Instructions for Form 7202 for Self-Employed People
Understand how to claim prior-year tax credits with Form 7202 if you were self-employed and took sick or family leave during 2020 or 2021.
Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, was a tax form for the 2020 and 2021 tax years. It allowed eligible self-employed individuals and independent contractors to claim refundable tax credits for income lost when they were unable to work for reasons related to the COVID-19 pandemic. These benefits were similar to those offered to employees under the Families First Coronavirus Response Act (FFCRA). This form is now obsolete but can be used for amended returns for 2020 and 2021.
Determining Your Eligibility for the Credits
To claim these credits, an individual must have been self-employed with net earnings from a regularly carried on trade or business. The credits were only available for leave taken during specific qualifying periods. The initial period was from April 1, 2020, to December 31, 2020. For 2021, the credits were available for two separate periods: January 1 to March 31, and April 1 to September 30. If an individual received sick or family leave wages from an employer, they could not claim these credits for the same period.
Sick Leave Credit Qualifications
The sick leave credit could be claimed if an individual was unable to work or telework for specific health-related reasons. An individual qualified if subject to a federal, state, or local quarantine or isolation order related to COVID-19. They also qualified if advised by a healthcare provider to self-quarantine or if they were experiencing COVID-19 symptoms and seeking a medical diagnosis.
Family Leave Credit Qualifications
The family leave credit addressed situations where an individual had to care for others. A person was eligible if unable to work while caring for an individual subject to a quarantine order or advised to self-quarantine. Eligibility also extended to caring for a son or daughter whose school or place of care was closed, or whose child care provider was unavailable, due to COVID-19 precautions.
Information and Documentation to Gather
To complete Form 7202, you need your net earnings from self-employment for the tax year, found on Schedule SE (Form 1040). You also need the specific dates you were unable to work and the qualifying reason for each of those days.
You must maintain records to substantiate your claim, though they are not submitted with your return. This documentation includes copies of government quarantine orders, written advice from a healthcare provider to self-quarantine, or notices from a school or child care facility about closures.
Calculating the Credits A Line-by-Line Guide
The credits are calculated using an average daily income based on your self-employment earnings. This is determined by dividing your total net earnings by 260 and serves as the basis for both credit calculations.
Part I – Credit for Sick Leave
The daily credit amount depends on the reason for your leave. If you were sick or quarantining, the credit is the lesser of your average daily income or $511 per day. If caring for someone else, the limit is the lesser of two-thirds of your average daily income or $200 per day. This credit is capped at 10 days, and for 2021, this limit reset for the period starting April 1.
Part II – Credit for Family Leave
The daily family leave credit is limited to the lesser of 67% of your average daily income or $200 per day. For 2020, the credit was capped at 50 days with a maximum of $10,000. For January 1 to March 31, 2021, the 50-day limit was reduced by any family leave days claimed in 2020. A new limit of 60 days and a $12,000 maximum was available for April 1 to September 30, 2021.
Total Credit
The sick leave and family leave credits are added together to determine your total refundable credit. This final amount is then transferred to your main tax return, Form 1040.
How to File Form 7202
The total credit from Form 7202 is carried over to Schedule 3 (Form 1040). For 2020 returns, the amount was entered on line 12b. For 2021, the credit for leave from January 1 to March 31 was reported on line 13b, and the credit for leave from April 1 to September 30 was on line 13h. The completed Form 7202 must be attached to your Form 1040.
If you were eligible but did not claim these credits on your original 2020 or 2021 return, you can file an amended return using Form 1040-X. You must complete Form 7202 for the appropriate year and attach it to your Form 1040-X. The deadline to amend a return is three years from the date you filed the original.