Applying For Ppp As An Independent Contractor – On April 14, 2020, the SBA issued a new Interim Final Regulation (IFR) on the Paycheck Protection Program (PPP) for sole proprietors and independent contractors.
The initial guidelines issued by the SBA indicate the loan amount that individual properties can receive. The components of the loan calculation are as follows:
Applying For Ppp As An Independent Contractor
Determine the amount above and divide by 12 to calculate the loan using a 2.5x multiplier.
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Further, the guidelines state that the sole operator of the partnership cannot apply separately for the PPP loan as a sole proprietorship. In this case, self-employment income is applied at the partnership level because the maximum annual salary is $100,000.
These are new guidelines, so there is no clarity on how this will work for partner customers who have already applied for a PPP loan.
The guidelines state that you must file a 2019 Form C and a 2019 Form 1099-MISC (if you received one) with details of workers’ compensation payments received to receive a PPP loan. It is necessary to prove the expenses used to calculate the maximum loan amount.
Form C does not need to be submitted, but must be completed and submitted to the lender. The SBA provides additional guidance for self-employed individuals who were not employed in 2019 but were employed before February 15, 2020.
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It is important for all clients, regardless of health insurance and coverage type, to understand the above guidelines for retirement contributions. That is, eligibility for credit does not include the owner’s health insurance and pension contributions (more on exemptions below).
The instructions for the rent paid to the relevant party are unclear (for example, the owner of the dentist also owns the dental building and leases it to the dentist). It says mortgage interest is a qualifying expense, but then says rent is a qualifying expense. CWA recommends waiting for guidance before making assumptions in this situation.
You must have claimed a deduction to use the PPP funds for the expenses, or you can claim the expenses on Schedule C for 2019. Similar costs in 2019.
The above costs are eligible for PPP revenue costs. However, there is an additional definition of what constitutes an exemption. Employees (but not employers) are exempt from wages up to $100,000 a year. This is calculated weekly, so only 8/52 (8 weeks out of 52) is eligible, or a maximum of $15,385 per employee.
How Do I Pay Myself With Ppp As A Sole Proprietor, Independent Contractor, Or Schedule C Filer?
Other expenses such as pension contributions, health insurance premiums, rent, utilities and interest are also exempt. However, the regulations state that sole proprietors are entitled to a maximum $100,000 exemption from the 31 C Line plan for their own reimbursements. This means that the $100,000 cap covers only employer pension and health insurance contributions.
Additionally, the above restrictions were noted because Parliament did not want PPP loans to be “windfall” for the employer. The purpose of this program is to pay workers wages. This statement, along with the understanding that payments must be made in 2019, means that the fund has no opportunity to collect lump sums for pensions, employee salaries or deferred rent and utilities. This is not explicitly stated in the guidelines, but the wording in the HMHS can be taken into account.
Owner reimbursement is $100,000 for all customers, regardless of registration type.
Assuming this applies to other departmental structures, this would limit the PPP owner’s use of $100,000 ($15,385 per eight weeks), including pension and health insurance contributions.
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Also, expenses can only be used if paid in 2019. This limits the ability to add new payments to the exemption. For many CWA customers whose services have been shut down, this means it has become more difficult to settle agreements. Limiting total owner forgiveness to $15 and $385 significantly limits the maximum forgiveness possible on this loan when your office closes.
Each time a new MHHS report is published, the benefits for entrepreneurs seem narrower and narrower. CWA believes that this new interim financial statement is indicative of future guidance on PPP debt relief for all separate entities or amalgamated entities.
Finally, we encourage you to read our new post-IFR strategy to consider in your decision-making.
Stay up-to-date with our latest news and strategies on our COVID-19 resources page. If you are not a CWA client and feel you could benefit from an experienced advisor to guide you through this process, please contact a member of our team for advice.
Sba Ppp Guidelines For Sole Proprietors And Independent Contractors
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How To Apply For Paycheck Protection Program (ppp)
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Home / Blog / Our Story / COVID-19 Update / Payroll Protection Program (PPP) Application and Borrower Information Form
The Paycheck Protection Program (“PPP”) has provided $349 billion in loan forgiveness for small businesses during the coronavirus (COVID-19) crisis. All loan conditions are equal for everyone.
Below is a summary of the PPP Fact Sheet provided by the NJ SBA through Columbia Savings.
Each employee’s annual salary is capped at $100,000. Given the high probability of oversubscription, it is estimated that more than 25% of the forgiveness amount could be for non-salary expenses.
Ppp For Sole Proprietors
Businesses with 500 or fewer employees, nonprofit organizations, large organizations, tribal concerns, sole proprietorships, sole proprietorships, and independent contractors are eligible to apply. Businesses in certain industries may have more than 500 employees if they meet SBA’s employee-based standards for those industries (click here for details).
To qualify for this program, small businesses in the hospitality and food service industry must (1) be exempt from the SBA’s eligibility standards (click here to check NAICS codes) or (2) be licensed in the SBA’s Franchise Directory (click here to check (3) Recipients of financial assistance from SBA Authorized Micro-Investment Firms Additional instructions may be provided as needed.
You can apply through an existing SBA lender or through a participating federally insured depository institution, federally insured credit union, and participating Farm Credit System. Other regulated lenders can find these loans after they are approved and signed up for the program. Check with your local lender to see if they participate.
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