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Paycheck Protection Program for Sole Proprietors and Independent Contractors
April 10th 2020 was the first day independent contractors and self-employed individuals can apply for the $349 billion Paycheck Protection Program. Although the program emphasizes keeping workers on payroll, it is open to the nearly 26 million solo entrepreneurs in the U.S. who pay themselves by distributions, too. It gives small businesses access to forgivable loans to cover payroll or wages they pay themselves over the eight weeks following the signing date.
Application – Contact your local banker to request their application form and required document list
Eligibility – Must have begun operations prior to February 15, 2020
Cost Covered – Mortgage (rental office lease & utilities – for self-employed individuals that have a home office, business use of home can be covered) rent, office lease, utilities, payroll costs (if applicable) and net self-employment earnings
Documentation Required – 2019 tax return, including Schedule C. and/or Schedule 1.
If your 2019 tax return is not complete, attach the 2019 financial statements along with a 2018 tax return.
All 2019 Form 1099-MISC.
2019 payroll tax forms 940/941 (if you pay employees)
Any other documents that can
Loan forgiveness –8 weeks following receipt of funds. You must spend 75% on payroll costs, remaining 25% must be spent on business portion (home office calculation) of mortgage, rent and utilities.
Loan Amount - Ask your banker to provide a template to calculate loan amount, below is the calculation:
Without Employees - 2.5 times your average monthly payroll costs – Take the net –self-employment income from Schedule C, Line 31, (not exceeding $100,000) – divide by 12 months, and multiply by 2.5 to obtain loan amount
With Employees - Take the net –self-employment income from Schedule C, Line 31, add back employee wages, employer health insurance costs for employees, employee retirement plan contribution for employees (Not to exceed $100,00) Divide the net total by 12, and times by 2.5 to obtain loan amount