What is the SETC Tax Credit?

Were you self-employed during Covid and was your business impacted? You could receive up to $32,000 back with the SETC Tax Credit!

What is the SETC Tax Credit?

Need assistance as a self-employed individual recovering from COVID-19? We’ve got your back! You may be eligible for a generous tax credit of up to $32,200 through the Self-Employed Tax Credit (SETC). This special credit is specifically designed to support self-employed individuals during the challenging times of the pandemic. We understand the unique difficulties faced by those who work for themselves, especially when dealing with illness, caregiving responsibilities, quarantine, and other related situations. The SETC is here to lend a helping hand by bridging financial gaps caused by unforeseen disruptions. Take advantage of this valuable resource and let us assist you on your journey to recovery!

SETC Tax Credit

What is Required to Be Eligible for the SETC Tax Credit?

Self-Employment Status

If you were self-employed in 2020 and/or 2021. Including:

  • Sole proprietors who run businesses with employees
  • 1099 subcontractors, and single-member LLCs.
  • If you filed a “Schedule C” or a Partnership (1065) on your federal tax returns for 2020 and/or 2021

If you have been affected by COVID-19, whether it was through personal illness, experiencing similar symptoms, needing to isolate, getting tested, or taking care of a family member who caught the virus, the SETC can provide you with financial assistance.

4 Simple Steps

  1. Fill Out Questionnaire – Click here to complete the questionnaire to determine your eligibility. If you already have a MyDailyChoice account, please log in there and you will see the SETC Tax Credit application.
  2. Sign Engagement Letter – Our accounting firm will gather information from you in order to determine the tax credit you are eligible for.
  3. Pay Filing Fee – After submitting your payment, you’ll be placed in a queue to receive your funds.
  4. Receive Your Money – You will receive a check from the US Treasury via mail, sent to the address provided on your tax returns.

SETC Tax Credit Frequently Asked Questions

In 2020, the Families First Coronavirus Response Act (FFCRA) was passed to provide support for small business owners who needed help covering sick leave for their employees during the COVID-19 pandemic.

Initially, the FFCRA only applied to employees working for specific small businesses. However, in 2021, it was expanded to include self-employed US citizens who experienced business losses due to lockdowns or illnesses affecting themselves or their family members.

You can claim FFCRA income tax credit for dates from April 1, 2020 to March 31, 2021, and for up to 10 days between April 1, 2021 and September 30, 2021.

Here’s the breakdown:

Childcare-related time off – up to 110 days

– 50 days from April 1, 2020 to March 31, 2021
– 60 days from April 1, 2021 to September 30, 2021

Time off for yourself or a loved one (other than a child) – up to 20 days

– 10 days from April 1, 2020 to March 31, 2021
– 10 days from April 1, 2021 to September 30, 2021

To be eligible for FFCRA credits, you must have missed work due to COVID-related reasons. If any of the following apply to you, you may qualify:

– A quarantine or isolation order was imposed by a government agency.
– Your doctor recommended self-quarantine.
– You had COVID-19 symptoms while waiting for a doctor’s appointment.
– You were awaiting COVID-19 test results.
– You were receiving the COVID-19 vaccine.
– You experienced side effects from the COVID-19 vaccine.
– You had to take care of your children due to school or daycare closures.
– You provided care for someone else or family members affected by COVID-19.

Self-employed individuals can receive the FFCRA credit if they are unable to work or telework due to various reasons such as government quarantine orders, self-quarantine, COVID-19 symptoms, or the need for medical diagnosis. The credit amount is determined by multiplying the number of days on leave and selecting the smaller value between your average daily self-employment income for the year or $511. Even if you are unable to work or telework because you need to care for a family member under quarantine or a child without available childcare, you are still eligible for this credit. Again, the credit is calculated by multiplying the number of days on leave and taking the smaller of the two amounts.

Your self-employment income can be used to calculate your leave pay. We’ll take 2/3 of your average daily income or $200, whichever is higher. To determine your daily rate, we’ll use line 6 of your Schedule SE from your personal tax return, dividing your annual pay by 260 (the standard number of working days in a year).

Next, we’ll consider the reason for your leave to determine the rate for the claimed dates. If it’s self leave, you’ll receive your full daily rate, up to $511 per day. For family or childcare leave, you’ll receive 2/3 of your pay, up to $200 per day.

