The SETC vs the ERC: Find Out Which Tax Credit is Right for You!

With a myriad of tax credits available to small businesses, sometimes navigating through the options can be tough. Two significant credits you should be aware of are the Employee Retention Credit (ERC) and the Self-Employment Tax Credit (SETC). Both have the potential to provide your business with significant financial relief. But understanding which one to apply for is crucial for maximizing your benefits. Here’s a guide to help you make an informed decision, and why consulting with Pinnacle Minds can streamline this process.

What is the Employee Retention Credit (ERC)?

The ERC is a partially refundable tax credit aimed at businesses who kept employees on their payroll during the economic challenges of the COVID-19 pandemic in 2020 and 2021. Initially introduced under the CARES Act, the ERC has been extended and expanded, offering significant financial relief for eligible businesses.

  • Eligibility: Businesses that experienced a decline in gross receipts or were subject to a full or partial suspension of operations due to COVID-19
  • Benefits: Up to $26,000 per eligible employee, with a substantial portion ($21,000) available from wages paid in the first three quarters of 2021
  • Usage: This credit can be used to offset payroll taxes, and any excess may be refunded

What is the Self-Employment Tax Credit (SETC)?

The SETC, also introduced as part of the COVID-19 relief efforts, provides financial relief specifically to self-employed individuals who struggled to stay afloat during the pandemic.

  • Eligibility: Self-employed individuals who were unable to perform self-employment work due to COVID-19 government orders or illness, including the illness of certain family members and vaccine-related illness
  • Benefits: Allows eligible self-employed individuals to claim a refundable tax credit for qualifying days, helping to reduce their overall tax burden
  • Usage: The credit is calculated based on a percentage of net earnings from self-employment, your daily average self-employment, and the number of days missed due to COVID-19, offering direct tax relief.

Should You Apply for ERC or SETC?

The decision on whether to apply for the ERC or SETC depends on your specific circumstances. Here are some things to consider:

  1. Nature of Your Business: If you run a business with employees on payroll, and you retained employees during the pandemic, the ERC can provide significant tax relief. If you are a sole proprietor or self-employed without employees, the SETC is designed to provide you relief for days you were unable to work.
  2. Impact of COVID-19: Consider how the pandemic affected your business operations. If you had to suspend operations or experienced a significant drop in revenue, the ERC could be highly beneficial. If you were unable to perform self-employment work for many days during 2020 and 2021, the SETC is designed to help you.

Why Consult Pinnacle Minds?

Navigating the application process for these tax credits can be complex and time-consuming. Pinnacle Minds, one of the premiere tax and business consulting firms, offers experienced guidance to help you understand your eligibility and maximize your benefits. These are just a few of the things Pinnacle Minds has to offer:

  • Experienced Knowledge: Our team of seasoned former IRS Auditors is well-versed in the intricacies of the ERC and SETC, helping you receive the full benefits you’re entitled to.
  • Personalized Service: We take the time to understand your unique business circumstances, providing tailored advice and support throughout the application process.
  • Efficient Process: We handle all the detailed paperwork and compliance requirements, streamlining the process and saving you valuable time and effort.
  • Ongoing Support: Beyond filing, we offer continuous support and address any questions that you have, ensuring a smooth and relaxed experience.

Don’t miss out on the financial relief available to you. Contact Pinnacle Minds today to schedule a consultation and let us help you navigate the ERC, SETC, or both. Our knowledge and commitment to your business’s success can help you focus on what you do best—running your business.

Act now, and let Pinnacle Minds be your trusted partner. Reach out to us to get started on your journey to financial relief and business growth!

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