Claim up to $32,200 through the Self-Employed Tax Credit
The Self-Employed Tax Credit
Claim up to $32,200 of Pandemic Relief Funds for the Self-Employed
Welcome to Your Guide on the Self-Employed Tax Credit (SETC)
In an effort to mitigate the economic impact of the COVID-19 pandemic on self-employed individuals and small businesses, the American Rescue Plan Act of 2021 introduced the Self-Employed Tax Credit (SETC). This initiative aims to provide financial relief to those unable to work due to COVID-19 related reasons, including quarantine orders, experiencing symptoms, seeking diagnosis, or caring for affected family members.
Understanding SETC Benefits
The SETC, as part of the ARP, extends significant financial support to eligible self-employed individuals by offering refundable tax credits. These credits are designed to compensate for lost income due to the pandemic, covering up to 80 hours of paid sick leave and up to 12 weeks of paid family leave. Importantly, the ARP enhances the scope of these benefits by including health insurance costs and certain collectively bargained contributions in the tax credits calculation, providing a broader financial safety net for eligible individuals.
Eligible employers who provide paid leave due to COVID-19 related reasons can qualify for refundable tax credits. This includes businesses and certain governmental entities with fewer than 500 employees offering leave in line with the requirements set forth in the ARP.
The tax credits cover the full cost of paid sick and family leave wages, including allocable health plan expenses and certain collectively bargained contributions. This support is extended for leave taken from April 1, 2021, through September 30, 2021.
Employees eligible for paid leave include those under quarantine orders, experiencing COVID-19 symptoms, seeking diagnosis, obtaining vaccination, or caring for affected family members. Credits also apply to leave taken for vaccination recovery.
The credit amount is based on the type of leave taken—either sick leave at the employee's regular pay rate or family leave at two-thirds of the pay rate. Caps apply to daily and total payout amounts.
Employers can claim these credits on federal employment tax returns. They have the option to reduce federal employment tax deposits in anticipation of the credits and can request an advance from the IRS if their deposit amount falls short.
To substantiate eligibility for the credits, employers must retain comprehensive records of the paid leave provided, including health plan expenses and employment tax returns filed to claim the credits.
Eligibility Criteria
Eligibility for the SETC hinges on specific conditions set forth by the ARP. Self-employed individuals and small business owners who have experienced an inability to work due to COVID-19 related reasons are encouraged to review the detailed criteria. This includes circumstances such as being subject to quarantine or isolation orders, experiencing COVID-19 symptoms and seeking diagnosis, and caring for family members affected by the virus. Understanding these criteria is crucial in determining your qualification for the tax credits.
Compliance and Documentation
Maintaining proper documentation is essential for SETC compliance. Eligible individuals must retain records that substantiate their claim for the tax credits, including documentation related to the COVID-19 related leave and associated health plan expenses. This documentation is critical not only for the initial application but also for any future audits or inquiries from the IRS. The ARP emphasizes the importance of compliance, encouraging applicants to keep detailed records to support their claims.
Empowering Self-Employed Individuals
The SETC represents a critical component of the ARP's efforts to support self-employed individuals and small businesses during the COVID-19 pandemic. By offering financial relief through refundable tax credits, the program aims to alleviate the economic burden faced by those unable to work due to COVID-19 related reasons. This homepage is your gateway to understanding the SETC, from eligibility criteria to application procedures and compliance requirements, ensuring you have the information and resources you need to benefit from this vital support.
Step 1: Determine Your Eligibility
The first step in claiming your SETC is to ascertain your eligibility. Eligibility criteria can vary, typically including factors such as your net earnings from self-employment, your business structure, and the type of business activities you're involved in. Review the specific requirements set by the tax authority in your jurisdiction, which may include income thresholds and types of allowable expenses. If you're uncertain about your eligibility, consulting a tax professional can provide clarity and ensure you meet all the necessary criteria.
Step 2: Gather Necessary Documentation
Once you've confirmed your eligibility, the next step is to compile all required documentation. This includes financial records, income statements, expense receipts, and any other relevant documentation that supports your claim for the tax credit. Organizing your documents systematically can expedite the filing process and facilitate a smoother review by tax authorities. Ensure that all records are accurate, up-to-date, and readily accessible to avoid any delays or complications in your claim process.
Step 3: Calculate Your Credit Amount
Calculating the exact amount of your SETC is crucial. This involves understanding the specific calculation formulas and guidelines provided by your tax authority. The calculation will typically consider your net earnings from self-employment, applicable tax rates, and any caps or limitations on the credit amount. Utilizing tax software or consulting with a tax professional can aid in accurately determining the credit amount you're entitled to, ensuring you maximize your benefits without overlooking any critical details.
Step 4: Complete and File Your Tax Return
With your eligibility confirmed, documentation prepared, and credit amount calculated, the next step is to complete your tax return. This includes filling out the necessary forms and schedules related to the SETC. Pay close attention to instructions to ensure that every section is completed correctly. Filing can often be done electronically, which is generally quicker and can lead to faster processing times. Ensure that your tax return, along with the claim for the SETC, is filed by the tax deadline to avoid penalties.
Step 5: Monitor and Follow Up
After filing your tax return with the SETC claim, it's important to monitor the status of your submission. Tax authorities may take several weeks to process your claim. Keep an eye on any correspondence from the tax authority, as they may request additional information or clarification. If you notice any delays or have concerns about the processing of your claim, don't hesitate to follow up. Keeping proactive communication can help resolve any issues promptly and ensure that you receive your tax credit without unnecessary delays.
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The #1 Question: What is the SETC tax credit program?
In March 2020, the Families First Coronavirus Response Act (SETC) was signed into law to help companies offer paid sick leave and unemployment benefits caused by COVID-19. Initially, the SETC focused on employers with W-2 employees to help them weather the economic impact caused by the pandemic.
In December 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which expanded the SETC to cover employers and the self-employed. Thanks to the SETC expansion, self-employed individuals, freelancers, independent contractors, and gig workers are now eligible for tax credits that pay you back for the time you would've typically spent earning money that was lost because of COVID.
The SETC is federal legislation passed in response to the COVID-19 pandemic. It provides paid sick leave, free COVID-19 testing, food assistance, and unemployment benefits and stipulates employer-provided health insurance protection. For self-employed individuals, it offers equivalent coverage via tax credits that can be claimed on your income tax return, effectively reimbursing you for periods of sick leave due to COVID-19.
Now is your opportunity to collect up to $32,200 for financial hardships and setbacks through the pandemic. Register an account now to get and get the ball rolling.
Is there a reason why I cannot find information about the Self-Employed Tax Credit (SETC) on the IRS' website?
The “SETC” (Self-Employed Tax Credit) is a colloquial term that refers to the provisional sick and family leave tax credits for self-employed individuals introduced under the FFCRA (Families First Coronavirus Response Act). You will need to started by searching for the FFCRA (Families First Coronavirus Response Act) and find the section indicating how it also applies to self-employed individuals.
Do I have to be self-employed to file for the tax credit refund?
YES. This tax credit is for self-employed individuals, small business owners, freelancers, partners in a partnership that are subject to self-employment taxes, and 1099 contractors only.
Do I have to have positive tax earnings in 2020 to qualify for SETC income tax credit?
No, if you did not have positive earnings in 2020 because of Covid-19 restrictions but were still self-employed in 2020, you may elect to use your 2019 net income if that year has a positive self-employed income.
Do I have to have positive tax earnings in 2021 to qualify for SETC income tax credit?
