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SETC Tax Credit Qualification Explained
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 important relief measure designed to assist independent workers affected by the COVID-19 pandemic. By providing financial relief in the form of returnable tax benefits, the SETC aids freelancers, gig workers, and sole proprietors make up for lost revenue due to sickness, quarantine, or the need to care for others.

This thorough walkthrough will guide you through the eligibility standards for the SETC, the application process for the credit, and ways to make sure you get the most from your claim.


What is the SETC?
The SETC, established through the FFCRA and later expanded through additional COVID-19 support laws, was designed specifically to address the needs of self-employed individuals who do not have access to sick leave through an employer or family leave benefits. The credit compensates independent contractors who were unable to work because of COVID-19-related circumstances, whether from sickness or because they were caring for others impacted by the virus.


Qualification Criteria for the SETC
1. Self-Employment Status

To be qualify for the SETC, you must be recognized as self-employed, which includes:


Freelancers, independent contractors, and gig workers
Business owners with no employees
Business partners or members of a Limited Liability Company (LLC) that files taxes as a sole proprietor

You must have submitted Schedule SE with your IRS Form 1040 for the 2020 or 2021 tax year, showing your self-employment income. Even SETC qualifications with part-time self-employment can qualify, as long as they meet the income requirements and can document lost income.

Pandemic-Related Criteria

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


Quarantine or Isolation: If you were required to isolate due to a local, state, or federal quarantine order.
Health Issues Due to COVID-19: If you were diagnosed with COVID-19 or showed symptoms that stopped you from working, you can claim the credit.
Care for Others: If you were unable to do your job because you were responsible for caring for 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.
Childcare Disruptions: If pandemic-related closures of schools or childcare facilities stopped you from working, you are eligible for the family leave portion of the credit.


How the SETC is Calculated
The SETC is figured out based on your average daily self-employment income and can be filed in two main categories:

Credit for Sick Leave:


You can receive 10 days of missed work due to sickness, quarantine, or self-isolation. The highest amount you can claim is 100% of your average daily income, capped at $511 per day. For those who couldn’t work for the full amount 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 designed for those who were unable to work because they needed to care for someone impacted by COVID-19 or because childcare facilities were closed. 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 possibly request up to $32,220 in total relief across the two years.


Documentation Required to Claim the SETC
Homepage: https://officialsetcrefund.com/learn/setc-tax-credit-legitimacy-who-qualifies-how-to-apply-irs-information/