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SETC | What is SETC?

The Complete Guide to the Self-Employed Tax Credit.

Individuals can still claim their Self-Employed Tax Credit (SETC), worth up to $32,220, under the FFCRA. Here is everything you need to know.

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Assess Your Eligibility Now

The Families First Coronavirus Response Act (FFCRA) was signed into law on March 18, 2020, in response to the challenges brought forth by the COVID-19 pandemic. The FFCRA introduced relief for self-employed taxpayers who could not work or telework due to COVID-19 between April 1, 2020, and December 31, 2020, in the form of refundable sick leave and family leave tax credits.

The FFCRA established the foundation for determining who is eligible and how the tax credits are calculated.The Consolidated Appropriations Act (CAA) extended the 2020 tax credit period from December 31, 2020, to March 31, 2021. The American Rescue Plan (ARP) Act then introduced the 2021 tax period beginning April 1, 2021, and ending September 30, 2021.

Legislation

Date Signed

Tax Credits Affected

Eligible Time Periods

Families First Coronavirus Act (FFCRA)

March 18, 2020

Sick and Family Leave Tax Credits

April 1, 2020 – December 31, 2020

Consolidated Appropriations Act (CAA)

December 27, 2020

Sick and Family Leave Tax Credits

Extended to April 1, 2020 – March 31, 2021

American Rescue Plan (ARP) Act

March 11, 2021

Sick and Family Leave Tax Credits

Introduced April 1, 2021 – September 30, 2021

Who Is Eligible for the SETC Tax Credit?

Eligible self-employed individuals are generally those who meet the following three criteria:

  • You identify as a self-employed individual (e.g., sole proprietors, freelancers, independent contractors, and gig workers). See examples below.

Accountants

Airbnb Hosts

Amazon Resellers

Copywriters

Construction Workers

Consultants

Dentists

Graphic Designers

General Practitioners

Personal Trainers

Photographers

Rideshare

Delivery Drivers

Real Estate Agents

Social Media Marketers

Veterinarians

Website Designers

Developers

  • You filed a Schedule SE (IRS Form 1040) for 2020 or 2021, reported a positive net income, and paid self-employment taxes on your earnings.
  • You could not work or telework in 2020 or 2021 due to COVID-19.
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Are There Any Limitations to the SETC?

Yes, in addition to the eligibility criteria, there are a few limitations of the SETC to be aware of.

Sick or Family Leave Wages

  • You will not receive the full SETC amount if you already received wages from an employer for sick or family leave in 2020 or 2021. Your SETC portion will be reduced by the wages you received.

Unemployment Benfits

  • You will not receive the full SETC amount if you received unemployment benefits in 2020 or 2021. Your SETC calculation must exclude these days.

Non U.S. Citizen or Resident

  • You must be a U.S. citizen, permanent resident, or qualifying resident alien.
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How Are SETC Refunds Calculated?

Tax credits provided under the FFCRA for self-employed individuals are equal to the qualified sick leave and family leave equivalent amounts that eligible employers can claim.

Qualified Sick Leave Equivalent Amount

The qualified sick leave equivalent amount applies to self-employed individuals who are unable to work or telework due to:

  • being subject to a federal, state, or local quarantine or isolation order due to COVID-19,
  • being advised by a healthcare provider to self-quarantine due to COVID-19, or
  • experiencing COVID-19-related symptoms and seeking a medical diagnosis.

Under the Emergency Paid Sick Leave Act (EPSLA) provision of the FFCRA, individuals may claim the lesser of $511 per day or 100% of their average daily self-employment income per day. A total of 20 days may be considered: 10 days for the period between April 1, 2020, and March 31, 2021, and 10 days for the period between April 1, 2021, and September 30, 2021.

Qualified Family Leave Equivalent Amount

The qualified sick leave equivalent amount applies to self-employed individuals who are unable to work or telework due to:

  • caring for an individual who is subject to a quarantine or isolation order related to COVID-19, or
  • caring for a child if their school is closed or childcare provider is unavailable due to COVID-19.

Under the expanded Family and Medical Leave Act (FMLA) provision of the FFCRA, individuals may claim the lesser of $200 per day or 67% of their average daily self-employment income per day. A total of 110 days may be considered: 50 days for the period between April 1, 2020, and March 31, 2021, and 60 days for the period between April 1, 2021, and September 30, 2021.

Tax Credit

Maximum Number
of Days

Maximum Amount
Per Day

Maximum Value Overall

Sick Leave Credit
(April 1, 2020 – March 31, 2021)

10

$511

$5,110

Sick Leave Credit
(April 1, 2020 – March 31, 2021)

10

$511

$5,110

Family Leave Credit
(April 1, 2020 – March 31, 2021)

50

$200

$10,000

Family Leave Credit
(April 1, 2021 – September 30, 2021)

60

$200

$12,000

How Do I Apply for the SETC?

Universal Tax Credit's self-service platform is the easiest, fastest, and most secure way for individuals to apply for the SETC.

Using Our Platform

  • Confirm Your Eligibility for the SETC. Use our pre-qualification survey to determine your eligibility and calculate your estimated SETC amount.
  • Gather Your Tax Statements and Identification. We need information on the dates and reported income from your 2020 and 2021 tax statements and a copy of your driver’s license or passport.
  • Complete Your SETC Application. Answer the questions provided, upload your ID, sign a few documents, and select your preferred payment method for the processing fee.
  • Await Your Check or Direct Deposit (ACH). The IRS will process your claim and issue a refund via check or direct deposit (ACH) based on your preferences.
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Frequently Asked Questions

Can I qualify for the Self-Employment Tax Credit?
Yes if you are self-employed as a sole proprietor, a 1099 contractor or service provider, or a single-member or partnership LLC with no S-Election.
What documents are needed?
Your 2020 and 2021 tax returns
Do I have to repay the SETC Credit?
No. This is not a loan. It’s a refundable tax credit. When we file your SETC claim we request a refund check for you.
Will the SETC funds run out?
This is not a lending program – tax refunds are issued by the US Treasury. Therefore, all eligible self-employed individuals will receive the funds.
Is the SETC taxable?
The SETC credit is not considered income for federal income tax purposes, but you must reduce any deductible wage expenses by the amount of the credit. Please provide the credit information to your CPA for tax purposes.
How long does it take to get my SETC Credit?
This is how the process works: you send us the required documents and we process an analysis. Very quickly we will send you the amount of your credit. If you wish to move forward, you will select your desired payment option and we file your claim. Within 14-16 weeks you will receive your SETC payment.
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The following will provide answers to some of the most common questions. If you don't see your question, feel free to email info@universaltaxcredit.com for assistance.