Millions of eligible 1099 taxpayers can still get their COVID sick pay
As a Tax Rebate Specialists Independent Consultant, you can help ensure every eligible 1099 self-employed business owner and gig worker knows about the Self-Employed Tax Credit (SETC).
COVID Sick Pay (SETC)
You can start signing up eligible taxpayers for the Self-Employed Tax Credit (SETC).
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Remember, you are not the expert in this product.
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TRS does not help in the process, so there is no reason to contact us during the process.
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When TRS gets an update from SEC, we will update you on the status you see.
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You should see these files reflected in your dashboard on February 1, 2024.
COVID Sick Pay (SETC) Interview and Update
Watch our latest interview with Geri Bohn of Self Employed Credits.
Qualified Sick & Family Paid Leave Wage Credit (aka SETC)
Watch this short 8-minute video to learn the basics behind the COVID Sick Pay program.
Documents
Look for marketing material and other collateral in this section.
COVID Sick Pay (SETC) Handout
Contact the correct department.
TRS (Tax Rebate Specialists) wants to ensure all support issues get handled promptly, so always send questions to the appropriate department.
How does the process work?
Each new COVID Sick Pay customer goes directly into the SEC (Self Employed Credits) pipeline. Once the customer is in the pipeline, there is nothing you, as a TRS consultant, can do to expedite the process.
An SETC file can show several statuses as it progresses through the Self Employed Credits pipeline
The following SETC Display Statuses cover an application from start to finish. You will not be notified when a customer receives their check.
Remember, with SETC, you will never see the amount of credit an individual will receive. Your commission is based on the flat fee SETC charges the customer after they sign off on their analysis.
All payments made to SEC are calculated throughout each month. Reconciliation happens between SEC and TRS early in the following month and TRS will pay out the commissions due on the 15th of that month.
COVID Sick Pay FAQs
Check out our Frequently Asked Questions if you're still seeking additional information.
The Families First Coronavirus Response Act (extended by the Consolidated Appropriations Act) and the American Rescue Plan offer tax credits to individuals through paid sick leave and extended family and medical leave for COVID-19-related reasons.
The IRS will refund you for your 2020 and 2021 tax credits via a check. Please note that the IRS will first use the credit to offset the tax balance if you have any outstanding tax liabilities.
The PPP (Paycheck Protection Program), under the CARES Act, aids in retaining employees on payroll, offering loans potentially forgivable for small businesses. Qualified Sick & Family Leave wage credits, stemming from the FFCRA, Consolidated Appropriations Act, and the American Rescue Plan, provide tax credits for individuals without requiring repayment. While PPP targets business support, Qualified Sick & Family Paid Leave wage credits aim to assist individuals affected by the economic impact of missing work due to the COVID-19 pandemic.
Yes. The deadline to amend your 2020 and 2021 tax returns for claiming or adjusting Qualified Sick & Family Paid Leave credits is three years from the return's original due date. For the Qualified Sick & Family Paid Leave wage credits, the deadline for amending your 2020 tax return is April 15, 2024, and your 2021 tax return is April 15, 2025.
No. The Self-Employed Tax Credit functions as a tax credit, not a loan or grant. Tailored to address needs similar to those covered by mandatory paid leave for employees, these tax credits aim to compensate for income lost due to COVID-19-related circumstances. Whether you were sick, caring for someone affected by COVID-19, or facing conditions hindering your ability to work, these credits aim to alleviate the financial impact on your income.
You must fulfill specific requirements to be eligible for Self-Employed Qualified Sick & Family Paid Leave wage credits. These requirements include being self-employed, encompassing categories such as sole proprietors, independent business owners, 1099 contractors, freelancers, gig workers, and single-member LLCs. Additionally, you must have filed a Schedule SE of IRS Tax form 1040 in either 2020 or 2021, showing a positive net income and the payment of self-employment tax on your earnings. Furthermore, qualification entails missing work due to issues directly related to COVID-19.
COVID-related paid time off is as follows: 1) Up to 60 days (12 weeks between April 1 and March 31, 2020) and 2) Up to 70 days (14 weeks between April 1 and September 30, 2021).
An eligible self-employed individual is defined as an individual who regularly carries on any trade or business within the meaning of section 1402 of the Code, and would be eligible to receive qualified sick leave wages or qualified family leave wages that would have satisfied the requirements of the EPSLA or Expanded FMLA, as amended for purposes of the ARP, if the individual were an employee of an Eligible Employer (other than the self-employed individual) that would have been subject to the requirements of the EPSLA or Expanded FMLA, as amended for purposes of the ARP.
Eligible self-employed individuals are allowed a credit against their federal income taxes for any taxable year equal to their "qualified sick leave equivalent amount" or "qualified family leave equivalent amount."
