CPA SETC Management:

What is the Self Employment Tax Credit (SETC) program?
The Self-Employed Tax Credit (SETC) program, established by the Families First Coronavirus Response Act in March 2020, was initially designed to assist companies in offering paid sick leave and unemployment benefits during the COVID-19 crisis. Focusing primarily on W-2 employees at the outset, it was later expanded through the December 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act to include self-employed individuals, freelancers, and gig workers. This expansion enables them to claim tax credits for lost earnings due to COVID-19, covering sick leave, and other related financial impacts.


How Do SETC and FFCRA Differ from one another?
"SETC" stands for Self-Employed Tax Credit, a term commonly used for the tax credits available to self-employed individuals for sick and family leave under the Families First Coronavirus Response Act (FFCRA). The primary distinction is that SETC caters specifically to self-employed individuals, while the FFCRA is directed towards employees.

Is it possible to qualify for SETC tax credits while being employed and receiving a W2?
You might still qualify for SETC tax credits even if you have W2 income, provided you also earned self-employment income during 2020 or 2021. However, if your employer claimed FFCRA credits for you, the amount you can claim under SETC might need to be reduced. Receiving paid leave as a W2 employee could also affect your SETC credit amount, as claiming the same benefit twice for the same period isn't allowed. Yet, if your employee benefits don't fully cover your situation, you may be able to claim additional credits based on your self-employment income.

Am I eligible for the SETC tax credit if I have already claimed Sick & Family Leave credit in my 2020 or 2021 tax returns?
Eligibility for the SETC tax credit in cases where you've already received Sick & Family Leave credit on your 2020 or 2021 returns is contingent on not having fully utilized those credits. This means either you didn't declare the most advantageous self-employed income year (2019 or 2020 for the 2020 adjustment, 2020 or 2021 for the 2021 adjustment), or you declared fewer COVID-related absence days than actually occurred.

Does the SETC tax credit calculation use gross or net income from self-employment?
To be eligible for the self-employed tax credit, it's essential to have shown a positive net income (after deducting expenses) from self-employment in either 2019, 2020, or 2021, in addition to having days that qualify under COVID-related criteria.

Am I eligible for the SETC tax credit if I have received unemployment benefits in either 2020 or 2021?
Receiving unemployment benefits doesn't automatically disqualify you from the SETC tax credit. However, you're not allowed to claim tax credit for days when you received unemployment benefits as these are not considered days lost to COVID-19 related work absences.

Is a full copy of my tax return required for amending it to claim the SETC credit?
For amending a tax return to claim the SETC credit, it's necessary to provide a full copy of the original return, including all its schedules. This complete document should accompany the amended return. For example, if you're adjusting your 2020 return and opting to use your positive self-employed income from 2019, you need to submit the entire 2020 return.


What is the value, or how much money is the SETC tax credit?
The SETC tax credit's maximum amount is $32,220, calculated from your net self-employed earnings in 2020 and 2021. The calculation involves dividing your annual net self-employment income by 260 to find your daily income, then considering the days of work missed due to COVID-19. This method helps estimate the wage loss for each day you were unable to work.

What is the process for obtaining SETC tax credits?
To apply for the SETC tax credits, you need to assess your eligibility and revise your tax returns for 2020 and/or 2021, along with their associated schedules. Engaging a Certified Public Accountant (CPA) is advisable for optimal results, although it may require significant time and resources. Alternatively, RetrieveMyMoney.com offers a streamlined solution designed for self-employed individuals and sole proprietors to efficiently claim these federal tax credits.

What is the eligibility criteria for obtaining SETC tax credits?
To be eligible for the SETC, this specific criteria must be fulfilled:
Be self-employed, such as a sole proprietor, independent business owner, 1099 contractor, freelancer, gig worker, or single-member LLC taxed as a sole proprietorship.File a Schedule SE with IRS Form 1040 for 2020 and/or 2021, showing positive net income and having paid self-employment tax for 2019, 2020, or 2021.Experience work absence due to COVID-19-related reasons.

What are the valid reasons for applying for the SETC?
Eligibility for SETC tax credits requires missing work as a self-employed individual due to circumstances related to COVID-19. This could include various scenarios where your ability to work was directly impacted by COVID-19:

Being under a quarantine or isolation order by a government agency.Following your doctor's advice to self-quarantine.Experiencing COVID-19 symptoms and awaiting a doctor's appointment.Awaiting results from a COVID-19 test.Receiving a COVID-19 vaccination.Dealing with side effects after getting the COVID-19 vaccine.

Does the SETC have any specific restrictions or limitations?

