COVID Tax Credits For The Self Employed

COVID tax credits for the self employed

In March 2020, the US president signed the Families First Coronavirus Response Act (FFCRA). This law has many facets that affect taxation. Under this law, self-employed people can use the form 7202 to receive a tax credit for their qualified sick and family leave.

The FFCRA allows self-employed people who could not work because of COVID-19 claim refundable tax credits. They can also claim these credits if they lost work while caring for a family member with COVID-19. Tax credits for the self-employed are the equivalent of their qualified family leave or their qualified sick leave.

To meet the qualifications of form 7202, the self-employed individual must:

  •     Perform work that the IRS considers self-employment
  •     Qualify for family leave or sick leave under the Emergency Family Medical Leave Expansion Act or the Emergency Paid Sick Leave Act

It is the taxpayer’s responsibility to keep all documents proving they qualify for these tax credits for the self-employed.

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Is the IRS Collecting Back Taxes during the Pandemic?

Besides the FFCRA, the IRS is taking other steps to help taxpayers affected by COVID-19. They want to make it easy for people to settle their debts with the IRS.

The IRS reviewed how they are collecting taxes. They have made it easier for people who are having a hard time financially to pay their back taxes as a part of the People First Initiative. The IRS will expand this help in the second phase of their plan.

The IRS has always provided options to help people create payment plans for their back taxes. However, the new taxpayer relief initiative is offering more tools.

These tools will specifically help taxpayers who have typically paid their taxes on time. The IRS is offering:

  •     Giving taxpayers 180 days to resolve tax issues instead of just 120 days
  •     Temporarily adjusting the terms of an Offer in Compromise for people who are struggling financially
  •     Allowing taxpayers who hold less than $250,000 to create installment agreements without giving a financial statement or other proof as long as their monthly payment proposal is sufficient
  • Adjusting and lowering direct debit installment agreements using an online payment agreement system. Taxpayers can also adjust their payment plan due date

Tax Credits for the Self-Employed

The IRS is allowing taxpayers to request a temporary delay of collections. If a person can’t afford their taxes, they may be allowed to delay collection until their financial situation improves.

An offer in compromise allows taxpayers to settle their bill for less than what they owe. The IRS has a handy offer in the compromise pre-qualifier tool. The IRS is providing relief from penalties through reasonable cause help and penalty abatement relief.

Is the IRS collecting back taxes during the pandemic? Yes. However, the IRS is being uncharacteristically flexible and is helping taxpayers meet their tax obligations in response to the COVID-19 pandemic.

Taking Advantage of Coronavirus-Related Tax Benefits

COVID-19 has affected the lives of billions of people. The IRS recognizes the impact it has had on taxpayers in the United States. If you are having tax issues, now is not the time to go silent. Interacting with the IRS can be intimidating, but it can be a positive experience if you understand the laws and take advantage of the tax benefits that are currently available, such as the IRS People First Initiative.

At Fusion CPA, we understand how frustrating it can be for self-employed individuals and those who owe back taxes to deal with the IRS. Don’t waste money by not following the right tax guidelines. Our tax planning, bookkeeping, and business advisory services can help you track, organize, and pay your taxes in a timely manner. Learn more about the services we offer by clicking the discovery button below.

This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.