The Relief Consultants Blog

Category: SETC

  • Understanding COVID-19 Tax Credits for the Self-Employed

    Understanding COVID-19 Tax Credits for the Self-Employed

    The coronavirus pandemic has sent shockwaves throughout the global economy. Among those hardest hit have been self-employed workers, such as freelancers, independent contractors, and entrepreneurs. For many, the inability to work means a loss of essential income. But there may be some relief in sight. A federal law implemented in 2021 to help those affected by the crisis. This post will provide an in-depth look at the tax credits available to the self-employed and how to calculate them.

    How Do These Tax Credits Work?

    The federal government recognizes the unique challenges self-employed individuals faced during this period. To offset the financial strain, tax credits have been introduced for those unable to work due to specific coronavirus-related reasons.

    Calculating Your Credits:

    1. Determine Your Average Daily Self-Employment Income

    To calculate the credit, you must first know your average daily self-employment income. This is obtained by dividing your net earnings from self-employment for the taxable year by 260.

    2. Eligibility Period

    Remember, these credits are only applicable for days you couldn’t work due to a covered reason between April 1, 2020, and September 30, 2021.

    Types of Tax Credits:

    Sick Leave Tax Credit:

    • 100% Credit: If you have coronavirus symptoms and are in the process of getting a medical diagnosis, are under a quarantine or isolation order, or have been advised to self-quarantine, you can receive a tax credit equal to 100% of your average daily self-employment income. The maximum you can receive is $511/day or a total of $5,111 for up to 10 days.
    • 67% Credit: If you need to care for your child due to school or childcare closures or if you’re caring for someone under a quarantine order or advised to self-quarantine, you can receive 67% of your average daily income. The cap here is $200/day or a total of $2,000.

    Family Leave Tax Credit:

    If you cannot work because your child’s school or childcare facility has closed, you can take advantage of the family leave tax credit. This offers 67% of your average daily income, with a maximum limit of $200/day or a cumulative total of $10,000 for up to 50 days.

    For those eligible, it’s possible to claim both the sick leave and family leave credits, though there’s a cap of 60 combined days. If you have both a traditional job and a self-employment venture, any paid leave you avail from your job for COVID-19 reasons might affect the tax credits you can claim for your self-employment.

    In Conclusion:

    While the coronavirus pandemic has been challenging, it’s heartening to see measures in place to support self-employed workers. If you belong to this group, it’s crucial to understand your rights and the financial assistance available to you.

    To have a professional help you claim this credit in as little as 24 hours, click here.

  • 95% of Self-Employed Individuals Are Missing Out on this $32,220 IRS Check

    95% of Self-Employed Individuals Are Missing Out on this $32,220 IRS Check

    The Self-Employment Paid Sick & Family Leave Tax Credit is a critical lifeline for many self-employed individuals, providing them with financial support in times of need. However, a staggering 95% of self-employed individuals are not taking advantage of this tax credit. This blog post aims to shed light on this underutilized resource and encourage more self-employed workers to explore their eligibility for this valuable tax break.

    What is the Self-Employment Paid Sick & Family Leave Tax Credit?

    The Self-Employment Paid Sick & Family Leave Tax Credit is a provision under the Families First Coronavirus Response Act (FFCRA) and was later expanded under the American Rescue Plan Act (ARPA). It was initially introduced in response to the COVID-19 pandemic to provide relief to self-employed individuals who were unable to work due to illness, quarantine, or caregiving responsibilities.

    This tax credit allows self-employed individuals to claim a refundable credit against their income tax for up to 10 days of qualified sick leave and up to 50 days of qualified family leave. The credit amount is based on the individual’s average daily self-employment income, with a maximum daily limit of $200 for family leave and $511 for sick leave. All parts combined Self Employed individuals can receive up to $32,220 from the IRS with the Self Employment Sick and Family leave.

    Why Are 95% of Self-Employed Individuals Not Utilizing the Tax Credit?

    1. Lack of Awareness: Many self-employed individuals are simply unaware of the tax credit’s existence or how it applies to them. The complexities of tax laws and regulations can be overwhelming, leading to confusion and missed opportunities.
    2. Misconceptions About Eligibility: Some self-employed workers may believe that they do not qualify for the tax credit, either because they think their income is too high, their situation does not fit the criteria, or their work structure does not align with the tax credit’s requirements.
    3. Fear of Making a Mistake: The fear of filing taxes incorrectly and potentially facing an audit or penalties can deter some self-employed individuals from claiming the tax credit, even if they are eligible.
    4. Inertia: The process of claiming the tax credit may seem daunting, leading to procrastination and a lack of action. Many self-employed individuals simply never get around to exploring their eligibility.

    If you’re unsure about your eligibility or need assistance with the tax credit, consult The Relief Consultants. We can help guide you through the process until money hits your bank account.