April 16, 2020 Coronavirus en_US Are you self-employed? Want to find out if you're eligible for the Paycheck Protection Program amid the coronavirus. See this article for guidance. https://quickbooks.intuit.com/cas/dam/IMAGE/A8Cq9eFqQ/Self-employed-qualify-PPP.jpg https://quickbooks.intuit.com/r/coronavirus/paycheck-protection-program-eligibility/ Are self-employed workers eligible for the Paycheck Protection Program?
Coronavirus

Are self-employed workers eligible for the Paycheck Protection Program?

By Katie McBeth April 16, 2020

Last updated: June 2020

Editor’s Note: Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules.

Yes, just like small businesses, eligible self-employed workers and independent contractors may apply for financial assistance through the Paycheck Protection Program (PPP). Eligible self-employed workers can submit applications beginning April 10, 2020.

If you receive self-employment income, you may be eligible for a PPP loan if:

  • You were in operation on February 15, 2020
  • Your principal place of residence is in the United States
  • You filed or will file a Form 1040 Schedule C for 2019

How much can self-employed workers request in loan funds?

How you estimate your maximum loan amount depends on whether you employ other individuals.

If you have no employees, loan amounts are determined by your net profit. You can find your net profit amount in your 2019 Form 1040 Schedule C on line 31. If line 31 on Schedule C is greater than $100,000, reduce it to $100,000. If line 31 on Schedule C is zero or less, you are not eligible for a PPP loan.

If you are self-employed and have employees, calculate 2019 payroll costs by adding the following:

  • Net profits on line 31 of your 2019 Form 1040 Schedule C (if line 31 on Schedule C is greater than $100,000, reduce it to $100,000. If line 31 on Schedule C is less than zero, set it to zero)
  • Gross wages from Form 941, line 5c, column 1, from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips. Subtract any amounts paid to any individual employee in excess of $100,000 annualized and any amounts paid to any employee whose principal place of residence is outside the U.S.
  • Employer health insurance contributions on line 14 of your 2019 Form 1040 Schedule C
  • Retirement contributions on line 19 of your 2019 Form 1040 Schedule C
  • State and local taxes assessed on employee compensation (commonly referred to as State Unemployment Tax or SUTA from state quarterly wage reporting forms)

To estimate your loan amount:

  1. Take your net profit amount (in the case of no employees) or your 2019 payroll costs, as calculated above (in the case of employees)
  2. Divide it by 12
  3. Then multiply it by 2.5
  4. Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

Learn more here.

How can self-employed workers spend Paycheck Protection Program loans?

You can use the loan for:

  • Owner compensation replacement (calculated based on 2019 net profit)
  • Employee payroll costs for employees whose principal place of residence is in the U.S. (if you have employees)
  • As provided on your 2019 Form 1040 Schedule C:

    • Mortgage interest payments on any business mortgage obligation on real or personal property
    • Business rent payments
    • Business utility payments

Note: You must have claimed or be entitled to claim a deduction for these expenses on your 2019 Form 1040 Schedule C for them to be a permissible use during your loan forgiveness covered period. For example, if you did not claim or are not entitled to claim utilities expenses on your 2019 Form 1040 Schedule C, you cannot use the proceeds for utilities during the covered period.

  • Interest payments for loans or other debts incurred before February 15, 2020
  • Refinancing an SBA Economic Injury Disaster Loan made between January 31, 2020 and April 3, 2020 for payroll costs

Make sure to keep detailed records of how you use your loan so you are ready when it’s time to apply for forgiveness. When you apply for loan forgiveness, you will need to show evidence of any business rent, business mortgage interest, or business utility payments made during the covered period. You will need Form 941 and state quarterly wage unemployment tax reporting forms (or equivalent payroll processor records), and provide the 2019 Form 1040 Schedule C that you used to apply for the loan.

Learn more here.

What else do self-employed workers need to know about the Paycheck Protection Program?

You may apply for a Paycheck Protection Program loan through an approved SBA 7(a) lender or any participating federally insured depository institution, credit union, or Farm Credit System institution. Consult your local lender to see if it’s participating in the Paycheck Protection Program.

Additionally, borrowers may have loans forgiven, in whole or in part, under certain criteria. After the eight-week period following disbursement of a Paycheck Protection Program loan, borrowers can apply for loan forgiveness with their lenders.

Regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly and the above information may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.

The funding described is made available to businesses located in the United States of America and is not available in other locations. 

Given the large demand for limited SBA authorized funding and limits on our funding capacity, not every qualified Paycheck Protection Program applicant will receive a loan.

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

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Katie McBeth

Katie McBeth

Prior to joining the QuickBooks marketing team, Katie McBeth spent her time writing for various blogs across the web, including Quiet Revolution, Fortune Magazine, and many more. Her writing focus is on small business management, marketing, and recruitment. When she’s not writing, she’s hanging out with her small private zoo of three cats, two dogs, and dozens of plants. Read more