Introduction
TheSelf-EmployedTaxCredit(SETC)isasignificantfinancialreliefprogramintroducedundertheFamiliesFirst CoronavirusResponseAct(FFCRA)tosupportself-employedworkersimpactedbytheCOVID-19pandemic.The SETCprovidesrefundabletaxcreditsofupto$32,220foreligibleself-employedworkerswhowereunabletoworkdue toCOVID-relatedcircumstancesin2020and2021.
SETCTaxCreditEligibilityRequirements
ToqualifyfortheSETCtaxcredit,youmust:
Beself-employed(soleproprietorship,freelancer,gigworker,orpartnershipmember)HavefiledaScheduleSE (Form1040)for2020or2021,reportingpositivenetincomeandpayingself-employmenttaxesHavebeenunable toworkorteleworkduetoCOVID-19reasons,suchashavingthevirus,beingunderquarantine,orcaringfor someoneaffectedbythepandemicClaimthecreditforeligibletimeperiodsbetweenApril1,2020,andSeptember 30,2021
Ifyouhavebothself-employmentincomeandW-2earnings,youmaystillbeeligible,butyourSETCwillbeadjustedto preventdouble-dippingifyoureceivedpaidleavebenefitsthroughyouremployerundertheFFCRA.
SETCTaxCreditBenefits
TheSETCtaxcreditcanprovidesubstantialfinancialrelieftoself-employedworkers:
Upto$32,220inrefundabletaxcreditsfor2020and2021combinedCreditsarebasedonyouraveragedailyselfemploymentincomeandthenumberofdaysyouwereunabletoworkduetoCOVID-19Theaveragecredit amountisaround$9,000,butcanvarybasedonindividualcircumstancesSETCisnottaxableincomeanddoes notaddtoyourtaxburden
HowtoClaimtheSETCTaxCredit
ClaimingtheSETCtaxcreditinvolvesamendingyour2020and/or2021taxreturns:
Gatherrequireddocuments,suchas2019-2021taxreturns,ScheduleSE,andrecordsofCOVID-impacteddays CompleteIRSForm7202fortheapplicabletaxyearstocalculateyourcreditamountAmendyourtaxreturns (Form1040-X)toclaimthecreditsSubmitamendedreturnsandwaitfortheIRStoprocessyourrefund(cantake upto20weeks)
Manyself-employedworkersopttoworkwithataxprofessionaltoensure setctaxcreditaccuracyandmaximizetheir credit.Servicestypicallychargeaprocessingfeeplusapercentageofthecreditreceived.
SETCTaxCreditDeadlines
ThedeadlinesforclaimingtheSETCtaxcreditare:
For2020taxes:April15,2024For2021taxes:April15,2025
It’simportanttofileamendedreturnsclaimingtheSETCbeforethesedeadlinestoreceiveyourcredits.
Conclusion
TheSelf-EmployedTaxCreditgivesmuch-neededfinancialsupporttoself-employedpeoplewhoselivelihoodswere disruptedbytheCOVID-19pandemic.Ifyouqualifybasedontheeligibilitycriteria,amendingyour2020and2021tax returnstoclaimtheSETCcanoffersubstantialtaxreliefofupto$32,220.WiththeApril15,2024deadlineapproaching for2020credits,nowisthetimeforself-employedworkerstoinvestigatethisvaluableopportunity.