The IRS has recently issued a warning about false claims circulating on social media regarding a bogus “Self-Employment Tax Credit.” Promoters falsely suggest that self-employed individuals and gig workers can receive up to $32,000. In reality, the actual tax credits available are for Sick Leave and Family Leave, which are far more limited.
The IRS is scrutinizing these claims closely and emphasizes that many people do not qualify for these credits. The situation is similar to the dubious claims surrounding the Employee Retention Credit (ERC). IRS Commissioner Danny Werfel urges taxpayers to consult with trusted tax professionals (like us!) before filing claims, highlighting that misleading social media posts are fooling taxpayers into believing they are due significant payouts.
Self-employed individuals can only claim Credits for Sick Leave and Family Leave for specific COVID-19 related circumstances in 2021. These credits are not available for 2023 tax returns.
Legitimate Tax Credits for Self-Employed Individuals
The American Rescue Plan Act of 2021 provides legitimate tax credits for paid sick and family leave, which can offer substantial financial relief if the leave occurred between March 31 and October 1, 2021.
Credits Available:
- Qualified Sick Leave Credit: Based on your average daily self-employment income, this credit is available to those who were unable to work due to quarantine, COVID-19 symptoms, or caring for someone affected by COVID-19. To calculate how much you can apply for, multiply the number of qualifying days by the lesser of $511 (its cap) or 100% of your average daily self-employment income.
- Qualified Family Leave Credit: This one is set aside for those who were unable to work due to caring for a child or someone affected by COVID-19. To calculate this one, multiply the number of qualifying days by the lesser of $200 (its cap) or 67% of the average daily self-employment income.
Taking advantage of legitimate tax credits can provide significant financial relief, but if something sounds too good to be true, it likely is. For more detailed information on these credits, visit the IRS official page or reach out to us for tailored guidance.