No, if you did not have positive earnings in 2021 because of Covid-19 restrictions but were still self-employed in 2021, you may elect to use your 2020 net income if that year has a positive self-employed income.
How much of a tax credit can I expect to receive?
There are a few factors that go into calculating your tax credit refund amount. The biggest factors would be:
- Your net income from your schedule C on your 2019, 2020 and 2021 tax returns.
- How many days you were out sick or told to quarantine with Covid-19
- How long you might have cared for a loved one affected by Covid-19.
- How long any schools or daycare centers were closed (and you were forced to care for a minor child during the closings).
Can I still qualify if I already filed my taxes for 2020 & 2021?
Absolutely Yes! We will need to file an amendment on your tax return. We do this all the time. All we require from you is a copy of your 2019, 2020 and 2021 tax returns and a copy of your drivers license and we’ll handle the rest.
Do I have to fill out a ton of paperwork?
Not at all. We basically have an agreement letter on our website that you’ll need to read, sign and date, you will complete a survey to provide us your information and provide an estimate of your refund. You will also need to upload a copy of your 2019, 2020 and 2021 tax returns and a copy of your drivers license. That’s basically it.
We try to make the process as easy and stress free as we can for you. Once we have your tax returns we’ll take over and get everything filed for you.
Can I claim SETC tax credits if I am also a W2 employee?
You may still be eligible to claim SETC tax credits as long as you earned self-employment income in addition to your W2 salary during 2020 and/or 2021. If you are also a W2 employee and your employer filed for FFCRA credits on your behalf, you may have to decrease the credit fore the FFCRA wages paid.
If you receive paid leave benefits as an employee, it may affect the amount of tax credit you can claim as a self-employed individual under the SETC. You cannot claim a double benefit for the same period. However, if your situation as an employee doesn't provide full coverage, there might be potential to claim additional credits based on your self-employment income.
Furthermore, if you receive paid leave benefits in your capacity as an employee, there could be an impact on the tax credit available to you as a self-employed individual under the FFCRA. It is important to note that claiming a double benefit for the same period is not permissible. However, in cases where your employee status does not offer comprehensive coverage, there may be an opportunity to pursue additional credits based on your self-employment income.
Do I qualify for SETC tax credit if I already received Sick & Family Leave credit on either the 2020 or 2021 returns?
You would only be eligible if you did not FULL UTILIZE the credit(s) on previous return(s). Not full utilized means, did not list the most beneficial self-employed income by electing the highest self-employed income year (2019 or 2020 for the 2020 amendment, or 2020 or 2021 for the 2021 amendment) or you listed less than the actual COVID days in any of the three categories for the years 2020 or 2021.
Is the SETC tax credit based on gross self-employed income or net self-employed income?
In order to qualify for the self-employed tax credit you MUST have a positive NET (after deductions) self-employed income for either 2019, 2020 or 2021 AND qualifying COVID days.
How long before I will receive my cash refund?
To be honest, once we receive the necessary paperwork from you, we will begin to work on your case and get all the forms filed, etc. it is then up to the IRS to send your refund directly to you.
We find for the most part that it usually takes 12-16 weeks to complete the process and receive your cash refund.
If we filed a joint return and my spouse or partner is also self-employed, can we each qualify for the SETC?
Yes, if both of you are self-employed, you could each qualify for up to the maximum amount (under the right circumstances) of $32,220.
Do I qualify for SETC tax credit if I received unemployment benefits during 2020 and/or 2021?
You can still qualify for the SETC tax credit even if you received unemployment benefits. However, you CANNOT claim the days you received unemployment benefits as days you were not able to work due to COVID-19 related issues.
For the SETC credit, do you require a complete copy of my return to be amended?
Yes, for any return to be amended, we require a COMPLETE copy of the return, including all schedules. A complete copy of the return MUST be submitted with the amended return for the return being amended.
Example: If we are amending 2020 by electing to use the 2019 positive self-employed income, we must have a complete copy of the 2020 return.
How much is the SETC credit?
The SETC Tax credit can be up to $32,220, based on your self-employed net earnings in 2020 and 2021.
To calculate your SETC credit, we use your daily average self-employment income (this is your net earnings for the taxable year divided by 260) and the amount of self-employment work missed due to COVID-19-related issues. This allows the IRS to estimate how much you lost in wages for every day you could not work.
Note: The SETC is per qualified taxpayer. If your spouse is also self-employed, you may be eligible for up to another $32,220.
How can I claim the SETC tax credits?
To claim the SETC tax credits, you must determine your eligibility and amend your 2020 and/or 2021 tax returns and their supporting schedules. To amend these returns, it is recommended to use a Certified Public Accountant(CPA) to obtain the best results. This can take countless hours and funds. Or let us do it for you! Our CPA team has created the fastest, safest, and most accessible tool for self-employed individuals and sole proprietors to claim the federal SETC tax credits you deserve.
Why would the IRS just refund my taxes?
Essentially, the federal government is vested in supporting businesses impacted by COVID. They recognize small businesses, including yours, play a crucial role in local and national economies. However, this is a limited-time opportunity and won’t be around forever, so it’s important you get your SETC filed ASAP!
What is the Social Security tax deferral, all about?
If you have employees, you can defer the 6.2% employer portion of Social Security tax for March 27, 2020 through December 31, 2020. Self-employed taxpayers can also postpone the payment of 50% of the Social Security portion of their self-employment tax for the same period.
This is a deferral rather than forgiveness, so those amounts will eventually need to be repaid. Half of the deferred amount was due on December 31, 2021, and the other half was due on December 31, 2022.
Who qualifies for the SETC tax credits?
To qualify for the SETC, you must meet the following criteria
1 Identify as a Self-employed individual. A few examples, but not limited to, include sole proprietorship, independent business owners, 1099 contractors, freelancers, gig workers, and single-member LLC, taxed as a Sole-proprietorship, and general partner of a partnership.
2 Have filed a Schedule SE of IRS Tax Form 1040 in 2020 and/or 2021 with positive net income and paid self-employment tax on your earnings for the years 2019 and/or 2020 and or 2021.
3 Have missed work due to COVID-19-related issues.
Are you eligible for the tax credit if you don’t have health insurance?
Yes. Your eligibility for the Self-Employed Tax Credit (SETC) does not take health insurance coverage into consideration. However, if you are self-employed and need insurance, there are options for health insurance. You may even be eligible to write off the cost of your health insurance premiums by taking advantage of the self-employment health insurance deduction.
What if your child does not have health insurance?
You can claim the Self-Employed Tax Credit (SETC) on Form 7202 whether your child did or did not have health insurance. The credit only takes into account your ability to not work due to no child care or caring for your child. If your child is uninsured, you may be able to get insurance through the Children’s Health Insurance Program (CHIP).
Are costs for unpaid medical bills eligible for the tax credit?
Unpaid medical bills are not eligible for the Self-Employed Tax Credit (SETC). The credit only looks at your average daily wages and the number of missed days.
What qualifies as a reason for claiming SETC?
To qualify for SETC tax credits, you must have missed self-employment work due to COVID-related issues. If you were unable to work because of one of the following reasons, you may be eligible:
• A government agency imposed a quarantine or isolation order related to COVID–19.
• Advised by a health care provider to self-quarantine due to concerns related to COVID–19.
• You cared for an individual who is subject to either of the above two.
• You experienced COVID-19 symptoms while also waiting for an appointment with your doctor.
• You were waiting for COVID-19-related test results and quarantined as a precaution.
• You were getting vaccinated against COVID-19.
• You were experiencing side effects from the COVID-19 vaccine
• You cared for your child because the school or place of care of the child was closed, or the child care provider of such child is unavailable, due to COVID–19
precautions.