An individual regularly carries on a trade or business for purposes of being an eligible self-employed individual for the qualified sick leave equivalent credit and/or the qualified family leave equivalent credit if the individual carries on a trade or business within the meaning of section 1402 of the Code, or is a partner in a partnership carrying on a trade or business within the meaning of section 1402 of the Code. Section 1402(c) of the Code defines trade or business and includes exceptions to this standard for purposes of section 1402 of the Code.
For an eligible self-employed individual who is unable to work because the individual:
- is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
- is experiencing symptoms of COVID-19 and seeking a medical diagnosis,seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and the individual has been exposed to COVID-19 or is unable to work pending the results of the test or diagnosis, or obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to the immunization,
the qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual cannot perform services in any trade or business for one of the three above reasons, multiplied by the lesser of $511 or 100 percent of the "average daily self-employment income" of the individual for the taxable year, or the prior taxable year.
For an eligible self-employed individual who is unable to work because the individual is:
- caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- caring for a child if the child's school or place of care has been closed, or child care provider is unavailable due to COVID-19 precautions; or
- experiencing any other substantially similar condition specified by the Secretary of HHS in consultation with the Secretary of the Treasury and the Secretary of Labor. The Secretary of HHS has specified, after consultation with the Secretaries of Treasury and Labor, that a substantially similar condition is one in which the employee takes leave to accompany an individual to obtain immunization related to COVID-19, or to care for an individual who is recovering from any injury, disability, illness, or condition related to the immunization.
the qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual cannot perform services in any trade or business for one of the three above reasons, multiplied by the lesser of $200 or 67 percent of the "average daily self-employment income" of the individual for the taxable year, or the prior taxable year.
In either case, the maximum number of days a self-employed individual may take into account in determining the qualified sick leave equivalent amount is ten.
Note: The only days that may be taken into account in a taxable year in determining the qualified sick leave equivalent amount for the year are days occurring during the year and during the period beginning on April 1, 2021, through September 30, 2021.
Average daily self-employment income is an amount equal to the net earnings from self-employment for the taxable year, or prior taxable year, divided by 260. A taxpayer's net earnings from self-employment are based on the gross income that the individual derives from the taxpayer's trade or business minus ordinary and necessary trade or business expenses.
During the second and third quarters of 2021 , the qualified family leave equivalent amount with respect to an eligible self-employed individual is an amount equal to the number of days (up to 60) that the self-employed individual cannot perform services for which that individual would be entitled to paid family leave (if the individual were employed by an Eligible Employer (other than the self-employed individual)), multiplied by the lesser of two amounts: (1) $200, or (2) 67 percent of the average daily self-employment income of the individual for the taxable year, or the prior taxable year.
Yes, but the qualified sick or family leave equivalent amounts are reduced by the qualified sick or family leave wages.
That is, if a self-employed individual is entitled to a refundable credit for a qualified sick leave equivalent amount under 9642(a) of the ARP, and also receives qualified sick leave wages as an employee, section 9642(e)(2) of the ARP reduces the qualified sick leave equivalent amount for which the self-employed individual may claim a tax credit to the extent that the sum of the qualified sick leave equivalent amount described in section 9642(c) of the ARP and any qualified sick leave wages under section 3131(b)(1) of the Code, exceeds $2,000 (or $5,110 in the case of any day any portion of which is paid sick time described in paragraph (1), (2), or (3) of section 5102(a) of the EPSLA, as amended for purposes of the ARP).
Similarly, if a self-employed individual is entitled to a refundable credit for a qualified family leave equivalent amount under section 9643(a) of the ARP, and also receives qualified family leave wages as an employee , section 9643(e)(3) of the ARP reduces the qualified family leave equivalent amount for which the self-employed individual may claim a tax credit to the extent that the sum of the qualified family leave equivalent amount described in section 9643(c) of the ARP and the qualified family leave wages under section 3132(b)(1) of the Code, exceeds $12,000.
Example: In her capacity as an employee, Taxpayer A receives $4,000 in qualified sick leave wages, comprised of:
- $3,000 in qualified sick leave wages for reasons described in paragraphs (1), (2), or (3) of section 5102(a) of the EPSLA, as amended for purposes of the ARP; and
- $1,000 in qualified sick leave wages for reasons described in paragraphs (4), (5), or (6) of the EPSLA, as amended for purposes of the ARP.
