Taxpayers will want to be vigilant against a new push involving the “self-employment tax credit”. Aggressive promotors continue to target taxpayers with misleading marketing around tax credits, namely the employee retention tax credit, and now this new self-employment tax credit. We have the details here.

What are the details?

Promoters are marketing the self-employment tax credit largely on social media, falsely advertising the credit as a way to secure payments for the COVID-pandemic period. Taxpayers in some cases are being led to believe they qualify for up to $32,000 in payments.

What is the legitimate credit?

The so called “self-employment tax credit” is actually a very limited and technical credit called Credits for Sick Leave and Family Leave. Self-employed individuals can claim credits for sick and family leave only for limited COVID-19 related circumstances occurring in 2020 and 2021.

The credit is not available for 2023 tax returns.

There are a number of FAQs which outline the specific circumstances that make a taxpayer eligible for Credits for Sick and Family Leave.

Some examples include:

• Individual was unable to work because he/she was subject to or caring for an individual subject to a quarantine or isolation order in 2020 / 2021
• Individual was unable to work due to school closure or absence of childcare provider due to COVID-19 precautions

Stay vigilant

Be cautious of any inflated promises for large refunds. In addition to the “self-employment tax credit,” the IRS is also seeing an uptick in false claims for the fuel tax credit and household employment taxes.

False claims lead to delayed refunds and added documentation requirements for legitimate claims.

When in doubt, consult your tax advisor who can help you navigate your eligibility for tax credits.