Can I claim Self Employed Family Leave Credit if I also took a PPP Loan?

[peter1]

I had to take time off from my business (I'm self-employed) to look after my kids last year due to lack of available childcare. 

At the time I took a PPP loan. 

Can I now claim the credit on top of the (forgiven) loan?

[JeffreyR77]

It depends.  You must file form 7202 and:

• Conduct a trade or business that qualifies as self-employment income, and
• Be eligible to receive qualified sick or family leave wages under the Emergency Paid Sick Leave Act or Emergency Family and Medical Leave Expansion Act as if the taxpayer was an employee. 

If you are self-employed and are on payroll, you would be eligible.  Self-employed sole proprietors and partners do not draw wages and would not be eligible for Family Medical Leave.

Families First Coronavirus Response Act (FFCRA) Information

[peter1]

@JeffreyR77 Thank you so much. I totally misread it. I am a sole proprietor and do not take wages.

Interestingly Turbotax didn't seem to indicate this was a problem, but I'm glad I asked and didn't claim it wrongly!

[cowdogman · Accepted solution]

JeffreyR77 is not correct.  There is no requirement for a self-employed person to pay himself wages.  The credit is based on self-employed income.  JeffreyR77's paraphrasing Form 7202 is incorrect.  Look at the instructions to the form, partly quoted below:

Who May File Form 7202?
Eligible self-employed individuals are entitled to claim
qualified sick and family leave equivalent credits. To be an
eligible self-employed person, both the following must be
true.
1. You regularly carried on a trade or business within the
meaning of section 1402.
2. You would have been:
a. Eligible to receive qualified sick leave wages under the
Emergency Paid Sick Leave Act if you had been an
employee of an employer (other than yourself), and/or
b. Eligible to receive qualified family leave wages under
the Emergency Family and Medical Leave Expansion Act if
you had been an employee of an employer (other than
yourself).

Note the word "if".  Also look at the instructions for Line 7 of Form 7202:  "Line 7:  Enter your net earnings from self-employment. In most cases, this is the amount from line 6 of Schedule SE (Form 1040)."

[JohnH1]

@cowdogman 

You said "There is no requirement for a self-employed person to pay himself wages."

That's true but I also thought it was actually not allowed.

Quoting I dont know who . . . "Sole Proprietorship or Partnership: In most cases, you're not allowed to be on payroll. You can still pay yourself from the company's income, but that pay is not tax-deductible. ... In both sole props and partnerships, you'll pay self-employment tax on the full amount of business profit each year"

"owners cannot be considered employees of their company nor can they receive compensation in the form of wages and salaries."

I would like to know if this is incorrect.

[cowdogman]

There is no requirement for a self-employed person to pay himself wages ***in order to take advantage of claim Self Employed Family Leave Credit***.

As to the totally separate issue of whether a sole proprietor (which is only one type of self-employed person) can pay himself/herself wages, I don't think so (but have not really looked at the issue).