Tax Write-Offs and Credits for the Self-Employed Amidst COVID
Jan 30, 2021 08:01PM ● By Viviane Thompson
COVID-19 has impacted all of us, but when it comes to taxes, new and/or temporary rules have multiplied, most very complicated and often not widely understood or publicized. It may not be all that well known, but self-employed persons can get additional tax breaks.
First, the pandemic unemployment assistance program (PUA) has been reworked and extended. As a self-employed person, one may qualify, therefore they should contact the AZ Department of Economic Security for more information on benefits. Remember, payments received as unemployment are taxable income, so it is smart to plan on potential tax impact.
The second part of the law, both in the original and the new one, provides tax credits for the self-employed for family and medical leave, which cover the cost of: taking time off due to COVID-19 (being sick), taking care of a family member with COVID, or being unable to work because a child’s school/daycare is closed due to the pandemic.
The credits available have fairly complicated rules (unfortunate, though not surprising). However, they are very much worth researching and calculating the amounts available. As with every tax law, there are rules and maximums as to how much one can take as a credit, how many days would qualify and what is needed to prove that one qualifies for them.
Those who think they do qualify should add these on their 1040, either by telling a CPA or tax professional or by filing the right form on their tax return personally. The form is called “Credit for Sick Leave and Family Leave”, or form 7202.
And of course, there is the Payroll Protection Program (PPP). The new law has added several changes to the requirements and rules including how the PPP is taxed and what other credits are available. Those people who have employees, regardless of PPP, may be entitled to some tax refunds that are worth spending time investigating.
Note that the laws affecting our taxes due to COVID are fluid, meaning that changes could still occur, therefore it is wise not to rush into filing a 2020 tax return. The IRS has a huge backlog of mail to still deal with from the original shutdown in March 2020, so amending a return due to new tax laws in order to get additional refunds will be delayed, as it will take months (or more) to be processed.
Viviane Thompson is a CPA at Thompson Accounting Company, in Tucson. It might be time to work with a CPA. Contact Thompson Accounting for a safe appointment, either through Zoom or on their outside patio. Call 520-822-8208. See ad, page 22.
Thompson Accounting Company, PLLC - 1643 N Alvernon Ste 104, Tucson, AZ
BUSINESS SERVICES: Tax and accounting CPA practice specializing in small business accounting, QuickBooks, and bookkeeping, payroll, taxes, and business advice. We are four very experience... Read More »
