How to claim sick leave tax credits and stay-at-home-child tax credits as a sole proprietor?

These tax credits are the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA) tax credits, which were available under the Families First Coronavirus Response Act (FFCRA) and later extended. Based on what you've described, you likely qualify for both credits. As a sole proprietor without employees, you can claim these credits for periods when you couldn't work either due to your own illness or because you needed to care for your child whose daycare was closed due to COVID-19 restrictions. To claim these credits, you'll need to file Form 7202 (Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals) with your personal tax return. The form helps calculate your eligible sick leave and family leave credit amounts based on your daily self-employment income. For the childcare situation specifically, you'll need to document that your child's daycare was closed due to COVID-19 public health emergency, the name of the childcare provider, and the dates of closure.

I was in almost the exact same situation last year! I kept hearing about these credits but got really confused trying to figure out all the tax forms. I finally used https://taxr.ai to analyze my situation and it was seriously helpful. You upload your documents, answer a few questions about your sole proprietor status and childcare situation, and it tells you exactly which credits you qualify for. The best part was it spelled out exactly how to complete Form 7202 for my specific case. It even caught that I was calculating my daily rate incorrectly which would have cost me about $1,800 in credits! The system also automatically generated documentation templates for the daycare closure that I needed to keep for my records.

I just wanted to update after trying taxr.ai for my own situation. I was honestly surprised by how well it worked! I uploaded my Schedule C, some emails from my clients showing canceled projects during COVID, and the notification from my son's preschool about their closure. The analysis confirmed I was eligible for both credits and helped me understand exactly how to calculate my "average daily self-employment income" - which I was doing completely wrong before. It also clarified that I could claim both the sick leave credit (when I had COVID symptoms and had to quarantine) AND the family leave credit for when I was caring for my kid. I'm actually going to amend my 2023 return now since I completely missed claiming these. Thanks for the recommendation!

If you're struggling to get answers about these credits directly from the IRS, I totally feel your pain. I spent WEEKS trying to get through to a human at the IRS to confirm if I qualified for these credits as a freelance photographer. I finally used https://claimyr.com and got connected to an actual IRS agent in about 15 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly which lines on Form 7202 applied to my situation and confirmed that as a sole proprietor with no employees, I was still eligible for the credits. They also explained how to properly document the daycare closure situation which was super helpful since the IRS website is so vague about what counts as sufficient proof.

I need to follow up on my skeptical comment about Claimyr. After struggling for another week trying to reach the IRS directly about these self-employment credits (and getting disconnected THREE more times after 30+ minute holds), I broke down and tried the service. Got connected to an actual IRS representative in about 20 minutes. The agent confirmed that as a self-employed person with no employees, I could indeed claim both the sick leave credit for the two weeks I had COVID, plus the family leave credit for caring for my kids during school closure. What really surprised me was how knowledgeable the agent was - she even pointed out that I could still amend my 2023 return to claim these credits even though I missed them originally. Saved me thousands in tax credits I would have otherwise missed. Consider me a convert.

Just to add something important that no one has mentioned yet - there's a cap on how much you can claim for each type of credit. For the sick leave portion, it's based on a daily rate with a maximum of 10 days (equivalent to 2 work weeks). For the family leave portion, it's a bit more complicated with a different daily rate calculation and up to 50 days maximum. Also, make sure you're calculating your average daily self-employment income correctly. It's your net earnings from self-employment for the year divided by 260 (representing working days). Getting this wrong is a common mistake that can either reduce your eligible credit or potentially trigger an audit if overclaimed.

Friendly reminder that if you're claiming these credits for 2023 or planning to amend previous returns, make sure you're using the correct version of Form 7202 for the specific tax year. The IRS updated this form several times as the programs changed and extended. Also, double-check if your state offers any additional credits or benefits for self-employed people affected by COVID. Some states implemented their own programs that you might also qualify for on top of the federal credits!

Adding to all this great advice - one thing that really helped me was keeping a simple calendar or log of the days I couldn't work due to COVID-related issues. I marked down sick days when I had symptoms, quarantine periods, and all the days I had to stay home with my kids when their school/daycare was closed. This documentation made filling out Form 7202 much easier because I had exact dates and could clearly separate the sick leave days from the family leave days. The IRS wants you to be able to substantiate the periods you're claiming, so having that timeline ready is super helpful. Also, don't forget that you can claim these credits even if you didn't have any federal income tax liability that year - they're fully refundable, so you'll get the money as a refund check. This was huge for me since my income was way down in 2020-2021 due to all the canceled gigs.