Indeed, apart from meeting the eligibility requirements, there are several restrictions related to the SETC that one should be mindful of:
If you've already received employer-paid sick or family leave wages in 2020 or 2021, the SETC amount may be reduced accordingly.The SETC amount will also be less if you received unemployment benefits in these years, as these days can't be counted for SETC.Eligibility requires being a U.S. citizen, permanent resident, or a qualifying resident alien.

Which time periods are covered by the SETC tax credits?

The SETC applies to the period from April 1, 2020, to September 30, 2021, covering days when self-employment work was impossible. It includes a specific allowance for childcare-related absence, with a maximum limit on the number of days that can be claimed:
For childcare-related time off, up to 110 days are covered:

April 1, 2020, to March 31, 2021: 50 daysApril 1, 2021, to September 30, 2021: 60 daysFor time off for oneself or caring for loved ones, up to 20 days are covered:April 1, 2020, to March 31, 2021: 10 daysApril 1, 2021, to September 30, 2021: 10 days

The eligibility for the SETC tax credit extends to situations where you provided care for your children during closures of schools or daycare centers, as well as times when you looked after a family member or another individual experiencing COVID-19 related health issues.

What method is used to calculate the SETC credit amount?
The calculation of your SETC credit is based on two key factors: the average income you earn daily from self-employment and the number of workdays you missed due to COVID-19 circumstances. These circumstances include mandatory quarantines, voluntary self-quarantine, symptoms of COVID-19, and periods spent obtaining medical diagnoses.

The credit amount is determined based on different criteria depending on the reason for your leave:
Childcare Portion:

Calculate the number of days on leave.Determine the smaller amount between your daily average self-employment income per year and $511.

Personal COVID-Related Issues or Caregiving for Others:

Calculate the number of days on leave.Determine the smaller amount between two-thirds of your daily average self-employment income and $200.

What is the value of the SETC tax credit?
The SETC tax credit has a maximum value of $32,220, which is determined by your self-employed net earnings in the years 2020 and 2021.
To compute your SETC credit, we utilize your average daily self-employment income, calculated by dividing your net earnings for the taxable year by 260 (the number of weekdays in a year). We also consider the number of days you were unable to work in your self-employed capacity due to COVID-19-related issues. This calculation helps the IRS estimate the income you lost for each day you couldn't work.

What is the typical SETC refund amount that individuals receive?

On average, customers of RetrieveMyMoney.com have received a SETC refund totaling $9,400.

What is the typical processing time for receiving a refund?

The IRS may take approximately three weeks to confirm the receipt of your SETC credit application, followed by a waiting period of up to 20 weeks after confirmation for you to receive your refund, either through a check or direct deposit. Our service and the CPA can expedite this process as long as you agree to the set forth Terms and Conditions. Resulting in a delivery to you within 15 days (on average).

Why might the SETC tax credits be unfamiliar to many people?

At first, the SETC primarily targeted employers with W-2 employees. Although the CARES Act, passed in the same year, expanded the program to include self-employed individuals, this change wasn't extensively promoted. Studies indicate that more than 80% of self-employed individuals are unaware of their eligibility for SETC tax credits.

Is there a time limit for applying for the SETC tax credits?
Certainly, you have a specific timeframe within which to amend your 2020 and/or 2021 tax returns to claim or make adjustments to the SETC credits. This deadline is determined as follows: you have three years from the original due date of the return or two years from the date you paid the tax, whichever comes later. For instance, the deadline for amending your 2020 tax return to claim the SETC tax credits is April 15, 2024, and for your 2021 tax return, it's April 15, 2025. It's important to note that while extensions are possible, it's advisable not to wait until the last minute.

What should I do if I've already submitted my 2020 and 2021 tax returns?
Our team (and partners) of Certified Public Accountants (CPAs) and Enrolled Agents (EAs) will take care of the process by filing an amended tax return for the relevant years. To get started, we only need you to provide copies of your 2019, 2020, and 2021 tax returns along with a copy of your driver's license. The rest will be handled by our professionals.

Is it possible to receive the SETC if I haven't filed for 2020 or 2021?
Certainly. Our partnered team of Certified Public Accountants (CPAs) and Enrolled Agents (EAs) will need to assist you in preparing your original tax returns for 2020 and 2021, ensuring that the SETC is included. It's important to keep in mind the refund statute mentioned earlier.

If I had no income in 2020, will my SETC be calculated based on my 2019 income?
If you were classified as "self-employed" in 2020, you have the option to choose either your 2019 or 2021 self-employed income for SETC calculation. Similarly, for 2021, if you are categorized as "self-employed," you can decide to use either your 2020 or 2021 self-employed income for the calculation.