The Complete Guide to the Self-Employed Tax Credit (SETC)
Individuals can still claim their Self-Employed Tax Credit (SETC), worth up to $32,220, under the FFCRA. Here is everything you need to know.
By Gigworkersolutions.co
Published December 14, 2023
Key Takeaways
- The SETC allows qualified individuals to claim up to $32,220 under the FFCRA
- You may qualify for the SETC if:
- You were self-employed during 2020/2021
- COVID impacted your ability to work
- The SETC is calculated based on your Schedule SE income and:
- Qualified sick leave days (up to 20 days)
- Qualified Family leave days (up to 110 days)
What is the Self-Employed Tax Credit (SETC)?
The Self-Employed Tax Credit refers to the sick leave and family leave tax credits for self-employed individuals provided under the FFCRA. The SETC allows qualified individuals to claim up to $32,220 in tax credits for 2020 and 2021.
More than 63 million self-employed individuals were active during 2020 and 2021, but less than 80% of people have even heard of the SETC, let alone claimed it.
Did You Know?
Americans Qualify for the SETC
Have NEVER heard of it
Introduction to the FFCRA
The Families First Coronavirus Response Act (FFCRA) was originally signed into law on March 18th 2020 with the main goal of providing paid leave to employees affected by the pandemic.
It legislated that employers must provide paid sick leave and paid family leave to all employees who were unable to work due to complications related to the pandemic, including sickness, testing, quarantine, lockdown etc. In providing qualified paid leave to employees, the employer could claim a tax credit based on duration and amount of paid leave provided.
The FFCRA also provided these tax credits to self-employed individuals, as they hold both an employer and employee position in the economy. The Self-Employed Tax Credit (SETC) refers specifically to the sick leave and family leave tax credits for self-employed individuals provided under the FFCRA.
Who is Eligible for the SETC Tax Credit?
There are TWO main eligibility criteria that determine if you qualify for the SETC.
- Self-Employment status during 2020/2021
- COVID impacts on your ability to work.
Were You Self-Employed During COVID?
You are considered self-employed if you are a sole proprietor, freelancer, independent contractors, gig worker, etc. Generally anyone who filed a Chedule SE (IRS Form 1040) will qualify as self-employed. See examples below.
- Accountants and Bookkeepers
- Airbnb Hosts
- Copywriters
- Construction Workers
- Consultants
- Graphic Designers
- General Practitioners
- Personal Trainers
- Photographers
- Rideshare and Delivery Drivers
- Real Estate Agents
- Website Designers
Did COVID Impact Your Ability to Work?
Were you unable to work or telework due to implications surrounding the COVID-19 Pandemic? Whether you missed work because you were sick, went through testing, was in quarantine, was in lockdown, or was caring for another person (child, spouse, elder etc.) who was affected by COVID-19.
Note that to qualify for this credit your Schedule SE from 2020 or 2021 must report a positive net income, and you must have paid self-employment taxes on your earnings. As for COVID impacts, you don’t have to formally “prove” with documentation that COVID had an impact on your work, rather you will give an attestation in good faith.
How is the SETC calulated?
The Self-Employed Tax Credit is calculated based on your qualified income in 2020/2021 and the number of qualified days the pandemic impacted your ability to work. The calculation is split into qualified sick leave days and qualified family leave days.
- Qualified Sick Leave Days: the days you were unable to work because you were personally affected by COVID-19.
- Qualified Family Leave Days: the days you were unable to work because you were caring for another person who was affected by COVID-19
How to Calculate Qualified Sick Leave
It’s possible to claim up to 20 days for qualified sick leave; 10 days in the period between April 1st, 2020, and March 31st, 2021, and 10 days in the period between April 1st 2021, and September 30, 2021.
For each qualified sick leave day, qualifed individuals may claim the lesser of $511 per day OR their average daily self-employed income. The maximum claim for sick leave is therefore: $511 * 20 days = $10,220.
How to Calculate Qualified Family Leave
It’s possible to claim up to 110 days for qualified family leave; 50 days in the period between April 1st, 2020, and March 31st, 2021, and 60 days in the period between April 1st 2021, and September 30, 2021.
For each qualified family leave day, qualifed individuals may claim the lesser of $200 per day OR 67% of their average daily self-employed income. The maximum claim for sick leave is therefore: $200 * 110 days = $20,000.
How to Apply for the SETC?
Gig Worker Solutions has partnered with Anchor Accounting Services to create the most seamless SETC application process possible. With our self-serve platform, you can get your application started in as little as 5 minutes.
Just follow these simple steps:
- Create Your Free Account at Gig Worker Solutions
- Click “Calculate Your Credit!”
- Fill out the questions to get your credit estimate
- Upload your documents
- Collect your money
