Is the FFCRA Too Good To Be True? A Guide for Self-Employed Individuals
The Families First Coronavirus Response Act (FFCRA) has played a crucial role in aiding employees affected by the COVID-19 pandemic. However, what about self-employed individuals? Are they eligible for FFCRA benefits, or is it just free money from the IRS? Let's delve into the details.
Here’s what you need to know.
A Brief Overview of the FFCRA
Enacted on March 18, 2020, in response to the COVID-19 crisis, the FFCRA aimed to provide essential assistance and relief to workers impacted by the virus. It mandated certain employers to offer paid sick leave and expanded family and medical leave to address COVID-19-related situations affecting employees.
Understanding FFCRA Benefits for Self-Employed Individuals
Initially focused on employees under covered employers, recent expansions by Congress now allow self-employed individuals to leverage specific FFCRA provisions, including Emergency Paid Sick Leave (EPSL) and Expanded Family and Medical Leave (EFMLA). Eligible self-employed individuals can potentially receive up to $32,220 in tax credits from the IRS.
What's a Tax Credit?
Tax credits act as a refund, reducing current tax liabilities or, for those with a $0 IRS balance, being disbursed via ACH or a paper check, based on eligibility criteria.
FFCRA Eligibility for Self-Employed Individuals
To qualify for FFCRA benefits, self-employed individuals must meet specific criteria, such as being a sole proprietor, freelancer, gig worker, or partner in a partnership. The IRS definition of self-employment must align with your business, and you should have experienced a COVID-19-related circumstance that qualifies for FFCRA leave. Filing a Schedule SE (Form 1040) during 2020 or 2021 is a key indicator of eligibility.
Uncertain about your self-employment status? The IRS defines it as:
Operating a trade or business as a sole proprietor or an independent contractor.
Being a member of a partnership engaged in a trade or business.
Otherwise conducting a business independently, which includes part-time businesses or gig work.
Feeling overwhelmed? We get it; it's complex! To determine eligibility, ask yourself: Did you submit a Schedule SE (Form 1040) in 2020 or 2021? Individuals like hair stylists, gig workers, independent contractors, freelancers, e-commerce owners (Etsy, eBay, Shopify, etc.), food delivery drivers, and rideshare drivers might have filed this.
If you did file a Schedule SE, you might qualify for FFCRA benefits. If not, unfortunately, you can't claim these tax credits.
Additionally, you must meet FFCRA credit criteria and demonstrate that your business suffered income loss due to COVID-19-related reasons.
COVID-19-Related Reasons for Claiming FFCRA
Eligible reasons for missing work due to COVID-19 include quarantine orders, caring for children affected by school closures, experiencing COVID-19 symptoms, seeking medical diagnosis, facing side effects from the vaccine, or caring for someone with COVID-19 symptoms.
Calculating Eligible Paid Leave
Upon establishing eligibility, self-employed individuals can calculate their eligible paid leave based on their average daily self-employment income, a process facilitated by the FFCRA Credits portal.
Documenting Eligibility and Claiming Benefits
Documentation of COVID-19-related reasons, government orders, and healthcare provider communication is essential for a smooth FFCRA application. FFCRA Credits assists in pulling tax data directly from the IRS, streamlining the process.
Okay, This All Sounds Great. What’s the Catch?
While the FFCRA aims to aid businesses during the COVID-19 impact, there are key stipulations:
The filing deadline is approaching: Applications for 2020 relief are due by April 15, 2024, and for 2021 by April 15, 2025.
A $0 balance with the IRS is necessary for check or ACH deposit issuance.
Limits exist: a maximum of 20 sick days and 110 days for family and medical leave.
Only one date can be claimed for each category, with no double-dipping allowed.
Positive tax earnings are required for eligibility, meaning a profit for the claimed year.
Why Would the IRS Just Refund My Taxes?
The government recognizes the pivotal role of small businesses, including self-employed individuals, in the economy. Refunding already paid taxes provides flexibility during COVID restrictions, acknowledging the unique challenges faced by these entities.
The Bottom Line
The FFCRA presents a valuable opportunity for self-employed individuals to access crucial benefits tailored to their recovery from COVID-19 challenges. FFCRA Credits is designed to simplify the filing process and expedite FFCRA refunds for self-employed individuals..