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Introduction



The Self-Employed Tax Credit (SETC) is a important financial relief program introduced under the Families First Coronavirus Response Act (FFCRA) to support self-employed workers impacted by the COVID-19 pandemic. The SETC provides refundable tax credits of up to $32,220 for eligible self-employed workers who were unable to work due to COVID-related circumstances in 2020 and 2021.





SETC Tax Credit Eligibility Requirements



To qualify for the SETC tax credit, you must:



















  • Be self-employed (sole proprietorship, freelancer, gig worker, or partnership member)
















  • Have filed a Schedule SE (Form 1040) for 2020 or 2021, reporting positive net income and paying self-employment taxes
















  • Have been unable to work or telework due to COVID-19 related issues, such as having the virus, being under quarantine, or caring for someone affected by the pandemic
















  • Claim the credit for eligible time periods between April 1, 2020, and September 30, 2021


















If you have both self-employment income and W-2 earnings, you may still be eligible, but your SETC will be adjusted to prevent double-dipping if you received paid leave benefits through your employer under the FFCRA.





SETC Tax Credit Benefits



The SETC tax credit can give substantial financial relief to self-employed people:



















  • Up to $32,220 in refundable tax credits for 2020 and 2021 combined
















  • Credits are based on your average daily self-employment income and the number of days you were unable to work due to COVID-19
















  • The average credit amount is around $9,000, but can vary based on individual circumstances
















  • SETC is not taxable income and does not add to your tax burden




















How to Claim the SETC Tax Credit



Claiming the SETC tax credit involves amending your 2020 and/or 2021 tax returns:



















  • Gather required documents, like 2019-2021 tax returns, Schedule SE, and records of COVID-impacted days
















  • Complete IRS Form 7202 for the applicable tax years to calculate your credit amount
















  • Amend your tax returns (Form 1040-X) to claim the credits
















  • Submit amended returns and wait for the IRS to process your refund (can take up to 20 weeks)


















Many self-employed workers opt to work with a tax professional to ensure accuracy and maximize their credit. SETC tax credit refund amounts for freelancers charge a processing fee plus a percentage of the credit received.





SETC Tax Credit Deadlines



The deadlines for claiming the SETC tax credit are:



















  • For 2020 taxes: April 15, 2024
















  • For 2021 taxes: April 15, 2025


















It is important to file amended returns claiming the SETC before these deadlines to receive your credits.





Conclusion



The Self-Employed Tax Credit provides much-needed financial support to self-employed workers whose livelihoods were disrupted by the COVID-19 pandemic. If you qualify based on the eligibility criteria, amending your 2020 and 2021 tax returns to claim the SETC can provide substantial tax relief of up to $32,220. With the April 15, 2024 deadline approaching for 2020 credits, now is the time for self-employed workers to investigate this valuable opportunity.

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