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There are 2 new coronavirus related tax credits for self-employed people. This includes Schedule C and 1065 filers (Earned Income from 1065 NOT Passive).
S Corp and C Corp owners should stop reading here and click this link to read this memo that relates to them. There were also similar Employee Retention Credits in 2020.
Memo – 2021 Employee Retention Credit
These 2 new credits are called Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals
These new credits are reflected on Form 7202. Click here to take a look.
Credit #1 is for Sick Leave. This relates to you. This allows you to take a credit for up to ten days during 2020 that you missed work due to the Coronavirus. Here are the valid reasons to take this credit. The first one will apply to most of you I believe. Please check your 2020 records thoroughly to see if you qualify.
- You were experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- You were subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- You were advised by a health care provider to self-quarantine due to concerns related to COVID-19.
Credit #2 is for Family Leave. This relates to time taken off to care for a child. This allows you to take a credit for up to 50 days during 2020 that you missed work due to the Coronavirus. If you missed work because your child was remote learning, that qualifies. So no one in this instance actually had to have Covid, you just needed to miss work due to Covid.
I will use a $50,000 net self employment income from either a Schedule C or 1065 Partner K1 Flow Through.
Credit #1 is entered in Part 1 of the form and reflects a tax credit, not just a tax deduction, of $1,920, based on a net self-employment income of $50,000. This means this is as if you had made a $1,920 estimated payment.
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Credit #2 is entered in Part 2 of the form and reflects a tax credit, not just a tax deduction, of $6,450, based on a net self-employment income of $50,000. This means this is as if you had made a $6,450 estimated payment.
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So, if you had lost ten days of work due to Covid and had lost 50 days of work to take care of a child due to Covid, then a $50,000 net self-employment income would mean a total of $8,370 in tax credits on your return.
Remember, the moment you have a business or tax question is the moment you should be calling me.
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Please reach out to me without hesitation with any tax, business or
accounting question, and to schedule a consultation.
Tax Laws are complex.
It is very easy to make mistakes that can incur penalties.
Do you have a Tax, Accounting or Business Question?
Call Me Immediately. (732) 673-0510.
Is your CPA or Attorney
ignoring your Phone Calls and Emails?
Call Me Immediately. (732) 673-0510.
Remember,
“If We Aren’t Working For You, Then You Aren’t Working At Your Best”
Chris Whalen, CPA
(732) 673-0510
81 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com
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