What Is The Self-Employed Tax Credit?
The self-employed tax credit was created under the Family First Coronavirus Response Act (FFCRA) and extended by the American Rescue Plan Act (ARP). It is a financial aid program for self-employed individuals, freelancers, and independent contractors. This credit aims to compensate those who experienced a loss of income due to COVID-19 related reasons.
How Is The Credit Calculated?
The SETC credit is calculated based on the number of days you couldn’t work due to COVID-19 and your net earnings from self-employment (From your schedule C or schedule SE). You get a daily amount for up to 10 days if you were sick or quarantined, and for up to 50 or 60 days for caring for someone else or due to school closures, depending on the year. Your daily earnings are determined by dividing your annual net self-employment income by 260 days.
How Do I Receive My Credit?
You’ll receive your credit directly from the IRS in the form of a check mailed to your home. The processing time can vary, typically ranging between 16 to 24 weeks from the time of your application submission.
Can I Receive My Credit If I Was A W2 Employee And Self-Employed?
Yes, if you were both a W2 employee and self-employed, you can still qualify for the tax credit, as long as your self-employed work meets the SETC program’s eligibility criteria. However, if you already claimed your full sick and family leave as a W2 employee, you may not be eligible to receive more.
How Do I know If I Am Eligible To Receive The Credit?
Here are the qualifications:
- Self-Employment Status: You must have earned income as a self-employed individual, freelancer, or independent contractor during 2020 or 2021.
- Impact of COVID-19 – You were unable to work due to:
- COVID-19 illness
- Quarantine
- Caring for a family member affected by COVID-19
- Childcare unavailability because of COVID-19
Income Criteria: Having net positive earnings from self-employment in the tax years you’re claiming the credit for. This means that you paid taxes on your self-employed income, which should be reported on schedule SE form 1040 from the IRS.
What Defines A Self-Employed Individual For The SETC Program?
For the SETC program, a self-employed individual is defined as someone who earns income directly from their own business, trade, or profession, rather than as an employee of another company. This includes freelancers, independent contractors, sole proprietors, and members of partnerships. To be considered self employed for this credit you will also need to have a schedule C and or schedule SE in your tax returns.
Is The SETC Program legit?
Yes the SETC credit is 100% legit. The program was created by the government to help self-employed individuals who were financially affected by COVID. Thousands of people have already successfully received their return.
Can I Still Apply If I Have Already Filed My Taxes?
Yes! Filing your 2023 taxes does not impact your ability to claim your SETC refund check. Remember, if you still owe taxes, the refund check will automatically be applied to your back taxes balance.
What Are Some Examples Of Qualifying Work?
Some examples of self-employed work that would qualify you for the self-employed tax credit are:
- Business owner: Product, trade, or any other service performed under your own business.
- Independent Contract, Freelance, or Gig work: Some examples include, but are not limited to:
a. Delivery Services: Independent contractors may work for delivery companies like DoorDash, Grubhub, Uber Eats, FedEx, UPS, or Amazon Flex, delivering packages or food orders.
b. Construction: Independent contractors in construction may include carpenters, electricians, plumbers, painters, and general contractors who are hired to complete specific projects or tasks.
c. Ridesharing and Transportation: Drivers for companies like Uber, Lyft, or taxi services operate as independent contractors, providing transportation services to passengers.
d. Consulting: Independent contractors in consulting offer their expertise and services in various fields such as management consulting, IT consulting, marketing consulting, or financial consulting.
e. Event Planning: Independent contractors in event planning may include event coordinators, wedding planners, or corporate event organizers who are hired to plan and execute events for clients.
f. Creative Arts: Artists, musicians, actors, and performers often work as independent contractors, taking on freelance gigs or projects such as exhibitions, performances, or commissioned work.
g. Information Technology (IT): Independent contractors in IT may work as software developers, web designers, IT consultants, or cybersecurity experts, providing services to businesses on a contract basis.
h. Healthcare: Independent contractors in healthcare include physicians, traveling nurses, therapists, or medical specialists who provide temporary or specialized services to healthcare facilities.
i. Freelance Writing and Editing: Writers, editors, and journalists often work as independent contractors, providing content creation, editing, or proofreading services to clients.
j. Personal Services: Independent contractors in personal services may include hairstylists, personal trainers, massage therapists, or private tutors who offer their services on a freelance basis.
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