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Re: Payroll Protection Program

nhansen
Community Leader
Nicole H Member Since: Nov 15, 2007
1 of 15

I've been reading about the payroll protection program offered by the US government as part of the Covid-19 bill. It can apply to us that are self-employed and I understand the part about how it can apply to business expenses. But does it cover our income at all? It's not clear from everything I have read. Anyone see any good articles on this topic that explain it well?

briandavis
Active Member
Brian D Member Since: Jun 29, 2016
2 of 15

https://bench.co/blog/operations/paycheck-protection-program-self-employed/

 

Independent contractors and the PPP

If you work as an independent contractor, you are by default considered to be a sole proprietor in the eyes of the IRS. This means your freelance income gets reported annually on a Schedule C within your personal tax return. You will have a Schedule C even if you pick up odd jobs or do freelance work, and this Schedule is based on the 1099-MISC forms you collect from the companies or individuals who have hired you as a contractor.

 

Sole proprietorships will need to submit schedules from their 2019 tax return filed (or to be filed) showing income and expenses from the sole proprietorship.

 

Sole proprietorships can apply starting April 3.

Independent contractors and self-employed individuals can apply starting April 10.

 

How do I apply?

You can apply for the Paycheck Protection Program through an SBA-backed lender.

Here is a the PPP application form from the U.S. treasury, indicating which information you’ll be expected to provide to your bank.

researchediting
Community Guru
Douglas Michael M Member Since: May 22, 2015
3 of 15

Thank you, Brian!

 

The application form includes the following required certification (first in a list):
The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:

_____The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.

 

On its face, this requirement would seem to exclude me and likely a number of other sole proprietors who collect our earnings via "owner's draw" rather than salary.

 

While there are other provisions for covering rent or mortgage, the application does say "must certify in good faith to all of the below." (emphasis added)

4hiremax
Active Member
Max J. M Member Since: Apr 6, 2020
4 of 15

Excuse my inexperience.  Freelancing less than a year and first time poster.

 

I see 2 situations here.

 

Situation 1:  As an Upwork freelancer with multiple clients suspending work due to virus, I can apply for the SBA loan as described in the CARES Act.  This includes PPP as well as other types of loans.  Some of which may be forgivable.  I believe most of this thread pertains to this situation.

 

Situation 2: I have a long-term client that has requested assistance in applying for the PPP.  He wonders if amounts paid to me as an Upwork freelancer can be counted toward the 2.5 months of "average payroll" as well as qualifies for forgiveness in the 8 week period after the loan is approved.  It looks like contractors "paid on a 1099 basis" do indeed qualify.  Since Upwork Freelancers do NOT recieve a 1099 from their client nor from Upwork, the eligibility for PPP loan is unclear.

 

Can anyone speak directly to Situation 2 above?

tlsanders
Community Guru
Tiffany S Member Since: Jan 15, 2016
5 of 15

Douglas Michael M wrote:

Thank you, Brian!

 

The application form includes the following required certification (first in a list):
The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:

_____The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC.

 

On its face, this requirement would seem to exclude me and likely a number of other sole proprietors who collect our earnings via "owner's draw" rather than salary.

 

While there are other provisions for covering rent or mortgage, the application does say "must certify in good faith to all of the below." (emphasis added)


I believe that applications for ICs have not opened yet. Presumably (one would hope, anyway) when that happens there will either be a separate application or branching logic that addresses this issue. I did see an analysis posted by an attorney in another group that categorically stated ICs would be eligible and that it would be based on net self employment income.

lysis10
Community Guru
Jennifer M Member Since: May 17, 2015
6 of 15

So much info flying around. If it's free money, I'll take free money! Money printer go brrrrrr.  😍😍😍

 

I don't want a loan or something I have to pay back with payments. I got 2 school loans left and I ain't got no more debt after that and I wanna keep it that way. For people with school loans, Navient just sent out notifications to everyone with federal loans that they are suspending interest so we got 0% interest until September. Oh yeah gonna pay that loan off this year fo sho.

feed_my_eyes
Community Guru
Christine A Member Since: May 4, 2016
7 of 15

Jennifer M wrote:

So much info flying around. If it's free money, I'll take free money! Money printer go brrrrrr.  😍😍😍

 


Unfortunately there's no such thing as free money. Whatever money we're given now will be have to be paid back again in the form of higher taxes and/or deep cuts to government services. The UK government has already said that they think the self-employed haven't been making enough contributions to national insurance and that they'll be making changes to our [already high] taxes. I'm fortunate to have enough work coming in at the moment, but I think that my disposable income will take a hit in the long run.

alphazomgy
Community Guru
Alexander B Member Since: Mar 30, 2017
8 of 15

So we can only get "free" money if our clients suspend work?

 

I don't understand this fully. However, I'm thinking most freelancers won't be getting any of the free money.

 

We are self sufficient people by nature so it doesn't surprise me. 

tlsanders
Community Guru
Tiffany S Member Since: Jan 15, 2016
9 of 15

Alexander B wrote:

So we can only get "free" money if our clients suspend work?

 

Yes, it's intended to compensate for lost revenues.

feed_my_eyes
Community Guru
Christine A Member Since: May 4, 2016
10 of 15

Tiffany S wrote:

Alexander B wrote:

So we can only get "free" money if our clients suspend work?

 

Yes, it's intended to compensate for lost revenues.


Will people need to prove that they've lost revenue due to the virus before they qualify, though? I'm working just as much as ever, but I don't know how long that will continue. And for certain, any government benefits will need to be declared on my taxes and if it's in excess of my usual income, it'll have to be paid back next year in the form of additional income tax. It could even push me into a higher tax bracket. Sorry to be a drag, everyone, but again, I'm just adding a note of caution for anyone who thinks that this is "free money". 

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