• You experienced any other substantially similar condition specified by the secretary of health and human services in consultation with the secretary of the treasury
and the secretary of labor.
What is the definition of quarantine or isolation in the above reason for claiming the SETC?
Federal, state, or local lockdown orders related to COVID-19 Quarantining or isolation order related to COVID-19
What is the definition of childcare in the above reason for claiming the SETC´?
Caring for your child whose school had closed or gone virtual care or caring for your child because your child care provider was unavailable due to COVID-19.
Can more than one parent of guardian claim SETC tax credits simultaneously to care for my child whose school or place of care was closed or went virtual due to COVID-19 related reasons?
Yes, but parents or guardians can not claim the same dates twice.
What is the definition of vaccination in the above reason for claiming the SETC?
A COVID-19 vaccination appointment or time away from your business due to the side effects related to a vaccination.
What is the definition of illness in the above reason for claiming the SETC?
Symptoms of COVID-19 or seeking a medical diagnosis and or sickness due to vaccination side effects or while caring for someone with COVID symptoms.
Are there any limitations to the SETC?
Yes, in addition to the eligibility criteria, there are a few limitations of the SETC should be aware of.
• You will not receive the full SETC amount if you already received wages from an employer for sick or family leave in 2020 or 2021. Your SETC portion will be reduced by the FFCRA wages you received.
• You will not receive the full SETC amount if you received unemployment benefits in 2020 or 2021. Your SETC calculation must exclude these paid through unemployment days.
• You must be a U.S. citizen, permanent resident, or qualifying resident alien.
What dates are eligible for SETC tax credits?
The SETC covers the days you were unable to perform self-employment work from April 1, 2020 - September 30, 2021.
Here is a breakdown of the number of days you could be eligible Childcare related time off - up to 110 days
• 50 days between April 1, 2020 and March 31, 2021
• 60 days between April 1, 2021, and September 30, 2021
Yourself or loved ones - up to 20 days
• 10 days between April 1, 2020 and March 31, 2021
• 10 days between April 1, 2021, and September 30, 2021
You took care of your children who were affected by school or daycare shutdowns.
You took care of someone else/family member who had COVID-19 issues.
How is the credit amount determined?
Self-employed individuals are eligible for FFCRA credit if they are out of work (or telework) due to government quarantine orders, self-quarantine, COVID-19 symptoms and seeking medical diagnosis. The credit is calculated by multiplying the number of days on leave and taking whichever amount is smaller:
• Your average daily self-employment income of year or:
• $511.
If you are unable to work (or telework) to take care of a family member who is under quarantine or to take care of a child whose child care is unavailable, you are still eligible for this credit. The credit is calculated by multiplying the number of days on leave and taking whichever amount is smaller:
• 2/3 of your average daily self-employment income or :
• $200.
We will use line 6 of the Schedule SE on your personal tax return to determine your total self-employed income, which is then divided by 260 (Considered the standard amount of working days in a year) to calculate your daily rate.
From there, we must determine which reason the leave was taken and that will decide what rate can be paid for the dates being claimed. For self-leave, we claim your full daily rate of up to $511/day. Family or childcare leave is calculated as 2/3rds of your pay up to $200/day.
What is the average SETC refund people receive?
The historical average SETC customer has received an SETC refund of $18,520.
How long does it take to receive a refund?
It can take up to three weeks for the IRS to acknowledge the acceptance of your SETC credit application and up to 20 weeks from that acceptance to receive your refund via check or direct deposit.
Why haven't I heard of the SETC tax credits before?
Initially, the SETC focused on employers with W-2 employees. While the CARES Act was passed later that same year with the expansion to provide tax credits to the self-employed, it was not widely publicized. Research shows over 80% of self-employed individuals are unaware they're entitled to the SETC tax credits.
Are there any deadlines for claiming the SETC tax credits?
Yes, the deadline to amend your 2020 and/or 2021 tax return for claiming or adjusting SETC credits is three years from the original due date of the return or within two years from the date you paid the tax, whichever is later. The deadline for filing for the SETC tax credits for your 2020 tax return is April 15, 2024, and Applications for 2021 (or a mix of 2020 and 2021) are due April 15, 2025, unless you filed an extension but would not suggest pushing that limit.
What if I already filed my taxes for 2020 & 2021?
Our CPAs and EAs must file an amended tax return for each year applicable. All we require from you is a copy of your 2019, 2020, and 2021 tax returns and a copy of your driver's license, and we'll handle the rest.
If I have NOT filed 2020 or 2021 tax returns, can I still receive the SETC?
Yes, but your own CPA must first prepare the 1040 and then we will modify those to include the SETC. Be mindful of the refund statute discussed above.
I had no income in 2020. Is the setc based on my 2019 income?
If you are considered "self-employed" in 2020, you may elect to use either the 2019 or 2021 self-employed income. The same applies to 2021. If you are considered "self-employed" in 2021, you may elect to use either the 2020 or 2021 self-employed income.
What is the IRS' definition of being considered "self-employed"?
Generally, you are self-employed if any of the following apply to you;
• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade or business.
• You are otherwise in business for yourself (including a part-time business or a gig worker).
Note: While you do not have to have a positive "self-employed" income to be considered "self-employed", the SETC is limited by the "self-employed" income listed on Form 1040-SE for the year elected.
*Note- Member of a Partnership: General partners have self-employment income on their percentage of the business income from the partnership, whether it's distributed or not. However, limited partners have self-employment income only on guaranteed payments for services they provide to the partnership.
I understand that I have to have self-employed income in either 2019, 2020 or 2021. Can the 2020 self-employed income be used for both the 2020 and 2021 amendments?
Yes! For 2020, you can elect to use either the 2019 or 2020 self-employed income to qualify. For 2021, you can elect to use either the 2020 or 2021 self-employed income to qualify.
Can a partner in a partnership claim the tax credits?
Maybe. A partner in a partnership is a self-employed individual if the partner's distributive share constitutes net earnings from self-employment or if the partner receives guaranteed payments for services. If the partner is a self-employed individual and is not able to work for reasons related to COVID-19, the partner is eligible for the tax credits.
Generally, partners in a partnership (including members of a limited liability company (LLC) that is treated as a partnership for federal tax purposes) are considered to be self-employed, not employees, when performing services for the partnership.
Is this similar to the PPP program?
The PPP (Paycheck Protection Program) and SETC (Families First Coronavirus Response Act) are two distinct initiatives responding to the economic impact of the COVID-19 pandemic. PPP assists small businesses by providing loans with the potential for loan forgiveness. SETC is not a loan but a credit on taxes individuals have already paid. While PPP supported businesses, SETC focused on helping individuals.
What is the Sick & Family Leave Tax Credit?
The Sick and Family Leave Tax Credit for self-employed and 1099 workers is for eligible self-employed individuals or independent contractors.
Under the FFCRA, eligible self-employed individuals or independent contractors could claim a refundable tax credit against their income tax liability for up to 100% of the qualified sick and family leave equivalent amounts, subject to certain limitations if they were unable to work or telework due to COVID-19-related reasons.
The qualified sick leave equivalent amount was the lesser of either $511 per day or 100% of the average daily self-employment income/260 for each day an individual was unable to work or telework because they were subject to a quarantine or isolation order, had COVID-19 symptoms and were seeking a medical diagnosis, or were caring for someone who was subject to a quarantine or isolation order or who had COVID-19 symptoms.
The qualified family leave equivalent amount was the lesser of either $200 per day or 67% of the average daily self-employment income for each day an individual was unable to work or telework because they needed to care for a child whose school or place of care was closed due to COVID-19.
