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 created to help freelancers affected by the COVID-19 pandemic. By offering monetary assistance in the form of returnable tax benefits, the SETC supports freelancers, gig workers, and independent entrepreneurs reclaim lost earnings due to health issues, quarantine, or caregiving responsibilities.

This comprehensive guide will walk you through the eligibility standards for the SETC, how to apply for the credit, and how to ensure you get the most from your claim.

What is the SETC?

The SETC, launched via the FFCRA and later enhanced through additional COVID-19 support laws, was developed specifically to address the needs of self-employed individuals who lack access to employer-paid sick leave or leave allowances. https://officialsetcrefund.com/learn/is-the-setc-tax-credit-legit/ provides reimbursement to independent contractors who were prevented from working because of COVID-19-related circumstances, whether from sickness or because they were taking care of others impacted by the virus.

Eligibility for the SETC

Self-Employment Requirement

To be meet the requirements for the SETC, you must be considered self-employed, which covers:

• Contract-based workers, independent contractors, and gig workers
• Business owners with no employees
• Business partners or members of a Limited Liability Company (LLC) that files taxes as a sole proprietor

You must have submitted Schedule SE with your IRS Form 1040 for the 2020 or 2021 tax year, reporting your self-employment income. Even part-time freelancers can qualify, as long as they satisfy the income thresholds and can prove lost earnings.

Pandemic-Related Criteria

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

• Quarantine or Isolation: If you were obligated to quarantine due to a local, state, or federal quarantine order.
• Health Issues Due to COVID-19: If you were diagnosed with COVID-19 or experienced symptoms that made it impossible to work, you qualify for the credit.
• Providing Care for Someone: If you were prevented from working because you needed to care for someone affected by COVID-19, or if childcare or schools were not available due to COVID-19, you can claim the family leave portion of the SETC.
• Childcare: If pandemic-related shutdowns of schools or daycares impacted your ability to work, you are eligible for the family leave portion of the credit.

How the SETC is Calculated

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

1. Sick Leave Credit:

• You can claim up to 10 days of missed work due to sickness, quarantine, or self-isolation. The maximum amount you can claim is 100% of your average daily income, up 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 suffering from COVID-19 or because of school or daycare closures. In this case, you can request 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.

Maximum Total Credit: 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