Bookkeeping

How To Apply For A PPP Loan if You’re Self-Employed

2021年09月21日

That said, it will be accounting for architects a lot easier to apply for PPP if your bookkeeping is up to date and you have kept good records of the income and expenses of your business. Your accounting professional can prove invaluable in this process so make sure you enlist their help in determining which COVID relief programs are best for your business. For businesses with employees, payroll may also include employee payroll costs for employees whose principal place of residence is in the United States.

1. However, these expenses must have been claimed (or must be claimed) on the 2019 Form 1040 Schedule C for them to be a permissible use during the eight-week period following the first disbursement of the loan.
2. Instead, it may make sense to skip ahead to the PPP Schedule A Worksheet now on page 4 of the application.
3. If you’ve already applied for a PPP loan, your total loan amount based on the gross income calculation can’t be increased.
4. Alternatively you may use information from your 2019 Schedule C to qualify instead.

The CARES Act became law March 27, 2020 and in the first round of PPP, self employed business owners did not get instructions on how to calculate payroll right away. When the guidance did come out, it did not include instructions for businesses that weren’t in business in 2019 but were in business by the deadline of February 15, 2020 required to qualify. Keep in mind that if you already qualified based on the maximum owner’s compensation of $20,833 based on net profit on your Schedule C there is no need to do anything. (For second draw loans to businesses with a NAICS code starting in 72, the maximum amount based solely on owner’s compensation is $29,167). Enter the amount of business utility payments paid or incurred during the covered period, for business utilities for which service began before February 15, 2020.

PPP loan forgiveness

If you are self-employed with employees, the SBA provides the following instructions. One of the more confusing aspects of the Paycheck Protection Program (PPP) is how to apply for a PPP loan if you are self-employed, including if you are a 1099 contractor or gig worker. This information should be straightforward, and you will generally use the information you used to apply unless it has changed from the time you applied. Before we dive into the application, there are a couple of important questions you’ll need to be able to answer. Build business credit, monitor credit health, and accelerate growth — all with Nav Prime. Understand that completing this application will require a number of calculations.

In all of these cases, include these FTEs on this line only if the position was not filled by a new employee. Any FTE reductions in these cases do not reduce the borrower’s loan forgiveness. If your lender has sold the loan for servicing, you will apply through the servicer. Keep in mind that ultimately your lender will process your forgiveness application so you will what is the difference between retained earnings and cash need to follow their instructions. If you applied for PPP as a self-employed individual using net profit, you may discover you could get a larger loan by using gross income.

The Bottom Line on Applying for PPP When Self-Employed

In fact, we strongly encourage you to  work with your accountant before you submit your application for forgiveness. Self employed individuals without employees will generally be using something called “owner’s compensation replacement,” to calculate the amount spent on payroll. Each forgiveness form has unique instructions for documentation that must be submitted with your loan forgiveness application. For detailed instructions, refer to your chosen forgiveness form for clear guidance.

Forgiveness Amount Calculation

A partner in a partnership cannot apply for a PPP loan; instead, the partnership must apply for the loan by reporting the self-employment income of the active general partners as a payroll cost. PPP borrowers must certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” However, there has been a “safe harbor” for loans below $2 million. For those who are self-employed and file a Form 1040, Schedule C, the SBA provides separate calculations based on whether or not you have employees. Instantly, compare your best financial options based on your unique business data. Know what business financing you can qualify for before you apply, with Nav.

First Draw PPP loan

SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. From April 3 through April 14, 2020, the Small Business Administration (“SBA”) has guaranteed over one million loans under the Paycheck Protection Program (“PPP”). Over 4,600 lenders throughout the U.S. have been tasked with serving as conduits for distributing $349 billion in federal loan funds made available for the PPP, with approximately $296 billion dollars having already been approved will meghan markle and prince harry’s second child have dual citizenship for distribution in eleven days. The average PPP loan amount so far has been $239,000, though the vast majority of approved loans (70%) have been for $150,000 or less. Contact your lender if you have already submitted a loan application based on Schedule C net profits and have questions about the new calculations. If the partnership has employees, a payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the partnership was in operation and had employees on that date.

A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish you were in operation on February 15, 2020. You must provide the 2019 or 2020 (whichever you used to calculate loan amount) Form 1040 Schedule C with your PPP loan application to substantiate the amount for which you applied. You must also include a 2019 or 2020 (whichever you used to calculate loan amount) IRS Form 1099-MISC detailing non-employee compensation received (box 7), invoice, bank statement, or book of record that establishes you are self-employed.