What documentation do I need to provide?
For the most part, we only require your 2019, 2020, and 2021 tax returns, including your Schedule C and a copy of your driver's license for identification.
What is the Form 1040 SE
A 1040 Schedule SE tax form is one of the schedules in an IRS Form 1040 ("U.S. Individual Income Tax Return”). A Schedule SE is used to calculate individuals’ total self-employment taxes. Self-employment taxes include Social Security and Medicare taxes, similar to those withheld for W-2 employees.
What is the Form 1040-X
An IRS Form 1040-X is an “Amended U.S. Individual Income Tax Return.” Since the FFCRA’s sick leave and family leave tax credits for self-employed individuals now have to be claimed retroactively, claimants must amend their original income tax return(s) to claim the credit(s).
Note: When you use our platform, your IRS Form 1040-Xs are filed on your behalf.
What is Form 7202?
An IRS Form 7202 is the core document used to claim sick leave and family leave tax credits for self-employed individuals. The 7202 is used to detail self-employed individuals’ eligibility and tax credit calculations.
Note: When you use our platform, your IRS Form 7202 is filed on your behalf.
How much are your processing fees?
Our fee schedule is really simple. We charge No upfront fee. After we calculate the amount of your tax credit, if you decide to move forward with the filing, you can have us file your tax returns for 20% of the amount of the credit. Once you receive your refund from the IRS, 20% of your refund amount is then due AFTER you receive your refund. If you do not receive a refund, you owe us nothing.
Does filing for SETC tax credits impact filing my 2023 income taxes?
Filing for the SETC tax credit will not impact filing your 2023 income taxes. To receive SETC tax credits, our team of CPAs will amend the taxes you already filed for 2020 and/or 2021.
How much of a tax credit can I expect to receive?
A few factors go into calculating your tax credit refund amount. The most significant factors would be:
• Your net income from your Schedule C on your 2019, 2020, and 2021 tax returns.
• How many days you were out sick or told to quarantine with Covid-19
• How long you might have cared for a loved one affected by Covid-19.
• How long were schools or daycare centers closed (and you were forced to care for a minor child during the closings).
But the fastest and easiest way to find out how much you qualify for is to simply use our online Tax Credit Calculator
If the taxpayer and spouse both have self-employed income, can they both get the max $32,220, if they each qualified for the max?
Yes. They can both get the max credit but again, they cannot share qualifying COVID days!
Is the Self-Employed Tax Credit (SETC) taxable?
No. Unlike the ERTC, it is not taxable!
How long before I will receive my cash refund?
Once we receive the necessary paperwork from you, we will begin to work on your case immediately and get all the forms filed; then, it is up to the IRS to send your refund directly to you.
For the most part, we find that it usually takes 12–16 weeks to complete the process and receive your cash refund.
What if I have an IRS debt or a Treasury Off-set (State Tax Debt, Child Support, etc) will the IRS take my money?
You’ll need a $0 balance with the IRS to get a check. That means any outstanding or past-due taxes or Treasury Offset must be paid off first, and you’ll receive whatever is left over (if anything).
What is the definition of a dependent?
The IRS defines a dependent as either a qualifying child or relative of the taxpayer. The relative can be your child, stepchild, foster child, sibling, parent, grandparent, grandchild, aunt, uncle, niece, nephew, or certain in-law relationships.
A child must have lived with you for over half of the tax year. Temporary absences, such as for education or medical care, are generally counted as periods of living with you. You must have provided more than half of the relative's total support during the tax year. The relative's gross income must be below a certain threshold determined annually by the IRS (subject to change). It's important to note that these are just general guidelines, and there may be additional rules and exceptions. The IRS provides detailed information in publications such as IRS Publication 501.
A Dependent must be;
• Under age 19 at the end of the tax year and younger than the taxpayer (or the taxpayer's spouse, if filing jointly) or
• A full-time student under the age of 24 at the end of the year and younger than the taxpayer (or spouse, if filing jointly) or
• Any age if permanently and totally disabled at any time during the year.
Examples of a Dependent:
• Child
• Parent
• Brother/Sister
• Stepparent/Stepchild
• Adoptive Daughter/Adoptive Son
• Stepbrother/Stepsister
• Half Brother/Half Sister
• Grandparent/Grandchild
• Son-in-law/Daughter-in-law
• Mother-in-law/Father-in-law
• Brother-in-law/Sister-in-law
• Uncle/Aunt
• Niece/Nephew
What happens in cases of divorce after filing 2020/2021 taxes?
All customers who filed the 2020 and/or 2021 tax returns with a Married Filing Joint status are required by the IRS to have both Taxpayer and Spouses' signatures on the amended tax returns before acceptance. We also require both spouses to verify their identities. However, if you were married and filed as Head of Household or Married Filing Separate, only your signature is required on the amended return(s).
What does it mean to be self-employed?
A self-employed person in the United States, as defined by the Internal Revenue Service (IRS), is generally considered someone to whom the following applies:
• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade or business.
• You are otherwise in business for yourself (including a part-time business or a gig worker).
Our platform is designed to assist sole proprietors, independent business owners, 1099 contractors, freelancers, gig workers, and single-member LLCs taxed as a sole proprietorship or Multi-Member LLCs taxed as a Partnership. We also work with individuals across all industries, including realtors, estheticians, hair stylists, taxi drivers, financial consultants, graphic designers, event staff, and construction workers.
Do I qualify for SETC tax credit if I already received unemployment benefits?
You can still qualify for the SETC tax credit even if you received unemployment benefits. However, you cannot claim the days you received unemployment benefits as days you were not able to work due to COVID-19 related issues.
Note: Unemployment Benefits are not considered Self-employed income for the Self-Employment Tax Credit.
Can I claim SETC tax credits if I am also a W2 employee?
You may still be eligible to claim SETC tax credits as long as you earned self-employment income in addition to your W2 salary during 2020 and/or 2021. If you are also a W2 employee and your employer filed for SETC credits on your behalf, you may not be able to utilize the our platform.
If you receive paid leave benefits as an employee, it may affect the amount of tax credit you can claim as a self-employed individual under the SETC. You cannot claim a double benefit for the same period. However, if your situation as an employee doesn't provide full coverage, there might be potential to claim additional credits based on your self-employment income.
Do weekends count as days I can claim?
Yes, if you missed self-employment work that you would have normally worked on a weekend, then you can claim weekends as days missed.
If you normally don’t work on weekends or your child does not go to school on weekends, you cannot claim credits for weekends that they would not have worked or taken leave anyway. The credits are only available for the days that you would have worked or taken leave if not for the COVID-19-related reasons.
Can I use days I took care of a child other than my own child?
Yes, you may qualify for taking care of a child other than your own under the "Caring for others" section of our portal.
What if my child's school moved to online instruction/classes? Is it considered "closed" for the purpose of the credit?
Yes, if the physical location where your child received instruction or care was closed, the school or place of care is "closed" for purposes of paid sick leave and expanded family and medical leave. This is true even if your child is still expected or required to complete assignments.
Will I get a check or will the refund be deposited in my account?
Refunds for 2020 and 2021 will be sent to you directly by the IRS via check to the address provided on your SETC Amendment Package.
Why do I have to have positive net earnings to qualify for SETC income tax credit?
Positive net earnings are a requirement from the IRS to qualify for the SETC income tax credit. Positive net earnings indicate taxable income against which a credit can be applied. We understand the Covid-19 pandemic effected everyone globally. If you did not have positing earnings in 2020 because of Covid-19 restrictions, we may use your 2019 net income.
