Criteria for Eligibility for the SETC Tax CreditBeing self-employed is just the first requirement to be eligible for the SETC Tax Credit.Certain requirements exist that you need to meet to be eligible.Specifically, you must show a positive net income from your self-employment activities on IRS Form 1040 Schedule SE for the tax years 2019, 2020, or 2021.This implies your earnings should exceed your expenses from your business operations.Nevertheless, if your earnings were not positive in 2020 or 2021 as a result of COVID-19, you can use your 2019 net income to qualify for the SETC Tax Credit.This is particularly helpful for those who are self-employed who faced financial challenges during the pandemic.Additionally, if both you and your partner are self-employed and submit a joint tax return, each of you can qualify for the SETC Tax Credit.However, you are not allowed to claim the same COVID-related days for eligibility.It should also be noted that even if unemployment benefits were received, you can still qualify for the SETC Tax Credit.You are not allowed to claim the days when you got unemployment benefits as days you were unable to work because of COVID-19.These days are treated separately from other pandemic-related work absences.Requirements for Self-Employment StatusThe term ‘self-employed’ covers a diverse array of professionals, among them are self-employed taxpayers.To qualify for the SETC tax credit, self-employed status includes:Sole proprietorsIndependent entrepreneursContractors receiving 1099 formsIndependent freelancersWorkers in the gig economySingle-member LLCs treated as sole proprietorshipsIt is important for these individuals to be aware of their self-employment tax obligations.So, if you’re a freelancer working from home, a gig worker in the fast-paced on-demand service industry, or a sole proprietor managing your own business, you may qualify for the targeted tax credit designed for individuals like you, known as the SETC Tax Credit.In addition to individual professionals, members of multi-member LLCs and qualified joint ventures may also be eligible for SETC.As an example, partners in partnerships that are taxed as sole proprietorships and partnership general partners may be eligible for SETC, if they satisfy other eligibility criteria.What is required for U.S. citizens, permanent residents, or qualifying resident aliens who are self-employed is filing a Schedule SE showing positive net income.Factors Regarding Income Tax LiabilityYour income tax liability plays a crucial role in determining your eligibility for the SETC Tax Credit.To be eligible, you must show positive net income in one of the approved years (in the years 2019, 2020, or 2021).That said, if you lacked positive earnings in 2020 or 2021 because of COVID-19, your 2019 net income can be used to qualify for the SETC Tax Credit.Moreover, the employed tax credit SETC, also known as the SETC tax credit, is capable of offsetting your self-employment tax liability or may be refunded if it surpasses your tax liability.It should be noted that the total SETC amount might not be available to individuals who received employer pay for family or sick leave, or unemployment benefits, during 2020 or 2021.Here’s where the self-employed tax credit can greatly aid in lessening your tax burden.Furthermore, even though those who received unemployment benefits can claim the SETC tax credit, they are barred from claiming days they were receiving these benefits as days unable to work due to COVID-19.COVID-Related Disruptions and Qualified Sick Leave EquivalentThe unpredictability of self-employment has been further compounded by the disruptions brought on by the COVID-19 pandemic.Nevertheless, the SETC Tax Credit is designed to provide financial assistance to those who experienced business disruptions due to COVID-19.From facing government quarantine orders to experiencing symptoms or providing care for family members and even grappling with school or childcare facility closures — if your work capacity was impacted between April 1, 2020, and September 30, 2021, you might be eligible for the SETC Tax Credit.That said, the SETC Tax Credit comes with its own set of caveats.Self-employed workers who received unemployment benefits during COVID-19 are still eligible for the SETC Tax Credit.However, they cannot claim credits for the days they were receiving unemployment benefits.Also, it’s crucial to maintain accurate documentation of how the COVID-19 pandemic affected your ability to work, as the IRS may request such documentation during an audit.