Frequently Asked Questions

The Self Employed Tax Credit Refund (SETC) is a key component of the Families First Coronavirus Response Act (FFCRA), enacted in March 2020 in response to the COVID-19 pandemic. The SETC is designed specifically for self-employed individuals, including freelancers, independent contractors, and gig workers. It provides tax credits equivalent to the paid sick leave and family leave that employees would receive under the FFCRA.

The purpose of the SETC is to offer financial relief to self-employed individuals who lost income due to COVID-19 related reasons, such as needing to quarantine or care for a family member affected by the virus. By claiming the SETC on their tax returns, these individuals can receive a refund that compensates for their lost earnings during the pandemic, ensuring that the financial support provided by the FFCRA extends beyond traditional employer-employee relationships to include the self-employed sector as well.

The FFCRA tax credit for eligible individuals can amount to a maximum of $32,200. This figure is determined based on the net earnings from self-employment in the tax years 2020 and 2021.

The method for calculating the FFCRA credit involves taking the average daily income from self-employment. This is computed by dividing your total net earnings for the tax year by 260 days. The calculation also factors in the number of workdays you missed due to COVID-19 related reasons. The purpose of this calculation is to provide the IRS with an accurate estimate of the income you lost for each day you were unable to work because of the pandemic.

The FFCRA credit amount you’re eligible to receive is based on two key factors: your average daily income from self-employment and the total days you were unable to work due to COVID-19 related issues. These issues may include compliance with government quarantine orders, self-quarantine, experiencing COVID-19 symptoms, or seeking a medical diagnosis.

1) For credits related to missing work due to personal COVID-19 issues:

The amount is capped at the lesser of your daily average pay or maximum of $511 per day.

2) For the childcare-related portion of the credit, the calculation involves:

The credit is capped at the lesser of your average daily self-employment income or $200 per day.

3) For caring for another person:

The credit is capped at the lesser of your average daily self-employment income or $200 per day.

Eligibility for the FFCRA Self Employed Tax Credit is determined by several criteria:

• Self-Employment Status: You should be a self-employed individual. This includes, but is not limited to, roles such as sole proprietors, independent entrepreneurs, contractors receiving 1099 forms, freelance workers, participants in the gig economy, and individuals operating single-member LLCs.

• Tax Filing History: You must have submitted a Schedule SE with your IRS Tax Form 1040 for the years 2020 and/or 2021. It is essential that this filing reflects positive net income, indicating that you have paid taxes on your self-employment earnings.

• Impact of COVID-19: The credits are specifically aimed at those who have experienced work absences due to circumstances related to COVID-19. This can include a variety of situations directly or indirectly caused by the pandemic.

Eligibility for SETC:

Eligibility for the Self Employed Tax Credit hinges on having missed work due to specific COVID-19-related reasons. If you fall under any of the following circumstances as a self-employed individual, you may qualify for SETC:

• Government-Imposed Quarantine or Isolation: If you were required to comply with a quarantine or isolation order issued by a government authority.

• Healthcare Provider’s Advice to Self-Quarantine: If a medical professional advised you to self-quarantine due to COVID-19 exposure or symptoms.

• Symptoms and Seeking Diagnosis: If you experienced symptoms of COVID-19 and were attempting to schedule a medical appointment for diagnosis.

• Awaiting COVID-19 Test Results: If you were unable to work while waiting for the results of a COVID-19 test.

• Receiving COVID-19 Vaccination: If you took time off work to get vaccinated against COVID-19.

• Experiencing Vaccine-Related Side Effects: If side effects from the COVID-19 vaccine prevented you from working.

• Caring for Children During School or Daycare Closures: If you had to care for your children because their school or daycare facility was closed due to COVID-19.

• Caring for Someone with COVID-19: If you were responsible for caring for a family member or another individual who was quarantined or advised to self-isolate due to COVID-19.

Eligibility Period for SETC:

The Self Employed Tax Credit is applicable for days you were unable to conduct your self-employment work due to specific COVID-19-related reasons within the period of April 1, 2020, to September 30, 2021.

