IRS Passes New COVID-19 Tax Provision to Assist Small Business and Self-Employed Tax Payers

COVID-19 has taken a toll on small business owners, as well as self-employed tax payers. Many have found themselves at the end of the rope, and without stimulus money from the government, may be forced to shut their doors. The IRS recognizes the financial hardship(s) that small businesses and self-employed tax payers suffer stemming from the COIVID-19 Pandemic, and has passed tax provisions designed to ease the pain. The self employed and small business tax payer may be able to take advantage of new COVID-19 related tax deductions.

The Families First Coronavirus Response Act (Pub. L. 116-127), also known as the Family First Act, provides paid sick leave and free coronavirus testing, expanded food assistance and unemployment benefits, and requires employers to provide additional protections for health care workers.

The law also provides the following four types of tax credits for employers and self-employed individuals:

(1) a payroll tax credit for required paid sick leave (¶106,410);

(2) a credit for sick leave for certain self-employed individuals (¶106,420);

(3) a payroll credit for required paid family leave (¶106,430); and

(4) a credit for family leave for certain self-employed individuals (¶106,440).

Some of the above credits may result in a refund. For example, pursuant to section 106,410.40 of the internal revenue code, if the amount of payroll credit for required paid sick leave is greater than limitations prescribed in section 106,410.30 for any calendar quarter, the excess amount could be treated as an overpayment that is refunded to the employer under Code Sec. 6402(a) and Code Sec. 6413(b) (Pub. L. 116-127, Sec. 7001(a)(4)). The self-employed, though not refundable may be eligible for tax credit equivalent to the following:

(1) the number of days during the tax year (but not more than the applicable number of days) that the individual is unable to perform services in any trade or business referred to in Code Sec. 1402 for a reason with respect to which such individual would be entitled to receive sick leave multiplied by

(2) the lesser of (i) $200 ($511 in the case of any day of paid sick time described in Pub. L. 116-127, Sec. 5102(a)(1), (2), or (3)) or (ii) 67 percent (100 percent in the case of any day of paid sick time described in Pub. L. 116-127, Sec. 5102(a)(1), (2), or (3)) of the average daily self-employment income of the individual for the tax year (Pub. L. 116-127, Sec. 7002(c)(1)). See ¶106,405 (“Tax Research Solutions – Parker Tax Publishing “, 2020).

For more information, or to see if you qualify for the aforementioned credit(s) please call advantage Tax Services, Inc. today.

Office: 404-736-6084 Fax: 770-679-8596 Website:

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