Comprehensive Guide to Qualifying for the SETC Tax Credit

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 hit by the COVID-19 pandemic. By offering monetary assistance in the form of refundable tax credits, the SETC supports freelancers, gig workers, and independent entrepreneurs reclaim lost earnings due to sickness, quarantine, or caregiving responsibilities.

This thorough walkthrough will guide you through the specific requirements for the SETC, the application process for the credit, and steps to guarantee you maximize your claim.

What is the SETC?

The SETC, established through the FFCRA and later enhanced through other pandemic relief measures, was developed specifically to cater to the requirements of independent workers who are not provided with employer-paid sick leave or leave allowances. The credit offers compensation to freelancers who were unable to work because of COVID-19-related circumstances, whether from sickness or because they were taking care of others suffering from the virus.

Who Qualifies for the SETC?

1. Self-Employment Status

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

• Contract-based workers, gig workers, and gig workers
• Sole proprietors
• Partners in a business or members of a Limited Liability Company (LLC) that files taxes as a sole proprietor

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

Pandemic-Related Criteria

The SETC is designed for those who were unable to work because of COVID-19-related issues, and this includes:

• Mandatory Isolation or Quarantine: If you were obligated to quarantine due to a local, state, or federal quarantine order.
• COVID-19 Symptoms or Diagnosis: If you were tested positive for COVID-19 or showed symptoms that made it impossible to work, you can claim the credit.
• Providing Care for Someone: If you were unable to do your job because you were responsible for caring for someone affected by COVID-19, or if childcare or schools were closed due to the pandemic, 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 qualified 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 filed in two primary categories:

Sick Leave Portion of the Credit:

• You can claim up to 10 days of missed work due to illness, quarantine, or self-isolation. The highest amount you can claim is 100% of your average daily income, limited 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 aimed at those who couldn’t work because they needed to care for someone impacted by COVID-19 or due to childcare closures. In this case, you can file for 67% of your average daily self-employment income, capped at $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.

Required Paperwork for SETC Claims