The IRS typically takes around three weeks to confirm the acceptance of your FFCRA credit application. Once approved, it may take up to 20 weeks to receive your refund through either a check or direct deposit.

The maximum amount you can receive for the FFCRA Tax credit is $32,200.00. It depends on your net earnings in both 2020 and 2021.

To figure out your daily average of self-employment income, divide your net earnings for the tax year by 260 (the typical number of working days in a year). This calculation helps the IRS estimate the amount of wages you lost for each day you couldn’t work.

In the US, a person is typically considered self-employed according to the IRS if they meet any of the following criteria:

  • Engaging in a trade or business as a sole proprietor or independent contractor.
  • Being a member of a partnership involved in a trade or business.
  • Being involved in a business of their own, including part-time or gig work.

The IRS defines a dependent as either a qualifying child or relative of the taxpayer. The relative can be your child, stepchild, foster child, sibling, parent, grandparent, grandchild, aunt, uncle, niece, nephew, or certain in-law relationships.

The Child Tax Credit helps families with qualifying children get a tax break. To have received a Child Tax credit or a credit for other dependents, you would have had to submit a Schedule 8821.

A child must have lived with you for more than half of the tax year. Temporary absences, such as for education or medical care, are generally counted as periods of living with you. You must have provided more than half of the relative’s total support during the tax year. The relative’s gross income must be below a certain threshold determined annually by the IRS (subject to change). It’s important to note that these are just general guidelines, and there may be additional rules and exceptions. The IRS provides detailed information in publications such as IRS Publication 501.

Examples of a Dependent:

  • Child
  • Parent
  • Brother/Sister
  • Stepparent/Stepchild
  • Adoptive Daughter/Adoptive Son
  • Stepbrother/Stepsister
  • Half Brother/Half Sister
  • Grandparent/Grandchild
  • Son-in-law/Daughter-in-law
  • Mother-in-law/Father-in-law
  • Brother-in-law/Sister-in-law
  • Uncle/Aunt
  • Niece/Nephew

Unfortunately, it is not possible to receive double benefits for days when you have already received payments from your unemployment insurance claims.

If you typically work on weekends or your child attends school or daycare during the weekend, you can include those days. However, if you don’t normally work on weekends or your child doesn’t go to school on weekends, you cannot claim credits for those specific days. The credits are only applicable for the days when you would have worked or taken leave if it wasn’t for the COVID-19-related circumstances.

Absolutely! The FFCRA was specifically created to address this very situation, particularly as many small business owners fit into this group.

No. you can only use days you took care of your dependent.

Yes. If the physical location where your child received instruction or care is now closed, the school or place of care is “closed” for purposes of paid sick leave and expanded family and medical leave. This is true even if your child is still expected or required to complete assignments.

Refunds for 2020 and 2021 will be sent to you directly by the IRS via check to the address provided on your FFCRA application.

We’re sorry but Jorns is unable to help W2 employees with filing for the FFCRA. You may still qualify for credit depending on if your employer filed for the FFCRA on your behalf. Consult a CPA for your specific situation.

The Child Tax Credit helps families with qualifying children get a tax break. To have received a Child Tax credit or a credit for other dependents, you would have had to submit a Schedule 8821

We understand Covid-19 pandemic effected everyone globally. If you did not have positive earnings in 2020 because of Covid-19 restrictions, we can use your 2019 net income.

Yes, but parents can not claim the same dates twice.

FFCRA is a tax credit not a loan. It is also not considered a grant as it’s a refund of taxes you’ve already paid.

Disclaimer

Please note that MyDailyChoice is an independent entity and is not associated with, endorsed by, or officially affiliated with the Internal Revenue Service (IRS) or any of its subsidiaries or affiliates. For official IRS information, please visit www.irs.gov. The term “IRS,” along with any related names, logos, symbols, and images, is the property of their respective owners and is registered as their trademark. Any mentions of the IRS on our website are solely for the purpose of providing information and commentary on relevant topics and are intended for informational use only. We do not assert any representation or special relationship with the IRS. If you have inquiries or issues related to taxes or the IRS, we recommend contacting the IRS directly.