One of the most confusing aspects of the Paycheque Protection Program (PPP) is how to apply for a PPP loan if you are self-employed, even if you are a 1099 contractor or an gig worker. I am an independent contractor from 1099 and I have always managed my business through my personal current account since 2004. My business expenses are low (usually less than $5,000/year), and the IRS and CPA have never had a problem with using my personal checking account for business expenses. I applied for the PPP loan on Tuesday morning (5.5.2020) and received the transfer to my personal current account the next day (5.6.2020). I only plan to use PPP funds on payroll. For documentation, I plan to write a check of myself on May 15, a paycheck for half of the PPP funds. The paycheck is refunded directly to the same personal current account. I intend to meet on the 15th. June with the rest of the PPP funds to issue another paycheck. Will keeping approved cheques as paycheques be sufficient documentation for forgiveness? Billie – Since you can apply based on gross income, you should definitely give it a try. I`m not sure what you mean by receipts – what kind of receipts? 1099er? I recommend that you complete at least one preliminary schedule C.
It shouldn`t be too difficult, but if you have any questions, an accounting or tax preparation department can help. The interim rules go beyond simply separating employers from independent contractors and sole proprietors in defining wage costs. The Provisional Rules explicitly raise and answer the question: Doug – You`re not the only one who notices these discrepancies. This wording comes from the CARES Act itself. SBA policy later stated that you cannot include 1099 contractors on your payroll (unless you are an entrepreneur applying yourself). By next Tuesday (March 9), any freelancer, sole proprietorship or 1099 entrepreneur who has lost income due to the pandemic can receive up to $20,833. It`s basically free money because as long as you follow the instructions, you don`t have to pay it back. You cannot include payments you make to 1099 contractors as payroll. They are not employees – they are contractors and can apply themselves. So, if you don`t have employees, follow the instructions in this article for freelancers and not employees. As a first-time applicant, you do not have to prove the reduction in gross income. You can apply for 2019 or 2020 based on Schedule C of net income.
For the purpose of determining eligibility, the provisional rules appear to separate small businesses with employees from independent contractors and sole proprietorships. Initially, the eligibility standard of (1) 500 or fewer employees based in the United States; (2) be operational on February 15, 2020; and (3) „Either you had employees for whom you paid salaries and payroll taxes, or you paid independent contractors, as indicated on a Form 1099-MISC“ seemed to mean that employers would include independent contractors in the number of employees. However, in the same section on eligibility, the provisional rules expressly provide that independent contractors and sole proprietors, who were appointed on September 15, are required: February 2020, are also eligible and recognize the different types of documents that employers, independent contractors and sole proprietors must provide to lenders to determine eligibility. Unless the SBA provides further guidance for eligibility purposes, small businesses should not include independent contractors in their workforce for eligibility reasons. If you file Schedule C for your income, I assume you will be paid more than $1099. If this is the case, you can apply. 13 CFR Part 120, Interim Final Rule, Section III, (2)(p), p. 15 of 31. Unless the SBA provides additional guidance on the granting of PPP loans, payments to independent contractors are not included in the review of the loan waiver and are not included in the list of permitted uses of PPP loan proceeds. You must prove that you are an independent contractor by looking at your book with records, invoices, bank statements, and other records. A copy of your 2019 and 2020 IRS tax returns will do.
You can also provide invoices, bank statements, and 1099 forms. I am self-employed. I have completed the PPP form and I have a 1099 and a Schedule C. How do I submit when so many certified lenders are no longer processing applications? Please advise. Thank you. If you are self-employed with a 1099 but you also have external contractors with a 1099, how would you apply for the PPP if you did not apply for it last time? Do you need clarification, please? There has been some confusion about the SBA loan application process for self-employed, freelancers and entrepreneurs 1099. For independent small business owners, there is an additional level of calculation for payroll and businesses that may be eligible. The most common question about independent PPP applications is the calculation of payroll. Many self-employed individuals, sole proprietorships, and independent contractors report different profits or seasonal fluctuations in the business each month, making it difficult to determine a fixed monthly payroll. I am not sure you will be. Your independent contractors do not count as payroll, but you may qualify for 2019 or 2020 based on your net income from line 31 of Schedule C. The formula can be found in this article.
For independent contractors, what do you give for the name of the company, I will get a small PPP loan. I am self-employed 1099. I work from home and I don`t really have a lot of expenses. When I applied for the loan, I provided my 1099 from 2019, plus I added according to health insurance information. My question is: what documents do I need to submit for my loan to be given, apart from my 2019 1099? I have bank statements that show I was paid as an independent contractor, but since I`m an S-Corp, they don`t give me a Form 1099. I made the formal payroll for 2020 with my PPP money, but now the bank says I should never have received the loan (and that`s why I can`t get a discount) because I don`t have a c schedule for 2019. I have k-1s. In your instructions above, you said that we could use bank statements. Do you know if the sba agrees with this? Do you have any advice for me? I am self-employed and have received funding from the LTRA. However, only $1,000 will be awarded in advance. I want to apply for a PPP (maybe too late, but it`s worth a try) to convert the EIDL loan to PPP. But I don`t know which lender to go to.
I`m in Southern California. Bank of America requires a business account, which I don`t have. I only have one personal account, but I receive 1099 miscellaneous ones. Thank you. You must submit Form 1040 Schedule C for 2019 or 2020 (depending on what you used to calculate the loan amount) to your PPP loan application to prove the amount you claimed. You will also need to provide an IRS 1099-MISC form for 2019 or 2020 (depending on what you used to calculate the loan amount), which lists the compensation received for non-employees (box 7), the invoice, bank statement, or the book indicating that you are self-employed. If you use 2020 to calculate the loan amount, it is required whether or not you filed a 2020 tax return with the IRS. You must provide a 2020 invoice, bank statement, or book to prove that you were operational on or about February 15, 2020. On January 14, 2021, Congress passed a new Economic Recovery Bill that makes the Paycheck Protection Program (PPP) available to 1,099 entrepreneurs and sole proprietors. Self-employed workers and independent contractors can take advantage of PPP loans in accordance with SBA guidelines. If you use loans appropriately, your business has the potential to get 100% loan forgiveness. .