What is a Form 1040?
IRS Form 1040 is the standard individual income tax form in the United States, used by taxpayers to report their annual income and calculate their tax liability. To file for the SETC tax credits,we will amend your previously filed IRS Form 1040.
What is a Form 1040X?
IRS Form 1040X is used to amend your previously filed individual tax return. To file for the SETC tax credits, we will amend your previously filed IRS Form 1040 by completing Form 1040-X.
What is a Schedule SE Form 1040?
Schedule SE is a tax form self-employed individuals use to calculate the self-employment tax owed. This tax covers Social Security and Medicare taxes for individuals who work for themselves. Although all businesses may qualify for the SETC tax credits, we can only process self-employed individuals now. To be eligible for the SETC tax credit, a self-employed individual must have self-employment income listed on line 6 of Schedule SE (2020 and 2021) and line 4 of Schedule SE (2019).
What is a Schedule C?
Schedule C is a tax form used by sole proprietors, single-member LLCs, and other self-employed individuals to report their business income and expenses. The form is filed as part of the individual's income tax return (Form 1040), and it helps calculate the net profit or loss from the business, which is then used to determine the individual's overall taxable income. Net income (line 31) from Schedule C calculates self-employment income on line 2 of Schedule SE (Form 1040).
This does not appear in the application. However, it is essential to know that Schedule C feeds into the overall self-employment income calculation on Schedule SE (Form 1040).
What is a Form 7202?
IRS Form 7202 is a tax form used to claim the Families First Coronavirus Response Act (SETC) credits for self-employed individuals. This form must be completed to calculate the total amount of SETC credit self-employed individuals qualify for COVID-19-related reasons.
What is a Form 8821?
IRS Form 8821 is the Tax Information Authorization form. Taxpayers use this form to authorize the release of their tax information to a third party, such as a tax professional, for a specified period. Once signed, Form 8821 allows us to pull your required tax information to accurately calculate your SETC credit and amend the 2020 and/ or 2021 tax returns to file for your SETC tax credits. This form does not authorize the designee to represent the taxpayer before the IRS; it only allows us to receive and inspect confidential tax information. If representation before the IRS is necessary, a separate form, such as Form 2848 (Power of Attorney and Declaration of Representative), would be required.
The Top 5 Most Asked SETC Questions
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Is there a reason why I cannot find information about the Self-Employed Tax Credit (SETC) on the IRS' website?
The “SETC” (Self-Employed Tax Credit) is a colloquial term that refers to the provisional sick and family leave tax credits for self-employed individuals introduced under the FFCRA (Families First Coronavirus Response Act). You will need to started by searching for the FFCRA (Families First Coronavirus Response Act) and find the section indicating how it also applies to self-employed individuals.
Do I have to be self-employed to file for the tax credit refund?
YES. This tax credit is for self-employed individuals, small business owners, freelancers, partners in a partnership that are subject to self-employment taxes, and 1099 contractors only.
Do I have to have positive tax earnings in 2020 to qualify for SETC income tax credit?
No, if you did not have positive earnings in 2020 because of Covid-19 restrictions but were still self-employed in 2020, you may elect to use your 2019 net income if that year has a positive self-employed income.
Do I have to have positive tax earnings in 2021 to qualify for SETC income tax credit?
No, if you did not have positive earnings in 2021 because of Covid-19 restrictions but were still self-employed in 2021, you may elect to use your 2020 net income if that year has a positive self-employed income.
Is there a reason why I cannot find information about the Self-Employed Tax Credit (SETC) on the IRS' website?
The “SETC” (Self-Employed Tax Credit) is a colloquial term that refers to the provisional sick and family leave tax credits for self-employed individuals introduced under the FFCRA (Families First Coronavirus Response Act). You will need to started by searching for the FFCRA (Families First Coronavirus Response Act) and find the section indicating how it also applies to self-employed individuals.
Do I have to be self-employed to file for the tax credit refund?
YES. This tax credit is for self-employed individuals, small business owners, freelancers, partners in a partnership that are subject to self-employment taxes, and 1099 contractors only.
Do I have to have positive tax earnings in 2020 to qualify for SETC income tax credit?
No, if you did not have positive earnings in 2020 because of Covid-19 restrictions but were still self-employed in 2020, you may elect to use your 2019 net income if that year has a positive self-employed income.
Do I have to have positive tax earnings in 2021 to qualify for SETC income tax credit?
No, if you did not have positive earnings in 2021 because of Covid-19 restrictions but were still self-employed in 2021, you may elect to use your 2020 net income if that year has a positive self-employed income.
How much of a tax credit can I expect to receive?
There are a few factors that go into calculating your tax credit refund amount. The biggest factors would be:
- Your net income from your schedule C on your 2019, 2020 and 2021 tax returns.
- How many days you were out sick or told to quarantine with Covid-19
- How long you might have cared for a loved one affected by Covid-19.
- How long any schools or daycare centers were closed (and you were forced to care for a minor child during the closings).
Can I still qualify if I already filed my taxes for 2020 & 2021?
Absolutely Yes! We will need to file an amendment on your tax return. We do this all the time. All we require from you is a copy of your 2019, 2020 and 2021 tax returns and a copy of your drivers license and we’ll handle the rest.
Do I have to fill out a ton of paperwork?
Not at all. We basically have an agreement letter on our website that you’ll need to read, sign and date, you will complete a survey to provide us your information and provide an estimate of your refund. You will also need to upload a copy of your 2019, 2020 and 2021 tax returns and a copy of your drivers license. That’s basically it.
We try to make the process as easy and stress free as we can for you. Once we have your tax returns we’ll take over and get everything filed for you.
Can I claim SETC tax credits if I am also a W2 employee?
You may still be eligible to claim SETC tax credits as long as you earned self-employment income in addition to your W2 salary during 2020 and/or 2021. If you are also a W2 employee and your employer filed for FFCRA credits on your behalf, you may have to decrease the credit fore the FFCRA wages paid.
If you receive paid leave benefits as an employee, it may affect the amount of tax credit you can claim as a self-employed individual under the SETC. You cannot claim a double benefit for the same period. However, if your situation as an employee doesn't provide full coverage, there might be potential to claim additional credits based on your self-employment income.
Furthermore, if you receive paid leave benefits in your capacity as an employee, there could be an impact on the tax credit available to you as a self-employed individual under the FFCRA. It is important to note that claiming a double benefit for the same period is not permissible. However, in cases where your employee status does not offer comprehensive coverage, there may be an opportunity to pursue additional credits based on your self-employment income.
Do I qualify for SETC tax credit if I already received Sick & Family Leave credit on either the 2020 or 2021 returns?
You would only be eligible if you did not FULL UTILIZE the credit(s) on previous return(s). Not full utilized means, did not list the most beneficial self-employed income by electing the highest self-employed income year (2019 or 2020 for the 2020 amendment, or 2020 or 2021 for the 2021 amendment) or you listed less than the actual COVID days in any of the three categories for the years 2020 or 2021.
Is the SETC tax credit based on gross self-employed income or net self-employed income?
In order to qualify for the self-employed tax credit you MUST have a positive NET (after deductions) self-employed income for either 2019, 2020 or 2021 AND qualifying COVID days.
How long before I will receive my cash refund?
To be honest, once we receive the necessary paperwork from you, we will begin to work on your case and get all the forms filed, etc. it is then up to the IRS to send your refund directly to you.
We find for the most part that it usually takes 12-16 weeks to complete the process and receive your cash refund.
