8895 Tax Form for Sick and Family Leave Credits

Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, was a tax relief measure for self-employed individuals whose work was impacted by the COVID-19 pandemic. This form allowed sole proprietors and other self-employed persons to claim refundable credits for periods they were unable to work. These credits were temporary and only applied to leave taken from April 1, 2020, to September 30, 2021. While they cannot be claimed for the current tax year, eligible taxpayers can still claim them for the 2021 tax year by filing an amended return.

Eligibility for the Credits

To claim these tax credits, an individual must have been an eligible self-employed person. This meant regularly carrying on a trade or business, which includes sole proprietors and partners in a partnership. The requirement was that the individual would have been eligible for paid leave under the Families First Coronavirus Response Act (FFCRA) if they had been an employee. An individual could not claim the credit for any day they also received sick or family leave wages from an employer, and they must have been scheduled to work on the days for which the credit is claimed.

The reasons for taking leave had to fall under specific COVID-19 related circumstances:

• Being subject to a government quarantine or isolation order
• Being advised by a healthcare provider to self-quarantine
• Experiencing COVID-19 symptoms and seeking a medical diagnosis
• Caring for an individual under a quarantine order or caring for a child whose school or place of care was closed due to the pandemic

Calculating the Credits

The calculation requires your net earnings from self-employment, a figure determined from Schedule SE (Form 1040). First, determine your average daily self-employment income by dividing your total net earnings for the tax year by 260. For example, if your net earnings were $52,000, your average daily income would be $200. This daily income figure serves as the baseline for calculating both the sick and family leave credits.

The qualified sick leave credit calculation depends on the reason for the leave. If you were unable to work due to your own quarantine, isolation, or symptoms, the credit is the lesser of $511 per day or 100% of your average daily self-employment income. If you were caring for someone else, the credit is the lesser of $200 per day or 67% of your average daily income.

For the qualified family leave credit, the calculation is based on days you were unable to work because you were caring for a child whose school or care provider was unavailable. The credit for these days is the lesser of $200 per day or 67% of your average daily self-employment income.

The sick leave credit was capped at a maximum of 10 days for the period between April 1, 2020, and March 31, 2021, with a separate 10-day limit for the period from April 1, 2021, to September 30, 2021. For family leave, the credit could be claimed for up to 50 days for leave taken from April 1, 2020, to March 31, 2021, with a maximum credit of $10,000, and for an additional 60 days in the subsequent period.

Claiming the Credits by Amending a Return

Since these credits were for leave taken in 2020 and 2021, they can no longer be claimed on a current tax return. The deadline to amend a 2020 tax return for these credits has passed for most taxpayers. For the 2021 tax year, you can file an amended return (Form 1040-X) to claim these credits, but you must do so by the deadline of April 18, 2025.

To do this, you will first need to fill out the 2021 version of Form 7202. The form is structured into two main parts for qualified sick and family leave. You will use your 2021 self-employment earnings and leave records to complete the form and calculate the total credit amount.

Once you have the completed 2021 Form 7202, you will use that information to fill out Form 1040-X, Amended U.S. Individual Income Tax Return. You will need to adjust your original 2021 tax return information to include the credits and explain the changes. Because these credits were refundable, they could reduce your tax liability to zero, and any remaining credit amount would be paid out to you as a refund.

It is important to maintain thorough records to substantiate your claim. This documentation should include proof of your self-employment, records detailing the dates and hours of your leave, and evidence supporting the qualifying reason for the leave, such as copies of government quarantine orders, notes from a healthcare provider, or notices from your child’s school about closures. These records are necessary in the event the IRS requests verification of your eligibility for the credits.