The Self-Employed Tax Credit (SETC) for Paid Sick and Family Leave is a valuable tax benefit offered by the IRS to self-employed individuals in the U.S. This credit was introduced as part of the Families First Coronavirus Response Act (FFCRA) in response to the COVID-19 pandemic, with the aim of helping self-employed workers manage the financial impact of illness and caregiving needs. Although originally designed for the pandemic, the credit has highlighted the need for support systems for independent workers who lack traditional employee benefits.
What is the SETC for Paid Sick and Family Leave?
The SETC provides tax relief for self-employed workers who were unable to work due to COVID-19-related reasons or who had to take time off to care for family members. This credit applies specifically to periods where individuals had to self-isolate due to COVID-19, were seeking medical diagnosis for the virus, or were caring for someone who was quarantined. It also covers time off for those who needed to care for a child whose school or care facility was closed due to the pandemic.
Eligibility Criteria
To qualify for the credit, self-employed individuals must meet certain conditions. The key requirement is that the person must have been unable to work or telework due to qualifying COVID-19-related circumstances. These circumstances include:
- Illness or Quarantine: The individual had to take sick leave due to contracting COVID-19 or being required to quarantine by a government mandate or healthcare provider.
- Family Care: The individual needed to care for a family member in quarantine or a child whose school or childcare facility was closed due to COVID-19.
- Duration: The credit applies to periods between April 1, 2020, and September 30, 2021, for both paid sick leave and family leave.
How the Credit is Calculated
The IRS allows self-employed individuals to calculate the credit based on their average daily self-employment income. The credit for sick leave can be claimed for up to 10 days, while family leave can be claimed for up to 50 days. The maximum daily credit for sick leave is $511, and for family leave, it is capped at $200 per day.
Claiming the Credit
To claim the SETC through a reputable IRS-approved agency, self-employed individuals CLICK HERE.
This form is submitted with the individual’s federal income tax return, allowing them to receive the credit as a reduction in their tax liability or as a refund.
The SETC provides critical financial support to self-employed individuals, offering them much-needed relief during challenging times.
