Introduction
TheSelf-EmployedTaxCredit(SETC)isavaluablefinancialreliefprogramimplementedundertheFamiliesFirst CoronavirusResponseAct(FFCRA)tosupportself-employedpeopleimpactedbytheCOVID-19pandemic.TheSETC providesrefundabletaxcreditsofupto$32,220foreligibleself-employedworkers employertaxincentivewhowere unabletoworkduetoCOVID-relatedcircumstancesin2020and2021.
SETCTaxCreditEligibilityRequirements
ToqualifyfortheSETCtaxcredit,youmust:
Beself-employed(soleproprietorship,freelancer,gigworker,orpartnershipmember)HavefiledaScheduleSE (Form1040)for2020or2021,reportingpositivenetincomeandpayingself-employmenttaxesHavebeenunable toworkorteleworkduetoCOVID-19relatedissues,suchashavingthevirus,beingunderquarantine,orcaring forsomeoneaffectedbythepandemicClaimthecreditforeligibletimeperiodsbetweenApril1,2020,and September30,2021
Ifyouhavebothself-employmentincomeandW-2earnings,youmaystillbeeligible,butyourSETCwillbeadjustedto preventdouble-dippingifyoureceivedpaidleavebenefitsthroughyouremployerundertheFFCRA.
SETCTaxCreditBenefits
TheSETCtaxcreditcanprovidesubstantialfinancialrelieftoself-employedindividuals:
Upto$32,220inrefundabletaxcreditsfor2020and2021combinedCreditsarebasedonyouraveragedailyselfemploymentincomeandthenumberofdaysyouwereunabletoworkduetoCOVID-19Theaveragecredit amountisaround$9,000,butcanvarybasedonindividualcircumstancesSETCisnottaxableincomeanddoes notaddtoyourtaxburden
HowtoClaimtheSETCTaxCredit
ClaimingtheSETCtaxcreditentailsamendingyour2020and/or2021taxreturns:
Gatherrequireddocuments,suchas2019-2021taxreturns,ScheduleSE,andrecordsofCOVID-impacteddays CompleteIRSForm7202fortheapplicabletaxyearstocalculateyourcreditamountAmendyourtaxreturns (Form1040-X)toclaimthecreditsSubmitamendedreturnsandwaitfortheIRStoprocessyourrefund(cantake upto20weeks)
Manyself-employedworkersopttoworkwithataxprofessionaltoensureaccuracyandmaximizetheircredit.Services typicallychargeaprocessingfeeplusapercentageofthecreditreceived.