Self-employed: Should I apply for a PPP loan? Absolutely!

As a follow up to my earlier post "Self Employed? Lower your tax liability with a PPP loan", it become apparent to me that there are still a large number of self-employed individuals and independent contractors in this country that have not taken advantage of the government relief program offered as part of the CARES act, called the Paycheck Protection Program. Many of them were probably scared away by the initial nightmare that some called an application process when the first wave of funding was announced, and the banks, and small businesses alike, had to scramble to build the infrastructure, gather the documentation, and process the 30 million some odd loans that were exited to come in within the first week. It was no wonder the self-employed and independent contractors didn't even bother when they were told their time to apply was a week later.

The mad dash for the cash

Many were led to believe that the money would be gone quickly (and it was in the first round). When the second round of finds were released, it wasn't the same mad rush for money, the average loan amount was much smaller due to the new rules, and some of the larger loans from round one were starting to be returned, as the government started to shame the larger public companies that have access to other methods of relief funding.

The well has not run dry (yet!)

The good news is that there is still money left (as of last week $130B). And.......earlier this week, the SBA provided new information about the forgiveness of the loans. Some of the changes in the latest guidance include the covered period of forgiveness being extended from 8 weeks out to 24 weeks. This basically guarantees that the loan amount received by the self-employed should be fully forgiven. How is that possible you ask?

Lets do the math

The calculation method for determining the amount of the loan and the amount of forgiveness for the self-employed is much more simple than businesses with employees. The amount is based on your 1040 Schedule C, line 31, net profit (or loss). Well, if you reported a loss, you don't qualify. Since the maximum amount allowed is $100,00 let's use that for the calculations.

Your loan amount = $100,000 x 2.5/12 or $20,833.33

Your eligible forgiveness amount = $100,000 x 24/52 or $46,153.85

Get your applications filed now

As you can see, the amount of eligible forgiveness now exceeds the maximum loan amount, so there is no reason not to file immediately. In fact, there is a very good reason to act fast. The PPP loan application deadline is currently set for June 30, and there is no indication that it will be extended. Although, I would never rule anything out as the PPP rules seem to be modified (sometimes for the good) every week or so.

Neglco Tax Services has been working with many self-employed individuals, independent contractors and small businesses to get their PPP loan applications competed, provide guidance and assistance in preparing the documentation required, and get them filed with the banks, since the program was first announced back in April.

Even if you have not yet filed your 2019 income tax return, Neglco Tax Services can help you get that done, too. Might as well, that deadline (July 15) is also right round the corner.

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