This article I found helpful although it is Illinois-centric:
Particularly this general information, which describes how the Pandemic Unemployment Assistance will use formulas from the existing Disaster Employment Insurance law:
“The DUA uses tax returns if available:
‘The base period to be utilized in computing the DUA weekly amount shall be the most recent tax year (2019) that has ended for the individual prior to the individual’s unemployment that was a direct result of the major disaster.’
‘The self-employment income to be treated as wages for purposes of computing the weekly amount…shall be the net income reported on the tax return.’
If you didn’t file your 2019 tax return yet, then you will need to provide documentation substantiating self-employment and wages earned.
Iowa and New York (two state unemployment agencies currently accepting self-employed applicants) are asking for 2019 1099 statements in the absence of 2019 tax returns.
And since all state unemployment offices are expected to follow the same guidelines, it’s a good idea to have your 1099 statements and other wage documents ready to upload on the IDES site.”
So, if you filed your 2019 taxes using Schedule C or if you have not yet filed but earned enough to get a 1099 from Airbnb, it may ease your application process. You might even be able to make a convincing case using an Airbnb earnings report if you did not make enough to get a 1099. If using a 1099 or other documentation, you should then, at the time of filing, be using Schedule C, not Schedule E. This presumes that Schedule C is the correct form (7 or less days average stay OR 30 days or less + significant personal services); you don’t get to choose which form you prefer to use.
If you have been erroneously filing with Schedule E all along (7 or less average STR stays), I agree you should file amended returns. It may seem like you should just switch to the correct Schedule C going forward, but the problem is a history of unpaid self-employment tax.
Schedule C filers generally pay self-employment tax, and there could be a conclusion that you owe back self-employment taxes plus interest, etc. This is a bit of a grey area as the tax rules in my opinion have not quite caught up with STR reality. The guidance not to use Schedule E if stays average 7 days or less is explicit, but the only additional guidance I have found is that the filer is then directed to use the “appropriate” forms, not Schedule C specifically. I note that IRS is more humane than you may expect for honest mistakes; penalties for failing to pay self-employment taxes may be waived if you make good. This is one reason to have your taxes prepared by a professional; their name will also be on the return and they will, in their own interest, want to correct any filing errors.
I have read some accountant analyses that a host who was renting 7 or less days on average but could argue they are not providing significant personal services (cleaning, meals, transport, tours) could back out the self-employment tax on the Schedule C (similar to the process for a notary public). This is certainly an attractive way of thinking as it avoids a 15.3% tax hit on one’s Schedule C earnings, but personally, I wouldn’t try it. It seems the rationale for the short average stay exclusion is that it would be presumed to be similar to a hotel or B&B commercial operation.
Not a professional tax opinion, for discussion purposes only.