If we filed a joint return and my spouse or partner is also self-employed, can we each qualify for the SETC?
Yes, if both of you are self-employed, you could each qualify for up to the maximum amount (under the right circumstances) of $32,220.
Do I qualify for SETC tax credit if I received unemployment benefits during 2020 and/or 2021?
You can still qualify for the SETC tax credit even if you received unemployment benefits. However, you CANNOT claim the days you received unemployment benefits as days you were not able to work due to COVID-19 related issues.
For the SETC credit, do you require a complete copy of my return to be amended?
Yes, for any return to be amended, we require a COMPLETE copy of the return, including all schedules. A complete copy of the return MUST be submitted with the amended return for the return being amended.
Example: If we are amending 2020 by electing to use the 2019 positive self-employed income, we must have a complete copy of the 2020 return.
How much is the SETC credit?
The SETC Tax credit can be up to $32,220, based on your self-employed net earnings in 2020 and 2021.
To calculate your SETC credit, we use your daily average self-employment income (this is your net earnings for the taxable year divided by 260) and the amount of self-employment work missed due to COVID-19-related issues. This allows the IRS to estimate how much you lost in wages for every day you could not work.
Note: The SETC is per qualified taxpayer. If your spouse is also self-employed, you may be eligible for up to another $32,220.
How can I claim the SETC tax credits?
To claim the SETC tax credits, you must determine your eligibility and amend your 2020 and/or 2021 tax returns and their supporting schedules. To amend these returns, it is recommended to use a Certified Public Accountant(CPA) to obtain the best results. This can take countless hours and funds. Or let us do it for you! Our CPA team has created the fastest, safest, and most accessible tool for self-employed individuals and sole proprietors to claim the federal SETC tax credits you deserve.
Why would the IRS just refund my taxes?
Essentially, the federal government is vested in supporting businesses impacted by COVID. They recognize small businesses, including yours, play a crucial role in local and national economies. However, this is a limited-time opportunity and won’t be around forever, so it’s important you get your SETC filed ASAP!
What is the Social Security tax deferral, all about?
If you have employees, you can defer the 6.2% employer portion of Social Security tax for March 27, 2020 through December 31, 2020. Self-employed taxpayers can also postpone the payment of 50% of the Social Security portion of their self-employment tax for the same period.
This is a deferral rather than forgiveness, so those amounts will eventually need to be repaid. Half of the deferred amount was due on December 31, 2021, and the other half was due on December 31, 2022.
Who qualifies for the SETC tax credits?
To qualify for the SETC, you must meet the following criteria
1 Identify as a Self-employed individual. A few examples, but not limited to, include sole proprietorship, independent business owners, 1099 contractors, freelancers, gig workers, and single-member LLC, taxed as a Sole-proprietorship, and general partner of a partnership.
2 Have filed a Schedule SE of IRS Tax Form 1040 in 2020 and/or 2021 with positive net income and paid self-employment tax on your earnings for the years 2019 and/or 2020 and or 2021.
3 Have missed work due to COVID-19-related issues.
Are you eligible for the tax credit if you don’t have health insurance?
Yes. Your eligibility for the Self-Employed Tax Credit (SETC) does not take health insurance coverage into consideration. However, if you are self-employed and need insurance, there are options for health insurance. You may even be eligible to write off the cost of your health insurance premiums by taking advantage of the self-employment health insurance deduction.
What if your child does not have health insurance?
You can claim the Self-Employed Tax Credit (SETC) on Form 7202 whether your child did or did not have health insurance. The credit only takes into account your ability to not work due to no child care or caring for your child. If your child is uninsured, you may be able to get insurance through the Children’s Health Insurance Program (CHIP).
Are costs for unpaid medical bills eligible for the tax credit?
Unpaid medical bills are not eligible for the Self-Employed Tax Credit (SETC). The credit only looks at your average daily wages and the number of missed days.
What qualifies as a reason for claiming SETC?
To qualify for SETC tax credits, you must have missed self-employment work due to COVID-related issues. If you were unable to work because of one of the following reasons, you may be eligible:
• A government agency imposed a quarantine or isolation order related to COVID–19.
• Advised by a health care provider to self-quarantine due to concerns related to COVID–19.
• You cared for an individual who is subject to either of the above two.
• You experienced COVID-19 symptoms while also waiting for an appointment with your doctor.
• You were waiting for COVID-19-related test results and quarantined as a precaution.
• You were getting vaccinated against COVID-19.
• You were experiencing side effects from the COVID-19 vaccine
• You cared for your child because the school or place of care of the child was closed, or the child care provider of such child is unavailable, due to COVID–19
precautions.
• You experienced any other substantially similar condition specified by the secretary of health and human services in consultation with the secretary of the treasury
and the secretary of labor.
What is the definition of quarantine or isolation in the above reason for claiming the SETC?
Federal, state, or local lockdown orders related to COVID-19 Quarantining or isolation order related to COVID-19
What is the definition of childcare in the above reason for claiming the SETC´?
Caring for your child whose school had closed or gone virtual care or caring for your child because your child care provider was unavailable due to COVID-19.
Can more than one parent of guardian claim SETC tax credits simultaneously to care for my child whose school or place of care was closed or went virtual due to COVID-19 related reasons?
Yes, but parents or guardians can not claim the same dates twice.
What is the definition of vaccination in the above reason for claiming the SETC?
A COVID-19 vaccination appointment or time away from your business due to the side effects related to a vaccination.
What is the definition of illness in the above reason for claiming the SETC?
Symptoms of COVID-19 or seeking a medical diagnosis and or sickness due to vaccination side effects or while caring for someone with COVID symptoms.
Are there any limitations to the SETC?
Yes, in addition to the eligibility criteria, there are a few limitations of the SETC should be aware of.
• You will not receive the full SETC amount if you already received wages from an employer for sick or family leave in 2020 or 2021. Your SETC portion will be reduced by the FFCRA wages you received.
• You will not receive the full SETC amount if you received unemployment benefits in 2020 or 2021. Your SETC calculation must exclude these paid through unemployment days.
• You must be a U.S. citizen, permanent resident, or qualifying resident alien.
What dates are eligible for SETC tax credits?
The SETC covers the days you were unable to perform self-employment work from April 1, 2020 - September 30, 2021.
Here is a breakdown of the number of days you could be eligible Childcare related time off - up to 110 days
• 50 days between April 1, 2020 and March 31, 2021
• 60 days between April 1, 2021, and September 30, 2021
Yourself or loved ones - up to 20 days
• 10 days between April 1, 2020 and March 31, 2021
• 10 days between April 1, 2021, and September 30, 2021
You took care of your children who were affected by school or daycare shutdowns.
You took care of someone else/family member who had COVID-19 issues.
How is the credit amount determined?
Self-employed individuals are eligible for FFCRA credit if they are out of work (or telework) due to government quarantine orders, self-quarantine, COVID-19 symptoms and seeking medical diagnosis. The credit is calculated by multiplying the number of days on leave and taking whichever amount is smaller:
• Your average daily self-employment income of year or:
• $511.
If you are unable to work (or telework) to take care of a family member who is under quarantine or to take care of a child whose child care is unavailable, you are still eligible for this credit. The credit is calculated by multiplying the number of days on leave and taking whichever amount is smaller:
• 2/3 of your average daily self-employment income or :
• $200.
We will use line 6 of the Schedule SE on your personal tax return to determine your total self-employed income, which is then divided by 260 (Considered the standard amount of working days in a year) to calculate your daily rate.
