Covid-19 Stimulus Payments and Tax Relief for the Self-Employed

A self-employed man delivers items to a customer while practicing social distancing

This article was last updated on April 7, 2020, at 12p.m. EST.  

Self-employed individuals make up an important part of the American workforce today, and many have lost income or their jobs entirely as a result of the COVID-19 outbreak.  “Self-employed” refers to anyone who earns income but is not employed in the traditional sense. Gig workers, freelancers, small business owners, and independent contractors are considered self-employed. 

The benefits and relief efforts described in this article apply to people in all different industries: landscapers, photographers, musicians, hairstylists, rideshare drivers, childcare workers, tutors, and more.   

New refundable tax credits   

The tax credits described here are part of the Families First Coronavirus Response Act, signed into law on March 18, 2020.  

Qualified sick leave 

If you have had to take sick leave from your job for your own health or to care for a member of your family, you could receive a refundable tax credit to help make up for your loss in income. For the sick leave credit, you can claim: 

  • up to ten days of sick pay at your average rate (maximum value: $511 per day) if you are quarantined due to coronavirus  
  • up to ten days at two-thirds your average rate (maximum value: $200 per day) if you are caring for a quarantined family member 

Example:  

Erin works full-time as a tutor. On average, she earns $100 per day of self-employed income. She was ill with coronavirus symptoms for six days in March, so she couldn’t teach students online like she had been doing. 

$100 x 6 days = $600 refundable tax credit

 When Erin files her 2020 taxes, she can claim a refundable tax credit worth $600 for sick leave. 

Qualified family leave 

In addition to this, you may be able to claim a refundable tax credit for family leave. In this case, if you’re unable to send your child to school or daycare because the facility closed, you may claim up to 50 days of income, at two-thirds the rate you would typically earn (maximum value: $200 per day).  

For example, let’s say you earn $100 per day on average working multiple side gigs. Suddenly, due to the coronavirus, your child cannot attend school for the next two months. With the family leave credit, you can claim two-thirds your income for 50 days.  

$100 x 2/3 = $66.67 

$66.67 x 50 days = $3,333 refundable tax credit 

Note: Because these credits are refundable, if the credit you are claiming is worth more than your tax bill, the government will give you back the difference in your tax refund. 

“Will I get these credits if I file my 2019 taxes now?” 

No. These credits will apply when you file your 2020 tax return (in 2021).  

“How can I use these credits to cover my expenses now?”

According to the IRS, you can take into account these credits when you are planning for your federal estimated tax payments. Your self-employment tax will be reduced by the amount of credit you qualify for. And since you won’t owe as much for tax later, that may free up some funds for you to use now.

How do I know what my average daily income is?

To calculate your average daily earnings, start by adding up all the income you earned for the year. This number is your gross income. Now subtract any ordinary and necessary expenses you paid during the year. This new number is your net income. Divide your net income by 260 to find your average daily income.

“What will I need to show to get these credits? 

The IRS will undoubtedly require some type of record proving that you are eligible to claim this credit. The Secretary of the Treasury will establish what that will be. In the meantime, it’s a good idea to keep track of any records you receive related to virus testing, medical care, and school closures for yourself and affected family members. 

Extended tax deadlines 

The due date to file and pay your 2019 taxes has been extended to July 15, 2020. You now have additional time to submit your return and pay any remaining liability.  

Due to the COVID-19 outbreak, the first quarterly estimated payment deadline for self-employed taxpayers has also been delayed. The quarterly tax payment due dates for 2020 are now as follows: 

Quarter  Payment Period Due Date 
Q1 January 1 – March 31 *July 15, 2020* 
Q2 April 1 – May 31 June 15, 2020 
Q3 June 1 – August 31 October 15, 2020 
Q4 September 1 – December 31 January 15, 2021 

“Should I wait to file my 2019 taxes?” 

That depends. The IRS is urging people who are expecting a tax refund to file as soon as possible, even though the deadline has been extended. This is because tax refunds are being issued normally, and if you are owed a refund, you should not wait to get your money.  

But if you have a tax liability that you cannot afford to pay right away, the extra time is meant to help you. It might make sense to file your return now and schedule your tax payment closer to the filing deadline. As long as you pay your income tax bill before July 15, you will not face a penalty. 

TaxSlayer’s got your back. File your 2019 tax return now with TaxSlayer Self-Employed.

CARES Act stimulus checks 

The U.S. government is sending Americans a one-time payment of up to $1,200 per eligible adult, plus $500 for each qualifying dependent. They will use your AGI and your tax filing status to determine how much you should receive. 

How to get a stimulus payment

Most people don’t need to take any action to get a stimulus check. The government will look at your 2019 tax return (the one you filed this year) to decide how much you are eligible to receive. If you haven’t filed yet for 2019, they will look at your 2018 return.  

The stimulus payments will be delivered the same way you receive your tax refund. If the IRS has your direct deposit information on file from your tax return, then your payment will be deposited in that bank account. Otherwise, you can expect a mailed check delivered to the address on your tax return. Learn more 

“How much stimulus money can I get if I’m self-employed?” 

If your AGI is under $75,000 and you file as single, you can receive $1,200. If you file jointly with your spouse and your combined AGI is less than $150,000, then you could each get $1,200. You could also receive an additional $500 for each dependent you claim, under age 17. 

To estimate your expected amount, use TaxSlayer’s stimulus check calculator.