I am writing about potential COVID-19 sick and family leave tax credits you may have overlooked on your 2020 tax return. You might be eligible for up to $15,110 in tax credits, and the good news is it’s not too late to claim them.
If you’re self-employed or running a corporation, there’s a chance you failed to claim the family leave credits on your 2020 tax return. The IRS allows amended tax returns, so you can claim the credits today. Please be aware that the timeline for submitting an amended return is limited, and it is essential to act promptly.
To realize the maximum of $15,110 in tax credits, you need to meet the following requirements:
- Adequate 2020 income ($143,866 of net income if self-employed or equivalent W-2 income if an employee of your corporation).
- An inability to work in 2020 due to COVID-19.
- A son or daughter either under age 18 or incapable of self-care because of a mental or physical disability.
The law divides the credits into two categories:
- Up to $5,110 for individuals unable to work due to COVID-19-related reasons.
- Up to $10,000 for individuals who cared for a child due to COVID-19.
If you are self-employed and qualify, you can claim the credits by amending your 2020 tax return and filing a completed 2020 Form 7202 (Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals) along with IRS Form 1040-X.
For corporation owners, if your corporation paid you while you were not working due to COVID-19, your corporation may qualify for sick or family leave tax credits. If your corporation has not claimed the credits in its 2020 returns, it can amend its payroll tax returns using Form 941-X. Please note that there’s a three-year statute of limitations for correcting payroll tax overpayments on Form 941-X, which for 2020 expires on April 15, 2024.
Also, please be aware that you cannot receive double benefits. If you received assistance through the Paycheck Protection Program (PPP), the Employee Retention Credit (ERC), or similar programs, you cannot claim the same self-employed income or employee wages for the COVID-19 sick and family leave credits.
