A Thorough Overview of SETC Qualification for the Self-Employed

The Self-Employed Tax Credit (SETC), as part of the Families First Coronavirus Response Act (FFCRA), is a notable relief measure designed to assist independent workers affected by the COVID-19 pandemic. By offering monetary assistance in the form of refundable tax credits, the SETC aids freelancers, gig workers, and independent entrepreneurs recover income lost due to health issues, quarantine, or caretaking duties.

This comprehensive guide will guide you through the specific requirements for the SETC, steps to apply for the credit, and how to ensure you maximize your claim.

Understanding the SETC Tax Credit

The SETC, launched via the FFCRA and later enhanced through expanded relief programs, was created specifically to cater to the requirements of freelancers who lack access to company-sponsored sick leave or family leave benefits. The credit compensates self-employed individuals who couldn’t work because of COVID-19-related circumstances, whether from sickness or because they were taking care of others affected by the virus.

Eligibility for the SETC

Self-Employed Status

To be qualify for the SETC, you must be considered self-employed, which encompasses:

• Independent contractors, gig workers, and gig workers
• Business owners with no employees
• Partners in a business or members of a Limited Liability Company (LLC) taxed as a sole proprietorship

You must have provided Schedule SE with your IRS Form 1040 for the 2020 or 2021 tax year, reporting your self-employment income. Even https://officialsetcrefund.com/learn/setc-faq/ with part-time self-employment can qualify, as long as they meet the income requirements and can show a loss of income.

Impact of COVID-19

The SETC is intended for those who couldn’t work because of COVID-19-related issues, and this includes:

• Isolation or Quarantine: If you were mandated to self-isolate due to a local, state, or federal quarantine order.
• COVID-19 Symptoms or Diagnosis: If you were tested positive for COVID-19 or suffered from symptoms that prevented you from working, you can claim the credit.
• Providing Care for Someone: If you were unable to do your job because you needed to care for someone suffering from COVID-19, or if childcare or schools were closed due to the pandemic, you can claim the family leave portion of the SETC.
• Childcare Disruptions: If pandemic-related closure of childcare centers impacted your ability to work, you are eligible for the family leave portion of the credit.

SETC Calculation Method

The SETC is determined based on your average daily self-employment income and can be claimed in two main categories:

Credit for Sick Leave:

• You can request 10 days of missed work due to illness, quarantine, or self-isolation. The limit you can claim is 100% of your average daily income, up to $511 per day. For those who were out for the maximum number of 10 days due to illness, the total credit for sick leave could be as high as $5,110 per tax year.

2. Family Leave Credit:

• The family leave credit is designed for those who couldn’t work because they were responsible for someone impacted by COVID-19 or because childcare facilities were closed. In this case, you can file for 67% of your average daily self-employment income, up to $200 per day. The credit covers up to 50 days in each year, allowing for a maximum family leave credit of $10,000 for 2020 and $12,000 for 2021.

Total Possible SETC Credit: Across both the sick leave and family leave credits, self-employed individuals can possibly request up to $32,220 in total relief across the two years.

Required Paperwork for SETC Claims