How Self-Employed Professionals Can Apply for PPP Assistance

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COVID-19 has had a profound impact on economic activity around the world. Freelancers, self-employed professionals, and independent contractors are no different.

A report reveals that the pandemic had a negative impact on at least 80% of independent contractors, with 61% experiencing a financial setback.

And to worsen the entire situation is the confusion surrounding the Paycheck Protection Program (PPP) for independent professionals.

As a CPA, let me assure you that you qualify for a PPP loan if:

  • You file a Schedule C with your 1040 return every year.
  • You pay your workers with 1099 instead of W2s.
  • If you’re paid in 1099s, you still qualify as an independent contractor.

Here is the link for the rules released by the SBA governing PPP loans.

Find out your PPP loan amount as a self-employed professional

  • Find out your 2019 Schedule C income.
  • Divide it by 12 to find a monthly average.
  • Multiply your monthly profit or income by 2.5 to find the PPP loan amount.

The upper limit for PPP compensation is set at $100,000 irrespective of your annualized income. Here is how it works out:

 Income LevelMonthly IncomePPP Loan (Monthly Income X 2.5)
Case I$100,000$8,333$20,833
Case II$70,000$5,833$14,583
Case III$45,000$3,750$9,375

How to apply for a PPP loan as an independent contractor

Unlike EIDL loans, PPP loans are issued by partner lenders working with the SBA. You can use the Lender Match Tool offered by the SBA to identify a lender near you. Submit the necessary documents along with any additional documents required by the lender. After approval, it usually takes less than ten business days to receive the loan.

How to apply for PPP loan forgiveness as a sole proprietor

Self-employed professionals with a loan amount of under $150,000 can file for PPP loan forgiveness with form 3508S. This form doesn’t require any supply documents or calculations. What you need to mention is the amount you spent on payroll expenses and the loan forgiveness amount you’re filing for.

Since you are likely to use the PPP loan for owner compensation, you can mention it as payroll expenses and file for the forgiveness of the entire amount. However, it is necessary to understand that you must spend these funds within a period of 8 to 24 weeks to qualify for loan forgiveness.

You need to file your loan forgiveness application with your lender and not the SBA, as it is the lender who takes care of the entire forgiveness procedure. Your lender will provide updates within 60 days of filing the forms.

If your lender rejects your loan forgiveness application, your lender is obligated to inform you about notifying the SBA of their action. You can apply for an SBA review and inform the lender about the same within 30 days.

Are you an independent contractor or self-employed professional applying for a PPP loan? Our team will be happy to address any of your concerns.

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