Breakdown of Eligible Days for SETC Claims:

1) Childcare-Related Absences:

Up to a total of 110 days can be claimed.

For the period between April 1, 2020, and March 31, 2021, up to 50 days are eligible.

For the period between April 1, 2021, and September 30, 2021, up to 60 days are eligible.

2) Days Off Due to Personal Illness or Caring for a Loved One:

Up to a total of 20 days can be claimed.

For each period (April 1, 2020, to March 31, 2021, and April 1, 2021, to September 30, 2021), up to 10 days are eligible.

Impact on 2023 Income Tax Filing:

Claiming the Self Employed Tax Credit (SETC) for previous years will not affect your income tax filing for the year 2023. The process for claiming SETC involves amending your previously filed taxes for the years 2020 and 2021.

Procedure for SETC Claims:

• When you file for SETC tax credits, it is done through an amendment to your tax returns for 2020 and 2021. This means our team will revisit and modify those specific year’s tax filings to incorporate your SETC claim.

• The amendment process is distinct and separate from your regular income tax filings for other years, including the 2023 tax year.

• Therefore, your regular tax filing process for 2023 remains unaffected. Your 2023 tax filing will proceed as usual, independent of any amendments made for SETC claims on your 2020 and 2021 tax returns.

Eligibility with Unemployment Benefits:

Qualifying for the Self Employed Tax Credit (SETC) is still possible even if you have received unemployment benefits. However, there are specific considerations to keep in mind:

• Non-Overlap of Claims: While you can be eligible for SETC, you should not claim tax credits for any days that you received unemployment benefits. This is because those days are not considered as days where you were unable to work due to COVID-19 related issues.

• Careful Documentation: It’s important to document and differentiate the days you received unemployment benefits from the days you’re claiming for SETC. This will ensure that your SETC claim is accurate and compliant with the program’s regulations.

In essence, while receiving unemployment benefits does not disqualify you from the SETC, you must carefully delineate between the periods covered by unemployment benefits and those for which you are seeking the SETC.

Eligibility for W2 Employees with Self-Employment Income:

Yes, you can still be eligible to claim Self Employed Tax Credit (SETC) even if you are a W2 employee, provided you have earned self-employment income during 2020 and/or 2021. However, there are certain conditions to consider:

Combining W2 and Self-Employment Income: Eligibility for SETC is contingent on having self-employment income in addition to your W2 earnings. You must have reported this income on your tax filings for the relevant years.

Avoiding Double Benefits: If your employer has already filed for similar tax credits on your behalf as a W2 employee, this may affect your eligibility to claim SETC for the same period. It’s crucial to ensure you’re not claiming a double benefit for the same time frame.

Impact of Paid Leave Benefits: Receiving paid leave benefits through your W2 employment could influence the amount of SETC you can claim. If these benefits don’t fully cover your lost income due to COVID-19, you might still be able to claim additional credits based on your self-employment earnings.

Specific Circumstances Matter: Each case is unique, and the extent to which you can claim SETC may vary based on the specifics of your employment situation and self-employment income.

In summary, while being a W2 employee doesn’t automatically disqualify you from claiming SETC, it’s important to carefully assess your individual circumstances, especially regarding any benefits received through W2 employment and their impact on your eligibility for additional tax credits as a self-employed individual.

Eligibility with Existing Sick & Family Leave Credits:

If you’ve already received Sick & Family Leave credits for the years 2020 or 2021, this will impact your ability to qualify for the Self Employed Tax Credit (SETC).

• Exclusion Due to Prior Credits: Unfortunately, if you have availed of Sick & Family Leave credits during these years, you are generally not eligible to claim additional SETC through platforms like Recapture SETC. This is because the same period cannot be claimed twice under different relief provisions.

Recapture SETC’s Processing Fee and Payment Methods

At Recapture SETC, our fee is solely based upon our success. We only get paid once your credit goes through. Our processing fee of your total 25% of your total tax refund.

This fee is essential for covering the costs involved in retrieving your official tax records, the meticulous work of our CPAs in calculating and filing your paperwork, and ensuring full legal compliance with all pertinent tax laws.