From there, we must determine which reason the leave was taken and that will decide what rate can be paid for the dates being claimed. For self-leave, we claim your full daily rate of up to $511/day. Family or childcare leave is calculated as 2/3rds of your pay up to $200/day.
What is the average SETC refund people receive?
The historical average SETC customer has received an SETC refund of $18,520.
How long does it take to receive a refund?
It can take up to three weeks for the IRS to acknowledge the acceptance of your SETC credit application and up to 20 weeks from that acceptance to receive your refund via check or direct deposit.
Why haven't I heard of the SETC tax credits before?
Initially, the SETC focused on employers with W-2 employees. While the CARES Act was passed later that same year with the expansion to provide tax credits to the self-employed, it was not widely publicized. Research shows over 80% of self-employed individuals are unaware they're entitled to the SETC tax credits.
Are there any deadlines for claiming the SETC tax credits?
Yes, the deadline to amend your 2020 and/or 2021 tax return for claiming or adjusting SETC credits is three years from the original due date of the return or within two years from the date you paid the tax, whichever is later. The deadline for filing for the SETC tax credits for your 2020 tax return is April 15, 2024, and Applications for 2021 (or a mix of 2020 and 2021) are due April 15, 2025, unless you filed an extension but would not suggest pushing that limit.
What if I already filed my taxes for 2020 & 2021?
Our CPAs and EAs must file an amended tax return for each year applicable. All we require from you is a copy of your 2019, 2020, and 2021 tax returns and a copy of your driver's license, and we'll handle the rest.
If I have NOT filed 2020 or 2021 tax returns, can I still receive the SETC?
Yes, but your own CPA must first prepare the 1040 and then we will modify those to include the SETC. Be mindful of the refund statute discussed above.
I had no income in 2020. Is the setc based on my 2019 income?
If you are considered "self-employed" in 2020, you may elect to use either the 2019 or 2021 self-employed income. The same applies to 2021. If you are considered "self-employed" in 2021, you may elect to use either the 2020 or 2021 self-employed income.
What is the IRS' definition of being considered "self-employed"?
Generally, you are self-employed if any of the following apply to you;
• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade or business.
• You are otherwise in business for yourself (including a part-time business or a gig worker).
Note: While you do not have to have a positive "self-employed" income to be considered "self-employed", the SETC is limited by the "self-employed" income listed on Form 1040-SE for the year elected.
*Note- Member of a Partnership: General partners have self-employment income on their percentage of the business income from the partnership, whether it's distributed or not. However, limited partners have self-employment income only on guaranteed payments for services they provide to the partnership.
I understand that I have to have self-employed income in either 2019, 2020 or 2021. Can the 2020 self-employed income be used for both the 2020 and 2021 amendments?
Yes! For 2020, you can elect to use either the 2019 or 2020 self-employed income to qualify. For 2021, you can elect to use either the 2020 or 2021 self-employed income to qualify.
Can a partner in a partnership claim the tax credits?
Maybe. A partner in a partnership is a self-employed individual if the partner's distributive share constitutes net earnings from self-employment or if the partner receives guaranteed payments for services. If the partner is a self-employed individual and is not able to work for reasons related to COVID-19, the partner is eligible for the tax credits.
Generally, partners in a partnership (including members of a limited liability company (LLC) that is treated as a partnership for federal tax purposes) are considered to be self-employed, not employees, when performing services for the partnership.
Is this similar to the PPP program?
The PPP (Paycheck Protection Program) and SETC (Families First Coronavirus Response Act) are two distinct initiatives responding to the economic impact of the COVID-19 pandemic. PPP assists small businesses by providing loans with the potential for loan forgiveness. SETC is not a loan but a credit on taxes individuals have already paid. While PPP supported businesses, SETC focused on helping individuals.
What is the Sick & Family Leave Tax Credit?
The Sick and Family Leave Tax Credit for self-employed and 1099 workers is for eligible self-employed individuals or independent contractors.
Under the FFCRA, eligible self-employed individuals or independent contractors could claim a refundable tax credit against their income tax liability for up to 100% of the qualified sick and family leave equivalent amounts, subject to certain limitations if they were unable to work or telework due to COVID-19-related reasons.
The qualified sick leave equivalent amount was the lesser of either $511 per day or 100% of the average daily self-employment income/260 for each day an individual was unable to work or telework because they were subject to a quarantine or isolation order, had COVID-19 symptoms and were seeking a medical diagnosis, or were caring for someone who was subject to a quarantine or isolation order or who had COVID-19 symptoms.
The qualified family leave equivalent amount was the lesser of either $200 per day or 67% of the average daily self-employment income for each day an individual was unable to work or telework because they needed to care for a child whose school or place of care was closed due to COVID-19.
What documentation do I need to provide?
For the most part, we only require your 2019, 2020, and 2021 tax returns, including your Schedule C and a copy of your driver's license for identification.
What is the Form 1040 SE
A 1040 Schedule SE tax form is one of the schedules in an IRS Form 1040 ("U.S. Individual Income Tax Return”). A Schedule SE is used to calculate individuals’ total self-employment taxes. Self-employment taxes include Social Security and Medicare taxes, similar to those withheld for W-2 employees.
What is the Form 1040-X
An IRS Form 1040-X is an “Amended U.S. Individual Income Tax Return.” Since the FFCRA’s sick leave and family leave tax credits for self-employed individuals now have to be claimed retroactively, claimants must amend their original income tax return(s) to claim the credit(s).
Note: When you use our platform, your IRS Form 1040-Xs are filed on your behalf.
What is Form 7202?
An IRS Form 7202 is the core document used to claim sick leave and family leave tax credits for self-employed individuals. The 7202 is used to detail self-employed individuals’ eligibility and tax credit calculations.
Note: When you use our platform, your IRS Form 7202 is filed on your behalf.
How much are your processing fees?
Our fee schedule is really simple. We charge No upfront fee. After we calculate the amount of your tax credit, if you decide to move forward with the filing, you can have us file your tax returns for 20% of the amount of the credit. Once you receive your refund from the IRS, 20% of your refund amount is then due AFTER you receive your refund. If you do not receive a refund, you owe us nothing.
Does filing for SETC tax credits impact filing my 2023 income taxes?
Filing for the SETC tax credit will not impact filing your 2023 income taxes. To receive SETC tax credits, our team of CPAs will amend the taxes you already filed for 2020 and/or 2021.
How much of a tax credit can I expect to receive?
A few factors go into calculating your tax credit refund amount. The most significant factors would be:
• Your net income from your Schedule C on your 2019, 2020, and 2021 tax returns.
• How many days you were out sick or told to quarantine with Covid-19
• How long you might have cared for a loved one affected by Covid-19.
• How long were schools or daycare centers closed (and you were forced to care for a minor child during the closings).
But the fastest and easiest way to find out how much you qualify for is to simply use our online Tax Credit Calculator
If the taxpayer and spouse both have self-employed income, can they both get the max $32,220, if they each qualified for the max?
Yes. They can both get the max credit but again, they cannot share qualifying COVID days!
Is the Self-Employed Tax Credit (SETC) taxable?
No. Unlike the ERTC, it is not taxable!
How long before I will receive my cash refund?
Once we receive the necessary paperwork from you, we will begin to work on your case immediately and get all the forms filed; then, it is up to the IRS to send your refund directly to you.
For the most part, we find that it usually takes 12–16 weeks to complete the process and receive your cash refund.
What if I have an IRS debt or a Treasury Off-set (State Tax Debt, Child Support, etc) will the IRS take my money?
You’ll need a $0 balance with the IRS to get a check. That means any outstanding or past-due taxes or Treasury Offset must be paid off first, and you’ll receive whatever is left over (if anything).
