• Your adjusted gross income was greater than $99,000 if your filing status was single or married filing separately; $136,500 for head of household; and $198,000 for married filing jointly.
• You can be claimed as a dependent on someone else’s return. For example, this would include a child or student who can be claimed on a parent’s return.
• You do not have a valid Social Security number.
• You are a nonresident alien.
• You filed Form 1040-NR, Form 1040NR-EZ, Form 1040-PR, or Form 1040-SS for 2019.

For more on the economic impact payments, see COVID-19: Important Tax Breaks from the CARES Act.

Small Employer Tax Credits and Payroll Tax Relief to Cover Required COVID-19-Related Paid Leave for Employees (No Double Tax Benefit Allowed)

The FFCRA preceded the CARES Act. The FFCRA grants tax credits and payroll tax relief to small employers—those with under 500 employees—to cover payments that these employers must now make for COVID-19-related emergency sick leave and emergency family leave pursuant to the FFCRA.

Credit for Required Leave Payments

Small employers can collect a federal tax credit equal to 100 percent of required emergency sick leave and emergency family leave payments made pursuant to the FFCRA. But the credit covers only leave payments made during the period beginning on April 2, 2020, and ending on December 31, 2020.

The credit is increased to cover the portion of the employer’s qualified health plan expenses that is properly allocable to the emergency sick leave and emergency family leave wages paid pursuant to the FFCRA.

The credit is first used to offset the Social Security tax component of the employer’s quarterly federal payroll tax bill for all wages paid to all employees.

Any remaining credit is offset against the employer’s otherwise required federal payroll tax deposits for FICA (Social Security and Medicare) taxes withheld from employee wages, federal income tax withheld from employee wages, and the employer’s share of FICA tax on employee wages.

Any remaining excess is refundable, meaning the government will issue payment to the employer for the excess.

Key point. Employers can request advance payments of the credit by filing new IRS Form 7200 (Advance

The 50 percent employee retention credit allowed by the CARES Act (which we explain later) cannot be claimed for the same wages taken into account for claiming the FFCRA credit for 100 percent of required

Strategy. Small employers should first claim the FFCRA credit for 100 percent of required leave payments and then claim the CARES Act 50 percent employee retention credit for other eligible wages.

The FFCRA credit for required employee leave payments is not available to employers that are already receiving the pre-existing federal credit for paid family and medical leave under Internal Revenue Code Section 45S.

Payroll Tax Relief

Emergency sick leave and family leave payments mandated by the FFCRA are exempt from the 6.2 percent Social Security tax component of the employer’s federal payroll tax that normally applies to wages.

Employers must pay the 1.45 percent Medicare tax component of the federal payroll tax, but they can claim a credit for that outlay.

Leave Credits for Self-Employed Individuals

If you are a self-employed individual who is affected by the coronavirus emergency, the FFCRA allows you to claim a refundable credit against your federal self-employment tax bill.

If the credit exceeds your self-employment tax bill, the government will issue you a payment for the excess.

The credit is equal to:

• 100% of the sick-leave equivalent amount, plus
• 67% of the sick-leave equivalent amount for taking care of a sick family member or taking care of your child following the closing of the child’s school or childcare location.

The sick-leave equivalent amount equals the lesser of

• your average daily self-employment income, or
• $511 per day for up to 10 days (up to $5,110 in total) to care for yourself due to the coronavirus, or
• $200 per day for up to 10 days (up to $2,000 in total) to care for a sick family member or to care for your child following the closing of the child’s school or childcare location due to the coronavirus emergency.

Average daily self-employment income means your net self-employment earnings for the year divided by 260.

In addition, you can claim a coronavirus emergency family leave credit for up to 50 days. The credit amount equals the number of qualified family leave days multiplied by the lesser of

• $200, or
• your average daily self-employment income. The maximum total family leave credit is $10,000 (50 days x $200 per day).

These credits are allowed only for days during the period beginning on April 1, 2020, and ending on

Key point. As we wrote this, there was no way for self-employed folks to request advance payment of these credits. Will the IRS do something to allow advance payments? Maybe later. Stay tuned.

Key point. To prove your entitlement to the sick leave tax breaks, you must maintain documentation of how you were affected.

CARES Act Employee Retention Credit (Can Conflict with Eligibility for Other Federal Relief, and No Double Tax Benefit Allowed)

The CARES Act allows a refundable federal payroll tax credit that has been dubbed the employee retention credit.

The credit amount equals 50 percent of eligible employee wages paid by an eligible employer in a 2020 calendar quarter. The credit is subject to an overall wage cap of $10,000 per eligible employee.

Eligible Employers