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SETC

SELF-EMPLOYED Tax credit

WHAT IS IT?

The Self-Employed Tax Credit (SETC) is a government initiative aimed at supporting self-employed individuals by offering a tax credit to reduce their taxable income. It acknowledges the unique financial challenges faced by those not traditionally employed, providing a much-needed financial buffer.

ELIGIBILITY CRITERIA

    • Self-Employed Individuals: If you earn income through freelance work, running a business, or as an independent contractor, you might be eligible.
    • Income Thresholds: Eligibility often depends on your net income from self-employment. Specific thresholds can vary, so it’s important to check the current year’s guidelines. 
    • Tax Status: You must be up to date on your tax filings and comply with all tax laws relevant to self-employed individuals.

    HOW TO APPLY

    • Determine Eligibility: Review the detailed eligibility criteria from the IRS.
    • Gather Documentation: Compile financial statements, tax returns, and any other required documents.

    • File Your Taxes: Apply for the SETC when filing your annual tax return. Ensure you follow the guidelines for the correct form and section.

    BENEFITS

    OF SETC

    • Reduced Tax Liability: Directly lowers the amount of tax you owe, potentially saving you significant money.
    • Reinvestment in Your Business: Freed-up funds can be reinvested into your business, helping spur growth and stability.
    • Encourages Entrepreneurship: By offering financial incentives, the SETC supports the entrepreneurial spirit, contributing to economic diversity.

    F.A.Q.

    Do I have to be self-employed to file for the tax credit refund?

    Yes. This tax credit is for self-employed individuals, small business owners, freelancers, partners in a partnership that is subject to self-employment taxes, and 1099 contractors only.

    Why can't I find details about the SETC on the IRS website?

    The “SETC” (Self-Employed Tax Credit) is a colloquial term that refers to the provisional sick and family leave tax credits for self-employed individuals introduced under the FFCRA (Families First Coronavirus Response Act). You will need to started by searching for the FFCRA (Families First Coronavirus Response Act) and find the section indicating how it also applies to self-employed individuals.

    What is the Difference Between SETC and FFCRA?

    The “SETC” (Self-Employed Tax Credit) is a colloquial term that refers to the provisional sick and family leave tax credits for self-employed individuals introduced under the FFCRA (Families First Coronavirus Response Act). There is no distinguishing difference besides SETC is for self-employed individuals and FFCRA for employees.

    How much of a tax credit can I expect to receive?

    Individuals can still claim their Self-Employed Tax Credit (SETC) for up to the maximum amount of $32,220, based on your self-employed net earnings in 2020 and 2021.

    There are a few factors that go into calculating your tax credit refund amount. The biggest factors would be:

    1. Your net income from your schedule C on your 2019, 2020 and 2021 tax returns.
    2. How many days you were out sick or told to quarantine with Covid-19
    3. How long you might have cared for a loved one affected by Covid-19.
    4. How long any schools or daycare centers were closed (and you were forced to care for a minor child during the closings).

    But the fastest and easiest way to find out how much you qualify for is to simply use our online Tax Credit Calculator.

    Note: The SETC is per qualified taxpayer.  If your spouse is also self-employed, you may be eligible for up to another $32,220.