Jonathan Cunningham, CPA
COVID CREDITS FOR 1099 CONTRACTORS, SELF-EMPLOYED AND SMALL BUSINESS OWNERS
Updated: Jun 30, 2021
MAXIMIZING YOUR 2020 STIMULUS & RELIEF FUNDING
2020 was an unprecedented year with an unprecedented Government response including nearly $6T in spending. Much of that spending was targeted at small businesses and self-employed individuals. Eligibility continues to expand. If you are self-employed (or work as a contractor) or own a small business read on to learn about the significant cash benefits you may be entitled to.
(believed current as of 3/6/2021)
Paid Sick Leave
For self-employed persons who were unable to work due to isolation orders or quarantines, or due to experiencing symptoms and seeking care. The paid sick leave credit is the lesser of $511 per day, or 100% of average self-employment income earned in the year.
Credits are available to small businesses who provided COVID paid sick leave to employees.
Self-employed persons who spent up to 10 days caring for someone who was sick with COVID 19 or up to 50 days caring for children whose school or childcare provider were closed or unavailable due to COVID 19. The expanded FMLA credit is the lesser of $200 per day, or 67% of average self-employment income earned in the year.
Credits are available to small businesses who provided FMLA payments to employees.
Employee Retention Credit
Available to all businesses regardless of size. If you file Schedule C or own a business that files 1120-S your W2 wages paid may qualify for the ERC. For 2020, the amount of the credit is 50% of qualified wages up to $10,000 per employee 2020. To be eligible, a business must have experienced a full or partial shutdown or a 50% or greater decline in gross receipts in any one quarter, year over year. ERCs for 2020 can be claimed retroactively in 2021. ERCs are even more generous for the first half of 2021. ERCs are claimed using form 941 (or an amended 941X).
Employers are eligible even if a PPP loan was taken, but wages paid by the PPP are not eligible for the purposes of the credit.
On March 1, IRS released Notice 20-2021 (https://www.irs.gov/pub/irs-drop/n-21-20.pdf) clarifying ERC qualification, calculation, tax treatment and interaction with PPP loans and more.
PPP Second Draw
Self-employed, contractors and small businesses who can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. Effective March 6, SBA is allowing small businesses and contractors who file Schedule "C" to base PPP loans on GROSS income, (Schedule "C" line 7).
Determining eligibility, calculating the amounts, and applying for these credits can get complicated. Despite the complexity, it may be worth it; depending on the details taxpayers may qualify for more than one credit. Collectively, these credits can be worth over $15,000 per employee or self-employed person for tax year 2020.
Contact Cunningham CPA for guidance on Covid ERC, FMLA, PPP and Sick Leave Credits
(858) 771 - 3845