Discovering crucial financial support, the Self-Employed Tax Credit (SETC) introduced by the Families First Coronavirus Response Act (FFCRA) becomes an essential resource for self-employed individuals affected by the COVID-19 pandemic. Despite its importance, many people are unaware of the SETC, potentially missing out on the benefits it offers. Time is running out, and there’s a limited opportunity to claim what you’re entitled to. This article aims to simplify who qualifies for the SETC refund, demystify the essential details of this tax credit, and to provide a simple way to make the claims process easier for eligible individuals.
Demystifying the Self Employment Tax Credit (SETC)
The Self Employment Tax Credit, commonly abbreviated as SETC, is a government-provided lifeline tailored to support those individuals who weathered the unique challenges of the tumultuous COVID-19 pandemic. This tax credit aims to aid self-employed individuals juggling issues such as illness, caregiving responsibilities, quarantine mandates, and more while keeping their businesses afloat.
Who are “Self-Employed” Individuals as Defined by the IRS?
The Internal Revenue Service (IRS) deems individuals self-employed based on various scenarios, emphasizing engagement in a trade or business as a sole proprietor, independent contractor, or partner.
What are the Key Eligibility Criteria to Qualify for SETC Refund?
Critical Eligibility Criteria encompass:
1. Self-Employed Status:
If you operated as a self-employed individual in either 2020 or 2021, you stand a chance of qualifying for the SETC. This category encompasses a spectrum of entrepreneurs, including sole proprietors managing businesses with employees, gig-workers, 1099 subcontractors, and single-member LLCs. These include individuals who teleworked.
2. COVID Impacts:
The SETC extends its support to those directly impacted by COVID-19 in various ways. Whether you battled the virus, endured COVID-like symptoms, underwent testing, needed to quarantine, or assumed the role of caregiver to a family member affected by the virus – all these scenarios make you eligible. If the closure of your child’s school or daycare due to COVID restrictions compelled you to stay home and consequently impacted your work, you may also qualify.
The qualifying circumstances include:
Quarantine:
To be eligible for SETC, individuals must have faced circumstances related to quarantine, which may include:
- Compliance with federal, state, or local lockdown orders specifically associated with COVID-19.
- Being subject to a quarantine or isolation order related to COVID-19.
Illness:
Eligibility criteria for illness under SETC encompass scenarios where individuals:
- Provided support to an individual who was subject to a COVID-19-related federal, state, or local quarantine or isolation order or received advice from a healthcare provider to self-quarantine due to concerns associated with COVID-19.
- Cared for a child affected by school or childcare closures due to COVID-19 precautions.
- Experienced symptoms of COVID-19 or sought a medical diagnosis.
- Suffered from sickness due to vaccination side effects.
Vaccination:
Individuals may qualify for SETC if they:
- Attended a COVID-19 vaccination appointment.
- Experienced side effects due to COVID-19 vaccination.
Other Similar Conditions:
SETC eligibility encompasses individuals confronting circumstances that are substantially similar to those explicitly outlined by the Secretary of Health and Human Services, following consultations with the Secretary of the Treasury and the Secretary of Labor.
Childcare:
Eligibility also includes situations related to childcare, such as:
- Caring for a child whose school closed or transitioned to virtual learning.
- Providing care for a child when the usual childcare provider was unavailable due to COVID-19.
Note: Entities such as Sub S or True S Corps / C Corps find themselves excluded from SETC eligibility, with the credit exclusively available to those who filed a “Schedule C” or a Partnership (1065).
Tax Credits for Self-Employed Workers
Navigating the tax landscape as a self-employed individual involves understanding the various credits available. Let’s explore two key tax credits introduced by the Family First Coronavirus Response Act (FFCRA):
A. Sick Leave Tax Credit:
The FFCRA introduced the Sick Leave Tax Credit, initially limited to certain employers but later expanded to include self-employed individuals. This credit provides financial support to freelancers, contractors, and gig workers who experience illness or need to take sick leave.
Description: Self-employed individuals can claim a tax credit equivalent to their daily earnings for up to ten days if they are unable to work due to sickness or quarantine.
B. Family Leave Tax Credit:
Another crucial provision of the FFCRA, the Family Leave Tax Credit, supports self-employed individuals by providing financial relief for family-related situations. This credit, too, was extended by the American Rescue Plan Act.
Description: Self-employed individuals can claim a tax credit equivalent to their daily earnings for up to fifty days if they need to take leave to care for a family member, particularly a child whose school or daycare is closed due to COVID-related restrictions.
How Much Can Eligible Individuals Receive in SETC Tax Credits?
Claiming the SETC tax credits requires a thorough understanding for self-employed individuals and small-business owners facing challenges due to COVID-19. These individuals have access to tax credits, and those unable to work or telework may be eligible for substantial credits. Specifically, qualified individuals can claim up to $15,110 for sick and family leave credits in 2020 and $17,110 in 2021.
To access these refundable credits, individuals must file a Form 7202 along with their 2020 or 2021 tax return. In cases where tax returns have already been submitted, an amendment is required to secure the refundable credit. Specialized tax professionals can assist in precise calculations, navigate the complexities of the process, and optimize the benefits available under the SETC.
How Can I Claim the SETC Tax Credit?
Claiming the Self-Employment Tax Credit (SETC) has evolved, making the process more accessible and user-friendly. Previously, individuals relied on personal CPAs to guide them through the claim process. However, with advancements in service providers like SETC Pros, the claim process has become remarkably easy and accessible through online channels.
SETC Pros stands at the forefront, advocating for the rights and well-being of self-employed individuals, gig workers, and more. They have introduced user-friendly online tools, such as an easily navigable website, to streamline the SETC application submission. Additionally, SETC Pros is actively engaged in a marketing campaign to raise awareness about this untapped resource among potentially eligible individuals.
Is There a Deadline for Claiming the Full SETC Tax Refund Amount?
It’s crucial to note that the deadline for claiming the SETC is April 15th, 2024. After this date, amending 2020 tax returns and claiming the full credit amount will no longer be possible. To ensure eligibility and claim the full credit amount, individuals are encouraged to file their claims before the April 2024 deadline.
Determining eligibility is the first step for those looking to initiate the process. The quickest way to do so is by visiting SETC Pros’ website and filling out the form. Take advantage of this opportunity before the deadline to secure the benefits of the SETC.
In conclusion, unlocking the potential of the SETC and understanding the array of tax credits available for self-employed individuals require a thorough examination of eligibility criteria and a strategic approach to leverage these financial opportunities. As entrepreneurs and self-employed individuals navigate the post-COVID business landscape, the SETC and these tax credits will provide crucial financial relief for those who qualify. Start the process now by filling-out the contact form on the SETC Pros’ website.
