Families First Coronavirus Response Act Provides Income Tax Sick Leave Credit for Self-Employed

March 26, 2020

Graves Dougherty Hearon & Moody

The Families First Coronavirus Response Act (the “Act”) provides a refundable income tax credit (including against the taxes on self-employment income and net investment income) for sick leave to a self-employed person which generally works as follows:

1. Self-Employed Sick Leave Credit: For purposes of the credit, the self-employed person is treated as both “employer” and “employee” and by doing so, the self-employed person is eligible for a sick leave credit to the same extent that an employer would earn per the payroll sick leave credit if the self-employed person were an employee.
2. Self-Employed Sick Leave Credit Amount: Accordingly, the self-employed person can receive an income tax credit with a maximum value of $5,110 or $2,000 per the payroll sick leave credit.
3. Decreases to Credit: However, those amounts are decreased to the extent that the self-employed person has insufficient self-employment income determined under a formula or to the extent that the self-employed person has received paid sick leave from an employer under the Act.
4. Self-Employed Sick Leave Credit Period: The credit applies to the following period:
   (a) Beginning on a date determined by IRS that is no later than April 2, 2020, and
   (b) Ending on December 31, 2020.

IRS Information Site: Ongoing information on the IRS and tax legislation response to COVID- 19 can be found here.

Frank L. Leffingwell is a tax attorney in the firm’s Tax Planning & Controversy, Estate Planning, Probate & Trusts, and Real Estate sections.