What is the definition of a dependent?
The IRS defines a dependent as either a qualifying child or relative of the taxpayer. The relative can be your child, stepchild, foster child, sibling, parent, grandparent, grandchild, aunt, uncle, niece, nephew, or certain in-law relationships.
A child must have lived with you for over half of the tax year. Temporary absences, such as for education or medical care, are generally counted as periods of living with you. You must have provided more than half of the relative's total support during the tax year. The relative's gross income must be below a certain threshold determined annually by the IRS (subject to change). It's important to note that these are just general guidelines, and there may be additional rules and exceptions. The IRS provides detailed information in publications such as IRS Publication 501.
A Dependent must be;
• Under age 19 at the end of the tax year and younger than the taxpayer (or the taxpayer's spouse, if filing jointly) or
• A full-time student under the age of 24 at the end of the year and younger than the taxpayer (or spouse, if filing jointly) or
• Any age if permanently and totally disabled at any time during the year.
Examples of a Dependent:
• Child
• Parent
• Brother/Sister
• Stepparent/Stepchild
• Adoptive Daughter/Adoptive Son
• Stepbrother/Stepsister
• Half Brother/Half Sister
• Grandparent/Grandchild
• Son-in-law/Daughter-in-law
• Mother-in-law/Father-in-law
• Brother-in-law/Sister-in-law
• Uncle/Aunt
• Niece/Nephew
What happens in cases of divorce after filing 2020/2021 taxes?
All customers who filed the 2020 and/or 2021 tax returns with a Married Filing Joint status are required by the IRS to have both Taxpayer and Spouses' signatures on the amended tax returns before acceptance. We also require both spouses to verify their identities. However, if you were married and filed as Head of Household or Married Filing Separate, only your signature is required on the amended return(s).
What does it mean to be self-employed?
A self-employed person in the United States, as defined by the Internal Revenue Service (IRS), is generally considered someone to whom the following applies:
• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade or business.
• You are otherwise in business for yourself (including a part-time business or a gig worker).
Our platform is designed to assist sole proprietors, independent business owners, 1099 contractors, freelancers, gig workers, and single-member LLCs taxed as a sole proprietorship or Multi-Member LLCs taxed as a Partnership. We also work with individuals across all industries, including realtors, estheticians, hair stylists, taxi drivers, financial consultants, graphic designers, event staff, and construction workers.
Do I qualify for SETC tax credit if I already received unemployment benefits?
You can still qualify for the SETC tax credit even if you received unemployment benefits. However, you cannot claim the days you received unemployment benefits as days you were not able to work due to COVID-19 related issues.
Note: Unemployment Benefits are not considered Self-employed income for the Self-Employment Tax Credit.
Can I claim SETC tax credits if I am also a W2 employee?
You may still be eligible to claim SETC tax credits as long as you earned self-employment income in addition to your W2 salary during 2020 and/or 2021. If you are also a W2 employee and your employer filed for SETC credits on your behalf, you may not be able to utilize the our platform.
If you receive paid leave benefits as an employee, it may affect the amount of tax credit you can claim as a self-employed individual under the SETC. You cannot claim a double benefit for the same period. However, if your situation as an employee doesn't provide full coverage, there might be potential to claim additional credits based on your self-employment income.
Do weekends count as days I can claim?
Yes, if you missed self-employment work that you would have normally worked on a weekend, then you can claim weekends as days missed.
If you normally don’t work on weekends or your child does not go to school on weekends, you cannot claim credits for weekends that they would not have worked or taken leave anyway. The credits are only available for the days that you would have worked or taken leave if not for the COVID-19-related reasons.
Can I use days I took care of a child other than my own child?
Yes, you may qualify for taking care of a child other than your own under the "Caring for others" section of our portal.
What if my child's school moved to online instruction/classes? Is it considered "closed" for the purpose of the credit?
Yes, if the physical location where your child received instruction or care was closed, the school or place of care is "closed" for purposes of paid sick leave and expanded family and medical leave. This is true even if your child is still expected or required to complete assignments.
Will I get a check or will the refund be deposited in my account?
Refunds for 2020 and 2021 will be sent to you directly by the IRS via check to the address provided on your SETC Amendment Package.
Why do I have to have positive net earnings to qualify for SETC income tax credit?
Positive net earnings are a requirement from the IRS to qualify for the SETC income tax credit. Positive net earnings indicate taxable income against which a credit can be applied. We understand the Covid-19 pandemic effected everyone globally. If you did not have positing earnings in 2020 because of Covid-19 restrictions, we may use your 2019 net income.
What is a Form 1040?
IRS Form 1040 is the standard individual income tax form in the United States, used by taxpayers to report their annual income and calculate their tax liability. To file for the SETC tax credits,we will amend your previously filed IRS Form 1040.
What is a Form 1040X?
IRS Form 1040X is used to amend your previously filed individual tax return. To file for the SETC tax credits, we will amend your previously filed IRS Form 1040 by completing Form 1040-X.
What is a Schedule SE Form 1040?
Schedule SE is a tax form self-employed individuals use to calculate the self-employment tax owed. This tax covers Social Security and Medicare taxes for individuals who work for themselves. Although all businesses may qualify for the SETC tax credits, we can only process self-employed individuals now. To be eligible for the SETC tax credit, a self-employed individual must have self-employment income listed on line 6 of Schedule SE (2020 and 2021) and line 4 of Schedule SE (2019).
What is a Schedule C?
Schedule C is a tax form used by sole proprietors, single-member LLCs, and other self-employed individuals to report their business income and expenses. The form is filed as part of the individual's income tax return (Form 1040), and it helps calculate the net profit or loss from the business, which is then used to determine the individual's overall taxable income. Net income (line 31) from Schedule C calculates self-employment income on line 2 of Schedule SE (Form 1040).
This does not appear in the application. However, it is essential to know that Schedule C feeds into the overall self-employment income calculation on Schedule SE (Form 1040).
What is a Form 7202?
IRS Form 7202 is a tax form used to claim the Families First Coronavirus Response Act (SETC) credits for self-employed individuals. This form must be completed to calculate the total amount of SETC credit self-employed individuals qualify for COVID-19-related reasons.
What is a Form 8821?
IRS Form 8821 is the Tax Information Authorization form. Taxpayers use this form to authorize the release of their tax information to a third party, such as a tax professional, for a specified period. Once signed, Form 8821 allows us to pull your required tax information to accurately calculate your SETC credit and amend the 2020 and/ or 2021 tax returns to file for your SETC tax credits. This form does not authorize the designee to represent the taxpayer before the IRS; it only allows us to receive and inspect confidential tax information. If representation before the IRS is necessary, a separate form, such as Form 2848 (Power of Attorney and Declaration of Representative), would be required.
Applying for SETC
The application process for the SETC is designed to be straightforward, allowing eligible individuals to claim their tax credits with minimal hassle. The ARP outlines a clear procedure for calculating the credit amount, which takes into account the duration and reason for the leave, capped at specific daily and aggregate amounts. Applicants are advised to meticulously document their eligibility, including the nature of the COVID-19 related leave and any health plan expenses, to ensure a smooth application process.
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The application process for the SETC is designed to be straightforward, allowing eligible individuals to claim their tax credits with minimal hassle. The ARP outlines a clear procedure for calculating the credit amount, which takes into account the duration and reason for the leave, capped at specific daily and aggregate amounts. Applicants are advised to meticulously document their eligibility, including the nature of the COVID-19 related leave and any health plan expenses, to ensure a smooth application process.