How is the SETC Tax Refund Calculated?

Maximize Your 2021 IRS Refund Claim

If you’re self-employed, understanding how to calculate the SETC tax refund could help you secure a significant payout for the 2021 tax year. With refunds of up to $32,220 available, this credit applies to 1099 contractors, gig workers, freelancers, small business owners, and sole proprietors. The deadline to file your claim closes on Apr 15th, 2025, so there’s still time to act, even if you’ve already filed your 2021 return.

At Legacy Tax & Resolution Services, we specialize in helping self-employed individuals like you claim tax credits with ease. Our platform simplifies the filing process so you can focus on your business while we ensure you receive the full refund you’re entitled to. Whether you’ve already filed your 2021 taxes or are submitting an amended return, we’re here to guide you every step of the way.

Here’s how the refund is calculated and how to take advantage of it.

What is the SETC Tax Credit?

The Self-Employed Tax Credit was created to support individuals whose ability to work was affected by COVID-19 in 2021. It provides compensation for lost income, offering significant financial relief. This refund is not a loan or grant but a non-taxable credit based on taxes you already paid in 2021.

The credit is available to many self-employed individuals, including 1099 contractors, small business owners, sole proprietors, freelancers, and gig workers. If COVID-19 affected your ability to work, you can claim up to $511 per day for the time you couldn’t earn.

How is it Calculated for Your 2021 IRS Refund?

The SETC Tax refund is based on your net self-employment income for 2021. Here’s how it works:

1. Determine your average daily income: Divide your annual net self-employment income by 260, the average number of workdays per year. This gives you your average daily income.
2. Sick days: If you couldn’t work due to being ill with COVID-19 or needing to quarantine, you can claim 100% of your average daily income, up to $511 per day, for up to 10 days.
3. Caregiving days: If you cared for someone with COVID-19 or a child whose school or daycare was closed, you can claim 67% of your average daily income, up to $200 per day, for up to 60 days.

Example:

Period 1- January 1st to March 31st, 2021

Let’s say your annual net self-employment income in 2021 was $68,000.

• Average daily income: $68,000 ÷ 260 = $262/day
• For sick days: You can claim $262/day (up to 10 days between Jan 1st and Mar 31st, 2021).
• For childcare days: You can claim $175/day (two-thirds of $262) for up to 50 days between Jan 1st and Mar 31st, 2021.

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In this scenario, if you claim all 10 sick days and 50 caregiving days, your total claim would be:

• Sick days: $262 × 10 = $2,620
• Caregiving days: $175 × 50 = $8,750
• Total refund: $11,370

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Period 2- April 1st to September 30th, 2021

Again, your annual net self-employment income in 2021 was $68,000.

• Average daily income: $68,000 ÷ 260 = $262/day
• For sick days: You can claim $262/day (up to 10 days between Apr 1st and Sept 30th, 2021).
• For childcare days: You can claim $175/day (two-thirds of $262) for up to 60 days between Apr 1st and Sept 30th, 2021.

In this scenario, if you claim all 10 sick days and 60 childcare days, your total claim would be:

• Sick days: $262 × 10 = $2,620
• Caregiving days: $175 × 60 = $10,500
• Total refund: $13,120

The combined total would be $24,490

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Who Qualifies For It?

Most self-employed individuals with Schedule C income qualify, including:

• 1099 contractors
• Freelancers
• Small business owners
• Gig workers
• Sole proprietors

If you experienced any COVID-related disruptions in 2021, you’re likely eligible. Even if you filed your 2021 taxes without claiming the SETC tax credit, you can still file an amended return for this claim.

Act Now Before the Deadline

The opportunity to claim your money is only available until Apr 15th, 2025. After that, the IRS will no longer accept amended returns for the 2021 tax year.

Filing sooner rather than later ensures you have time to gather the necessary documentation, file an amendment, and avoid missing out. The potential payout—up to $32,220—is significant, and there’s no reason to leave that money unclaimed.

Find out if you qualify for the SETC tax credit here.