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 important relief measure intended to support freelancers hit by the COVID-19 pandemic. By offering monetary assistance in the form of returnable tax benefits, the SETC helps freelancers, gig workers, and sole proprietors recover income lost due to sickness, quarantine, or the need to care for others.

This detailed overview will help you understand the specific requirements for the SETC, how to apply for the credit, and ways to make sure you optimize your credit claim.

What is the SETC?

The SETC, introduced under the FFCRA and subsequently broadened through expanded relief programs, was developed specifically to meet the demands of independent workers who lack access to sick leave through an employer or leave allowances. The credit offers compensation to independent contractors who couldn’t work because of COVID-19-related circumstances, either due to personal illness or because they were caring for others affected by the virus.

Qualification Criteria for the SETC

Self-Employed Status

To be eligible for the SETC, you must be recognized as self-employed, which covers:

• Freelancers, gig workers, and gig workers
• Sole proprietors
• Business partners 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, indicating your self-employment income. Even https://officialsetcrefund.com/learn/setc-scams-how-to-avoid-them-and-spot-shady-filing-companies/ with part-time independent work can qualify, as long as they satisfy the income thresholds and can show a loss of income.

Impact of COVID-19

The SETC is designed for those who had to stop working 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 experienced symptoms that stopped you from working, you qualify for the credit.
• Care for Others: If you were prevented from working because you needed to care for someone suffering from COVID-19, or if childcare or schools were not available due to COVID-19, you can claim the family leave portion of the SETC.
• School or Daycare Closures: If pandemic-related shutdowns of schools or daycares impacted your ability to work, you are eligible for the family leave portion of the credit.

Calculation of the SETC

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

1. Sick Leave Credit:

• You can receive 10 days of missed work due to sickness, quarantine, or self-isolation. The limit you can claim is 100% of your average daily income, limited to $511 per day. For those who missed 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.

Credit for Family Care:

• The family leave credit is aimed at those who were unable to work because they were responsible for someone affected 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 applies to up to 50 days in each year, allowing for a maximum family leave credit of $10,000 for 2020 and $12,000 for 2021.

Combined Maximum: Across both the sick leave and family leave credits, self-employed individuals can potentially claim up to $32,220 in total relief across the two years.

Documentation Required to Claim the SETC