Some reasons include, but are not limited to:
Only self-employed individuals with a net profit will be able to take the tax credits. If there was a loss in the business, you are not eligible for the sick or family leave credit.
Click here to see an example of where to find line 31 – Net Profit or (Loss) on your Schedule C.
You must have met one of or more of the following Sick Leave or Family Care Qualifications:
Includes isolation order/quarantine/experiencing COVID-19 symptoms and seeking medical diagnosis and/or caring for someone else under COVID-19 diagnosis and childcare.
Caring for a child when a school or other childcare facility/provider is unavailable due to COVID-19.
Caring for a child and / or an over 18 adult for any qualifying reasons for paid sick leave.
Includes COVID-19 vaccinations or sickness related to immunizations or COVID- 19 testing waiting periods, and to accompanying an individual to obtain immunizations related to COVID-19 or caring for an individual who is recovering from any injury, disability, illness, or condition related to the immunization.
Self-Employed Status:
If you were self-employed in 2020 and/or 2021, you could potentially qualify for the SETC. This includes sole proprietors who run businesses with employees, 1099 subcontractors, and single-member LLCs. You must have filed a “Schedule C” or a Partnership (1065) on your federal tax returns for 2020 and/or 2021.
If you have Net Income on Line 6 of the 1040, Net Income on line 31 of your Schedule C and / or Net Income in box 14A of your K1 then you will likely qualify. Sub S or True S Corps / C Corps are not eligible for the SETC.
COVID Impacts:
Whether you battled COVID, experienced COVID-like symptoms, needed to quarantine, underwent testing or cared for a family member affected by the virus, the SETC could be your financial relief. If the closure of your child’s school or daycare due to COVID restrictions forced you to stay home and impacted your work, we’re here to help.
What tax credits are available to self-employed workers affected by COVID-19?
There are two tax credits available to self-employed workers affected by COVID-19: Sick leave and family leave. The sick leave credit applies to qualified individuals who were not able to work for a period of time due to COVID-19 or were caring for someone with COVID-19. You may qualify for the family leave credit if you had to care for another family member due to COVID-19-related circumstances and already maxed out the sick leave days.
Prior to April 2020, the credit for sick and family leave was limited to certain employers. This credit was available to small and mid-sized employers who had fewer than 500 employees. Qualified employers received the credit for providing paid sick and family leave wages to their employees.
The Families First Coronavirus Response Act expanded these credits to include self-employed workers. This includes freelancers, contractors, and gig workers. This legislation allowed qualified self-employed individuals to claim the credit on their 2020 tax return. The American Rescue Plan Act extended the credit and allowed taxpayers to claim it on their 2021 tax return, too.
What is the self-employed tax credit?
The self-employed tax credits provide tax savings for individuals who could not work due to COVID-19. These credits offset any tax liability created from self-employment income in the taxable year.
The SETC is a specialized tax credit designed to support self-employed individuals during the COVID-19 pandemic. It acknowledges the unique challenges faced by those who work for themselves, especially during times of illness, caregiving responsibilities, quarantine, and related circumstances. This credit can be a valuable resource for eligible individuals to help bridge financial gaps caused by unforeseen disruptions.
Whether you’re a self-employed business owner, a 1099 subcontractor, or a family-centric small business, the Self-Employed Tax Credit is a great option to take advantage of if you qualify.
Almost everybody with Schedule C income, qualifies to some extent.
Are there any limits to the Self Employed Tax Credit?
Yes, there are limits to the sick and family leave credits. You will not receive the full tax credit if you also received any wages from an employer for sick or family leave. The wages received reduces the amount of the credit you are eligible for. This prevents individuals from double dipping from the same benefit. Qualified individuals may be able to claim up to $15,110 for the sick and family leave credits for 2020 and $17,110 for 2021.
Only self-employed individuals with a net profit will be able to take the tax credits. If there was a loss in the business, you are not eligible for the sick or family leave credit.
For your dependent children:
You took care of your dependent child (under the age of 18 or a child with severe disabilities) related to COVID. The child’s school or daycare closed, your child was sick, or your child was told to quarantine due to COVID. Your child had COVID, had COVID symptoms, a COVID related illness, and / or a COVID vaccination.
For yourself or a non child dependent:
You had COVID, had COVID symptoms, a COVID related illness, a COVID vaccination, were told to quarantine because you were exposed or affected by COVID and / or you were not allowed on location for your business because of COVID.
