The COVID era was a tough time for people working in all professions, and many individuals lost substantial work and income during that time. If you worked in the real estate industry during COVID, you may have missed out on financial opportunities because of social distancing, quarantining, and sick leave.
But there is some good news! There is a potential avenue to recover your financial setbacks.
The Families First Coronavirus Response Act (FFRCRA) was created in response to the fact that so many Americans lost income during the pandemic, . Its intent is to help people recover those lost wages and keep them living comfortably. Let's delve into understanding how this process works, and whether you may be considered an eligible candidate.
The Families First Coronavirus Response Act (FFCRA) was established in March 2020 to provide paid sick and family leave benefits related to COVID-19. Initially, only companies with W-2 employees were eligible to claim these benefits.
But Congress later expanded the FFCRA tax credit to eligible self-employed individuals. If you are (or were) an independent contractor, you may be one of them. That means you may qualify for up to $32,220 in COVID relief tax credits.
What Constitutes a “Self-Employed” Individual?
Self-employed individuals include freelancers, independent contractors, and gig workers, and are defined as “an individual who regularly carries on any trade or business.” All of the above are now eligible for the FFCRA tax credit IF they had positive net income on their 2020 and/or 2021 1040 SE tax form.
Partners in a partnership carrying on a trade or business are also accepted. Check out Section 1402 of the Internal Revenue Code for further clarification about who is considered “self-employed.”
Eligibility for this tax credit also extends to individuals with LLCs who filed a Form SE and those with W-2 and self-employment income. According to the IRS, real estate agents with a license are considered self-employed for federal taxes if most of their earnings depend on sales or results, not the hours they work.
You can find further resources to help you determine if you are an employee or a self-employed independent contractor on the IRS website.
Understanding the Tax Credit
The FFCRA tax credit is not a tax deduction, but a credit. The entire amount is available, does not need to be paid back, and is not considered a loan. When you receive the tax credit, you are not bound to use it for any specific purposes.
The FFCRA tax credit is divided into two categories:
1. Sick Leave
If you are self-employed and were unable to work due to COVID-19 in 2020 and/or 2021, you may receive up to 10 days of sick leave (up to $510 per day) per tax year if you meet one of the following criteria:
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You were subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
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You were advised by a healthcare provider to self-quarantine due to concerns related to COVID-19.
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You were experiencing symptoms of COVID-19 and seeking a medical diagnosis.
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You were seeking or awaiting the results of a COVID-19 diagnostic test and were exposed to the virus or unable to work pending the results.
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You were obtaining an immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to the immunization.
2. Family Leave
Eligible self-employed individuals may also receive up to 60 days of family leave (up to $200 per day) per tax year if unable to work because of any of these reasons:
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You were caring for an individual who was subject to a Federal, State, or local quarantine or isolation order related to COVID-19 or were advised by a healthcare provider to self-quarantine.
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You were caring for a child if the child's school or place of care had been closed, or the childcare provider was unavailable due to COVID-19 precautions.
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You had to accompany an individual to obtain an immunization related to COVID-19, or you had to care for an individual who was recovering from an injury, disability, illness, or condition relating to the immunization.
How to Apply For the Tax Credit
It’s simple! There are a few ways you can apply for the FFCRA tax credit:
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On your own, amend your 2020 and 2021 tax returns and complete the IRS forms required to obtain the tax credit. However, be careful as the forms can be complicated and – if not completed correctly – will be returned by the IRS. Processing times usually take 20-30 weeks.
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Use a website like www.CovidRebate.com, which includes a handy calculator that helps you determine your tax credit, detailed information about the program, and an online qualification and submission process. They will pull your tax returns from the IRS, have a CPA review your eligibility and submit your returns to the IRS electronically and on your behalf. Expect a check from the IRS in 8-10 weeks from submission.
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Seek a tax professional familiar with the Self-Employed FFCRA Tax Credit. Many tax professionals are familiar with the employer tax- credit, but not all have processed the new self-employed version. Also, confirm if they can submit your paperwork electronically; otherwise, you will be waiting 20 to 30 weeks for a check.
How to Use the Tax Credit
As long as you are not behind on your taxes and you meet all of the criteria laid out on the IRS’ website, you will get a refund check from the IRS. You are allowed to use the money however you want, and it does not need to be paid back. If you owe taxes, then you can use the tax credit to offset your federal income tax.
Tax Credits For the 2020 Tax Year Expire in April 2024
Be sure to apply for your FFCRA credit as soon as possible before the program expires in April 2024, because IRS processing can take some time.
Tell Your Family and Friends
The FFCRA tax credit is not limited to the real estate industry. So, if you have any family or friends who are also self-employed, please spread the word and encourage them to apply for the tax credit - provided they meet all of the IRS’ criteria. They could be eligible too!
The content provided on this website is deemed accurate at the time of creation.
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