Families First Coronavirus Response Act

Families First Coronavirus Response Act: Credits for the Self-Employed

On March 18, 2020, the President signed the Families First Coronavirus Response Act (Coronavirus Response Act) which increases funding for various programs and addresses paid sick and family leave, including tax credits for employers and self-employed persons.

The Coronavirus Response Act requires employers with fewer than 500 employees to provide paid sick leave to employees who are forced to stay home due to quarantine, the care for a family member (qualified sick leave) or to care for a child if the school or place of care is closed (qualified family leave).

Sick leave wages paid by an employer to an employee, may receive a refundable credit against its share of either the OASDI or the RRTA portion (as applicable) of the payroll tax. A separate refundable payroll tax credit applies for family leave wages paid by an employer under the Coronavirus Response Act.

The Self-employed may benefit from the sick and family leave credits as if they were an employee of an employer. The credits are allowed against regular taxes.

Credit for Qualified Sick Leave

The limit on sick leave wages is determined by multiplying the number of days the self-employed person is unable to perform services in their trade or business by the lesser of 67% of the taxpayer’s average daily self-employment income, or $200. The number of days is limited to 10 for the tax year.

The limits are increased to 100% and $511. Respectively if the self-employed person is unable to perform services for the following reasons:

• Subject to a federal, state or local quarantine or isolation order related to COVID-19;
• A health care provider advise to self-quarantine due to concerns related to COVID-19; or
• Experiencing symptoms of COVID-19 and seeking a medical diagnosis.

The amount of the sick leave credit is reduced by any sick leave wages the taxpayer might receive as an employee which exceed $2,000 ($5,110 in the case of any day covered for the three reasons described above).

Credit for Qualified Family Leave

The same calculation is used for family leave wages. It is multiplied by the lesser of 67% of your average daily self-employment income, or $200. The number of days is limited to 50 for the tax year. The amount of the family leave credit is reduced by any family leave wages in excess of $10,000 that’s received.

Average Daily Self-Employment Income

The average daily self-employment income is defined as the amount of net earnings from self-employment for the tax year divided by 260. These credits expire on December 31, 2020.

Please call our office to discuss the details of how these tax benefits may help you through a difficult time. You can stay update to date on important information by signing up for our newsletters.  You can also Follow CD Tax on Facebook!