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SETC Tax Credit Qualification Explained
SETC Tax Credit: Detailed Guide to Qualification for Self-Employed Individuals
The Self-Employed Tax Credit (SETC), as part of the Families First Coronavirus Response Act (FFCRA), is a significant relief measure intended to support freelancers financially impacted by the COVID-19 pandemic. By giving economic support in the form of refundable tax credits, the SETC supports freelancers, gig workers, and sole proprietors reclaim lost earnings due to sickness, quarantine, or the need to care for others.

This detailed overview will walk you through the specific requirements for the SETC, steps to apply for the credit, and steps to guarantee you get the most from your claim.


What is the SETC?
The SETC, established through the FFCRA and later expanded through other pandemic relief measures, was created specifically to meet the demands of independent workers who do not have access to sick leave through an employer or paid family leave. Refundable tax credit meaning compensates independent contractors who were prevented from working because of COVID-19-related circumstances, whether because of illness or because they were providing care affected by the virus.


Eligibility for the SETC
1. Self-Employment Status

To be qualify for the SETC, you must be classified as self-employed, which covers:


Contract-based workers, gig workers, and gig workers
Business owners with no employees
Partners in a business or members of a Limited Liability Company (LLC) treated as a sole proprietorship for tax purposes

You must have filed Schedule SE with your IRS Form 1040 for the 2020 or 2021 tax year, indicating your self-employment income. Even part-time freelancers can qualify, as long as they satisfy the income thresholds and can show a loss of income.

2. COVID-19 Impact

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


Quarantine or Isolation: If you were required to isolate due to a local, state, or federal quarantine order.
COVID-19 Symptoms or Diagnosis: If you were tested positive for COVID-19 or showed symptoms that made it impossible to work, you qualify for the credit.
Providing Care for Someone: If you were unable to do your job because you had to take care of someone affected by COVID-19, or if childcare or schools were shut down because of COVID-19, you can claim the family leave portion of the SETC.
Childcare: If pandemic-related closure of childcare centers impacted your ability to work, you are eligible for the family leave portion of the credit.


Calculation of the SETC
The SETC is determined based on your average daily self-employment income and can be filed in two main categories:

Credit for Sick Leave:


You can request 10 days of missed work due to sickness, quarantine, or self-isolation. The limit you can claim is 100% of your average daily income, up to $511 per day. For those who couldn’t work for the maximum number of 10 days due to illness, the total credit for sick leave could be as high as $5,110 per tax year.

2. Family Leave Credit:


The family leave credit is aimed at those who were unable to work because they were responsible for someone suffering from COVID-19 or due to childcare closures. In this case, you can claim 67% of your average daily self-employment income, capped at $200 per day. The credit is available for up to 50 days in each year, allowing for a maximum family leave credit of $10,000 for 2020 and $12,000 for 2021.

Combined Maximum: Across both the sick leave and family leave credits, self-employed individuals can potentially claim up to $32,220 in total relief across the two years.


Documentation Required to Claim the SETC
My Website: https://officialsetcrefund.com/learn/refundable-tax-credits-explained/