Payroll Protection Program (PPP) loans under the CARES Act are available not only to small business but to self-employed individuals, too. Banks began accepting PPP loan applications for self-employed individuals beginning April 10th. The Small Business Administration (SBA) has now issued helpful guidance to self-employed individuals who may apply for these PPP loans.
Under the new SBA guidance, an individual is eligible for a PPP loan if: (i) you were in operation on February 15, 2020; (ii) you are an individual with self-employment income (such as an independent contractor or a sole proprietor); (iii) your principal place of residence is in the United States; and (iv) you have already filed or will file an IRS Form 1040 income tax return, and containing a Schedule C, for 2019. The SBA also announced rules for partners and partnerships in this guidance, and which will be addressed in a separate post.
I. Calculate the Amount of your PPP Loan
The SBA states in its new guidance that the amount of a PPP loan will depend upon whether or not you employ other individuals.
Under Internal Revenue Service COVID-19 related announcements, the filing date for 2019 federal income tax returns for individuals has been extended to July 15, 2020. Under its guidance, the SBA now states that regardless of whether you have yet filed a 2019 income tax return with the IRS, you must fill out and submit the 2019 Form 1040, Schedule C with your PPP loan application, provide a 2019 IRS Form 1099-MISC (detailing nonemployee compensation received- box 7), and also provide a 2020 business-related invoice, bank statement, or other record showing you are self-employed and were in operation on or around February 15, 2020. The 2019 Form 1040, Schedule C can be found at the IRS website, www.irs.gov.
The SBA states that you must supply a 2019 IRS Form 1040, Schedule C; quarterly 2019 IRS Forms 941 (or other tax forms or equivalent payroll processor records containing similar information); state quarterly wage unemployment insurance tax (SUTA) reporting forms from each quarter in 2019 or equivalent payroll processor records; and evidence of any retirement and health insurance contributions, if applicable. A payroll statement or similar documentation from the pay period that covered February 15, 2020 must also be provided to establish you were in operation on February 15, 2020.
II. What Can I use my PPP Loan for?
The SBA in its guidance now instructs that the proceeds of a PPP loan are to be used for the following.
III. Restrictions on use of PPP Loans
IV. Loan Forgiveness
PPP loans are, in fact, loans – and which may be required to be repaid with interest. However, if the loan is used for specific purposes, the loan can be forgiven and need not be repaid. For purposes of determining whether all or part of a PPP loan for a self-employed individual may be forgiven, the SBA now states that the actual amount of loan forgiveness will depend, in part, on the total amount spent over the covered period on:
V. What Documentation must I submit to my bank for a self-employed PPP loan?