In addition, in her capacity as a self-employed individual, Taxpayer A is eligible for a $3,300 qualified sick leave equivalent credit comprised of:
- $2,500 in qualified sick leave equivalent credits for reasons described in paragraphs (1), (2), or (3) of section 5102(a) of the EPSLA, as amended for purposes of the ARP; and
- $800 in qualified sick leave equivalent credits for reasons described in paragraphs (4), (5), or (6) of section 5102(a) of the EPSLA, as amended for purposes of the ARP.
Taxpayer A must reduce the $3,300 qualified sick leave equivalent credit for which she is eligible by $2,190, which is comprised of:
- the excess of the qualified sick leave wages and qualified sick leave equivalent amounts for reasons described in paragraphs (1), (2), or (3) of section 5102(a) of the EPSLA over $5,110 (that is, $390); plus
- the excess of the qualified sick leave wages and qualified sick leave equivalent amounts for reasons described in paragraphs (4), (5), or (6) of section 5102(a) of the EPSLA over $2,000 (that is, $0); plus
- the remaining excess of the total leave credits to which Taxpayer A is entitled in her capacity as either an employee or a self-employed individual over $5,110 (that is, $1,800).
Accordingly, Taxpayer A may claim a qualified sick leave equivalent credit of $1,110.
Example: In his capacity as an employee, Taxpayer B receives $8,000 in qualified family leave wages. In addition, in his capacity as a self-employed individual, Taxpayer B is eligible for a $4,500 qualified family leave equivalent credit. Taxpayer B may claim a qualified family leave equivalent credit of $4,000, because he must reduce the qualified family leave equivalent amount to which he is entitled to the extent that the sum of the qualified family leave equivalent amount and his qualified family leave wages (that is, $12,500) exceeds $12,000 (that is, $500).
Yes. Section 9642(e)(2) of the ARP reduces the qualified sick leave equivalent amount for which a self-employed individual may claim a tax credit to the extent that the sum of the qualified sick leave equivalent amount described in section 9642(c) of the ARP and any amounts described in section 3131(b)(1) of the Code exceeds the applicable thresholds under section 5102(a) of the EPSLA, as amended for purposes of the ARP. Similarly, section 9643(e)(2) of the ARP reduces the qualified family leave equivalent amount for which a self-employed individual may claim a tax credit to the extent that the sum of the qualified family leave amount described in section 9643(c) of the ARP and any amounts described in section 3132(b)(1) of the Code exceeds $12,000.
Sections 3131(b)(1) and 3132(b)(1) of the Code describe the amounts of qualified sick leave wages and qualified family wages taken into account for purposes of the employer payroll tax credits for paid sick leave and paid family leave, respectively. Section 3131(c) and (f)(2) and section 3132(c) and (f)(2) of the Code define these qualified leave wages as wages (as defined in section 3121(a) of the Code determined without regard to the exclusions from employment under section 3121(b)(1)-(22) of the Code), and compensation (as defined in section 3231(e) of the Code, determined without regard to the exclusions from compensation under section 3231(e)(1) of the Code).
Therefore, when determining the amount by which to reduce their self-employed equivalent credits, self-employed individuals should account for wages excluded under section 3121(b)(1)-(22) of the Code or compensation excluded under section 3231(e)(1) of the Code.
No. Generally, federal governmental employers are not eligible to claim the tax credits under sections 3131 and 3132 of the Code. Accordingly, any sick leave wages and family leave wages paid by a federal governmental employer are not taken into account to reduce the self-employed taxpayer's self-employment equivalent credits on Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals PDF. If a federal governmental employer reports the sick leave wages or family leave wages in Box 14 of Form W-2, Wage and Tax Statement PDF or a separate statement with Form W-2, the self-employed person should not take these reported leave wages into account when determining the amount by which to reduce his or her self-employment equivalent credits.
This rule does not apply to the government of any State or political subdivision thereof, any agency or instrumentality of those governments, Tribal governments, or federal government employers described in section 501(c)(1) and exempt from tax under section 501(a) of the Code that are Eligible Employers permitted to claim the tax credits for sick leave wages and family leave wages paid to employees.
The refundable credits are claimed on the self-employed individual's Form 1040, U.S. Individual Income Tax Return PDF.
A self-employed individual will determine the paid sick and family leave equivalent tax credit to which the individual is entitled by completing Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals PDF. This form is available at irs.gov. To complete the Form 7202, self-employed individuals who are also employees will need any amount of qualified sick and family leave wages that their employers reported on the Form W-2, Wage and Tax Statement PDF. For more information on the requirement for Eligible Employers to report the amount of qualified sick and family leave wages paid to employees on Form W-2, see Special Issues for Employers: Other Issues and Notice 2020-54 PDF.
A self-employed individual may elect to use prior year (rather than current year) net earnings from self-employment to determine his or her average daily self-employment income by indicating this election when filing their 2020 or 2021 Form 1040, U.S. Individual Income Tax Return PDF. See applicable instructions for the form for more information.
