal, state, or local quarantine or isolation orders made it impossible to work
- A healthcare provider told you to self-quarantine because of COVID-19 concerns
- You suspected that you might have COVID-19 and were awaiting a medical diagnosis
You can claim a max of 10 sick days with this credit. If you don't have 10 sick days, you can add any days that you missed work due to:
- Caring for someone who was subject to a federal, state, or local quarantine or isolation order
- Caring for someone who was quarantining because of a presumed or confirmed COVID-19 diagnosis
- Your child's school or daycare was shut down and you had to provide childcare services. Your child must be under the age of 15
Cagan notes that if you were able to telework, you might not be able to claim a sick day unless your symptoms were so severe you could not work — not even from home.
However, if you missed work due to caring for someone else — including cyber-schooling children — you cannot be reasonably expected to work, even if telework opportunities were available. You were busy performing childcare services. These days do count towards the credit.
You can receive a credit of up to $511 for each eligible sick day for a total max benefit of $5,110.
Credit for family leave
To claim credit for family leave on Part II of Form 7202, you will need to document days that you missed work because your child's school or childcare facility was unavailable due to COVID-19. If you already counted a day for Part I, you cannot claim it again in Part II.
You can claim up to 50 days with this credit, for a max benefit of $200 per day or $10,000 total.
For both of these credits, you can use either 2019 or 2020 net self-employment income in your calculations. Whichever year you earned more, that's the year that you'll use to calculate your credit.
What if self-employment is my side hustle?
Let's say your drive for Lyft as a side hustle. You also have a day job. You're still eligible to claim these credits. But if your day job has already given you paid sick leave specifically for COVID purposes, it will count against the credit you can potentially claim on Form 7202.
To find the amount your employer paid you for COVID-related sick and/or family leave, look to Box 14 on your W-2. This information may also be attached to your W-2 as a separate statement.
Bonus for married couples
If you and your spouse are both self-employed, you can both claim this credit. Cagan says whether you file joint or separately, you should each fill out your own individual Form 7202. If you both qualify for the maximum credit, you could potentially have up to $30,220 knocked off your tax bill. If you don't owe that much, any remainder would go back in your pocket in the form of a tax refund.
The importance of documentation
Cagan stresses that if you claim these credits, you must maintain documentation proving the days you missed and the reasons why. Examples of documentation might include:
- Email correspondence with your doctor or healthcare professionals.
- Documentation from any COVID-19 testing.
- Records showing that your child's school or daycare center was indeed closed
"I suspect that maybe three years from now they will come back and audit [these credits]," says Cagan. "You need to substantiate it. Make sure you've got paperwork, and know that there's never a time limit if the IRS suspects fraud."
The need for documentation should not scare you away from filing for these credits. 2020 was a turbulent year, and if you're self-employed, you should file. Because you're probably eligible for a lot of money.
"Millions of people have had COVID," Cagan stresses. "Millions. And if they're self-employed, they're eligible."
Brynne Conroy Brynne Conroy is the owner and creator of Femme Frugality — a women's finance blog which has been a Plutus Awards finalist for three years running. She is also the author of "The Feminist Financial Handbook," which has been called "revolutionary" and "a unicorn among finance books."Her freelance writing has been featured in respected print and online publications where she looks beyond the dollars and cents to examine both the systemic and psychological flashpoints that determine the state of Americans' finances. Read more Read lessEditorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards.
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