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The IRS has created several tax credits for small business to help them deal with the impacts from the COVID-19 pandemic. Credits related to offering sick pay and family leave due to COVID-19 are reported on IRS Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals

Per IRS Instructions for Form 7202, page 1:

The Families First Coronavirus Response Act (FFCRA), as amended by the COVID-related Tax Relief Act of 2020, is intended to help the United States combat COVID-19 by providing small and midsize employers refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. The FFCRA extends to self-employed individuals equivalent refundable tax credits against net income tax.

Eligible self-employed individuals are entitled to claim qualified sick and family leave equivalent credits. To be an eligible self-employed person, both the following must be true.

  1. You regularly carried on a trade or business within the meaning of section 1402.
  2. You would have been:
    1. Eligible to receive qualified sick leave wages under the Emergency Paid Sick Leave Act if you had been an employee of an employer (other than yourself), and/or
    2. Eligible to receive qualified family leave wages under the Emergency Family and Medical Leave Expansion Act if you had been an employee of an employer (other than yourself).

Each eligible self-employed individual must file a separate Form 7202. If filing a joint tax return and both spouses are eligible self-employed individuals, each must attach a separate Form 7202 to the joint tax return.

You must maintain appropriate documentation to show that you are an eligible self-employed individual.

Regularly carried on a trade or business. An individual regularly carries on a trade or business for purposes of being an eligible self-employed person if he or she carries on a trade or business within the meaning of section 1402, or is a partner in a partnership carrying on a trade or business, within the meaning of section 1402. For more information, see sections 1402(c) and 1402(h).

To enter in TaxAct:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Other Credits in the Federal Quick Q&A Topics menu to expand, then click Other Credits.
  3. Click Certain Self-Employed Individuals - Form 7202
  4. The program will proceed with the interview questions for you to enter the appropriate information.

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