It depends. If a self-employed individual who claimed the qualified leave equivalent credits for qualified sick and/or family leave equivalent amounts for the period beginning April 1, 2021, and ending September 30, 2021, receives a Form W-2c, Corrected Wage and Tax Statement, reporting corrected amounts of sick and/or family leave wages in Box 14 (or receives a corrected statement) for this period, the individual must recalculate the credit on the 2021 Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. If the amount of the qualified leave equivalent credit has changed from the amount claimed on the individual’s 2021 Form 1040, U.S. Individual Income Tax Return, the individual must file a Form 1040-X, Amended U.S. Individual Income Tax Return, for 2021 with the corrected amounts from the Form 7202.
The self-employed individual may cover sick leave and family leave equivalents by taking into account the credit to which the individual is entitled and will claim on Form 1040, U.S. Individual Income Tax Return PDF, in determining required estimated tax payments. This means that a self-employed individual can effectively reduce payments of estimated income taxes that the individual would otherwise be required to make if the individual was not entitled to the credit on the Form 1040.
Yes. If an individual is an independent contractor who generally performs services for multiple clients as a nonemployee, the individual is self-employed and is eligible for the tax credits for days the individual is not able to work for reasons related to COVID-19.
For more information on whether an individual is an independent contractor or an employee, and the tax consequences of either status, see Self-Employed Individuals Tax Center.
Maybe. A partner in a partnership is a self-employed individual if the partner's distributive share constitutes net earnings from self-employment or if the partner receives guaranteed payments for services. If the partner is a self-employed individual and is not able to work for reasons related to COVID-19, the partner is eligible for the tax credits.
Generally, partners in a partnership (including members of a limited liability company (LLC) that is treated as a partnership for federal tax purposes) are considered to be self-employed, not employees, when performing services for the partnership.
No. Form 7200, Advance Payment of Employer Credits Due to COVID-19 PDF, is only available for employers that file Form 941, Employer's Quarterly Federal Tax Return PDF, or certain other employment tax returns. However, a self-employed individual may reduce payments of estimated income taxes equal to the credit to which the individual is entitled.
For more information about how a self-employed individual can reduce estimated income taxes to cover a credit for qualified sick leave equivalent amounts and qualified family leave equivalent amounts, see "How can a self-employed individual cover the individual's qualified sick leave equivalent and qualified family leave equivalent amounts before filing his or her Form 1040?"
No, the amount of the credits allowed under sections 9642 and 9643 of the ARP are not included in the gross income of the eligible self-employed individual.
Self-employed individuals should maintain documentation establishing their eligibility for the credits as a self-employed individual. That documentation should be similar to the documentation that employers claiming the credits for qualified leave wages under sections 3131 and 3132 of the Code should maintain. See "How Should an Eligible Employer Substantiate Eligibility for Tax Credits for Qualified Leave Wages?".
Yes. The qualified sick leave equivalent credits and qualified family leave equivalent credits under sections 9642 and 9643 of the ARP, respectively, are available to NRAs who otherwise meet the requirements to claim the tax credits. That is, an individual's status as an NRA does not preclude the individual from claiming the tax credits if the individual both (1) regularly carries on a trade or business within the meaning of section 1402 of the Code, and (2) would be eligible for paid leave that would have satisfied the requirements of the EPSLA or Expanded FMLA, as amended for purposes of the ARP, if the individual was an employee of an Eligible Employer (other than the self-employed individual).
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What to do if an ERC customer receives a notice from the IRS
If the IRS sent a notice directly to your customer's address, please give them this flyer detailing how they can upload the document(s) to ERC Specialists.
You're not seeing double. While we finish the ERC files, you'll see two statuses for each file.
As a customer's file travels through the TRS and ERCS (or CLV) pipelines, the status will update at each significant stage.
If all goes well, you will see your customer's ERC file make its way through two pipelines: TRS and ERCS (or CLV).
The first pipeline updates you on where the ERC file is with TRS. This starts with a completed questionnaire and uploaded documents and ends with an approved file package. When you see the "Package sent" label, you know the file has been sent to ERC Specialists.
The second pipeline updates you on where the ERC file is with ERCS (or CLV). This starts with an application received and ends when the customer has paid the invoice. When you see the "Fully Paid" label, you know the customer has received all the ERC checks and paid ERCS.
A completed ERC file will finish with the TRS status saying "Paid - Complete" and the ERCS status saying "Fully Paid." If the file has both of these statuses it means the commission has been paid to our TRS consultants. (Learn more about how commissions work in the next section.)
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TRS Statement of Policies and Procedures
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