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 independent workers hit by the COVID-19 pandemic. By offering monetary assistance in the form of refundable tax credits, the SETC supports freelancers, gig workers, and sole proprietors reclaim lost earnings due to health issues, quarantine, or the need to care for others.

This detailed overview 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, launched via the FFCRA and subsequently broadened through additional COVID-19 support laws, was created specifically to cater to the requirements of self-employed individuals who are not provided with company-sponsored sick leave or leave allowances. The credit offers compensation to self-employed individuals who were prevented from working because of COVID-19-related circumstances, whether from sickness or because they were caring for others impacted by the virus.

Eligibility for the SETC

Self-Employed Status

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

• Freelancers, gig workers, and gig workers
• Sole proprietors
• Business partners 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 independent work can qualify, as long as they meet the income requirements and can prove lost earnings.

Impact of COVID-19

The SETC is designed for those who had to stop working because of COVID-19-related issues, and this includes:

• Mandatory Isolation or Quarantine: If you were required to isolate due to a local, state, or federal quarantine order.
• Health Issues Due to COVID-19: If you were tested positive for COVID-19 or suffered from symptoms that made it impossible to work, you are eligible for the credit.
• Caring for Affected Individuals: If you were prevented from working because you had to take care of 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 prevented you from working, you are qualified for the family leave portion of the credit.

SETC Calculation Method

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

Sick Leave Portion of the Credit:

• You can request 10 days of missed work due to personal illness, 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 limit of 10 days due to illness, the total credit for sick leave could be as high as $5,110 per tax year.

Family Leave Portion:

• The family leave credit is intended for those who had to stop working because they were responsible for someone impacted by COVID-19 or because of school or daycare closures. In this case, you can request 67% of your average daily self-employment income, capped at $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 be eligible for up to $32,220 in total relief across the two years.

Documentation Required to Claim the SETC