Are You Classified as an Independent Contractor? Here Are Some Resources During COVID-19.
March 30, 2020
Many Pilates teachers are classified as Independent Contractors in the United States. We’ve outlined some help available to Pilates teachers classified as Independent Contractors.
Under the newly signed federal CARES Act, states may be able to extend unemployment benefits to people who were not previously covered by Unemployment Insurance, including:
- Self-employed workers
- 1099-independent contractor or gig workers
- Workers with a limited work history
The new law also increases weekly benefits for all unemployed workers by $600 a week for up to six months, and 13 weeks of benefits on to the number of weeks a state currently pays benefits.
Find your state’s Unemployment Insurance website
for more specific information about how to file. Please note that states are in the process of implementing these new rules and may not have updated information immediately. If you are out of work or have had your hours reduced, you should continue to follow your state’s guidelines for filing for unemployment. Many states are experiencing extensive traffic and ask filers to be patient and persistent.
Sick and Family Leave Tax Credits for the Self-Employed
Congress has enacted the "Families First Coronavirus Response Act
" which includes special sick leave and family leave tax credits for the self-employed.
You may qualify for the Sick Leave Credit
- You have to self-isolate, are experiencing symptoms and need to obtain a diagnosis, or comply with a self-isolation recommendation for coronavirus.
You may qualify for the Family Leave Credit
- You have to care for a son or daughter under 18 years of age whose school or place of care has been closed due to coronavirus.
The sick leave credit
is equal to 100% of the average net self-employment income you earn per day for a maximum of 10 days. The credit is currently capped at $510 per day.
The family leave credit
is equal to 67% of the average self-employment income you earn per day for a maximum of 50 days. But the credit is currently capped at $200 per day. Thus, the maximum credit is $10,000.
To calculate the credit you may be eligible to receive, you must determine your average daily net self-employment income. To do so, divide your total 2020 net self-employment income by 260. For example, if your 2020 net self-employment income is $40,000, your daily self-employment income is $154. Your sick pay credit is a maximum of 10 days x $154 = $1,540. Your family leave credit is $103 per day for up to a maximum of 50 days.
These credits are refundable, meaning you get the full amount even if you end up with a negative tax liability. For example, if you owe $1,000 in total taxes and qualify for a $2,500 credit, you won't have to pay any taxes and the IRS will send you a check for $1,500. The credits apply to both income and self-employment taxes (Social Security and Medicare tax).
Important to note:
you won't actually collect these credits until you file your 2020 taxes in 2021. But, if you qualify for either or both credits, you should reduce (or eliminate) your estimated tax payments to the IRS during 2020 to take the amount of your credit into account.
Check with your personal accountant for more information.
You Can Deduct Your Business Losses Against Other Income
If your business loses money this year, you can get a tax deduction. However, as the tax law currently stands, this deduction is limited. Due to the enactment of the Tax Cuts and Jobs Act (TCJA) in 2018, you may deduct your net operating loss (NOL) only up to 80% of your 2020 taxable income. This may include, for example, your spouse’s income or investment income. Unused NOL amounts may be carried forward and deducted in any number of future years.
The TCJA also limits deductions of “excess business losses” by individual business owners. Married taxpayers filing jointly may deduct no more than $500,000 per year in total business losses. Individual taxpayers may deduct no more than $250,000.
Before 2018, if a business had an NOL, it could be carried back two years, resulting in a refund of all or part of the taxes paid in those years. The TCJA eliminated carrybacks of NOLs—that is, they may only be deducted in current and future years.
Again, check with your personal accountant for more information.
You May Qualify for Low or No-Interest Loans
Even before the pandemic, there were many types of low-interest loans available to small businesses. These loan programs are going to be vastly expanded. Congress has already added millions in additional funds to the Small Business Administration’s Economic Injury Disaster Loans. These loans have a 3.75% interest rate. You can qualify for such loans if you don’t have access to credit elsewhere and need the money to pay for business expenses you can’t pay due to the pandemic. For more information, check with the Small Business Administration
Congress is currently working on additional loan programs. There will doubtless be low-interest loans available from many other sources as well. These include the states, local governments, and philanthropies. The SBA has an online tool called Lender Match
that helps you find lenders.
Grants—money you don’t have to pay back—may be available as well.
Other Help on the Way!
The IRS has set aside a special place on their website to keep taxpayers abreast of tax relief and support offered to help with the COVID-19 crisis. The link can be found at: https://www.irs.gov/coronavirus
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on how to become one.