Self-Employed: How To Apply For A Payroll Protection Program PPP Loan

Self-Employed: How To Apply For A Payroll Protection Program PPP Loan

Self-Employed: How To Apply For A Payroll Protection Program PPP Loan

President Trump signed the Paycheck Protection Program Flexibility Act into law. The legislation gives small business owners more flexibility in how they can use PPP funds and may make it easier to qualify for forgiveness. This article will be updated to include the new requirements soon. In the meantime, you can read about the changes HERE.

One of the more confusing aspects of the Paycheck Protection Program (PPP) is how to apply for a PPP loan if you are self-employed, including if you are a 1099 contractor. In earlier guidance, the SBA indicated that those individuals could apply for PPP loans beginning April 10, 2020 but did not provide specific instructions for how to do so. 

At Nav, we’ve received numerous questions from those who want to apply but aren’t sure how to calculate the loan amount for which they are eligible or the amount they may be able to have forgiven. They’ve asked us questions like:

  • How do I calculate my payroll or salary if I am self-employed? 
  • Can I include health insurance premiums I pay myself? 
  • What expenses may be included in the forgiven amount?
  • What if I have not filed my 2019 tax return? 
  • If I had a loss in my business do I qualify? 

On April 14, 2020 the SBA issued new guidance for those who are self-employed and file a Form 1040, Schedule C, in the form of an update to the Interim Final Rule. We have excerpted the main points below to help you understand how to apply for PPP if you are self-employed. However, this article does not include the full text of this guidance.

We strongly encourage you to review the SBA interim final rule for self-employed applicants carefully and discuss it with your tax professional, attorney, or financial advisor before you apply to clarify how it applies to your business. 

See How Much SBA Loan Money You Qualify For

See How Much SBA Loan Money You Qualify For

Use our CARES Act SBA loan calculator to see how much money your business may qualify to get.

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How To Calculate PPP Loan Amount If You Are Self Employed

The information in this article applies to those who are self-employed and who file a Form 1040, Schedule C. As a reminder the SBA states you are eligible for a PPP loan if: 

  • You were in operation on February 15, 2020; 
  • You are an individual with self-employment income (such as an independent contractor or a sole proprietor); 
  • Your principal place of residence is in the United States; and  
  • You filed or will file a Form 1040 Schedule C for 2019

For these applicants, the SBA provides separate calculations based on whether or not you have employees. (Also keep in mind the SBA has already issued guidance that if your business uses 1099-contractors in your business you do not include them in your PPP salary calculations.)

Self-Employed PPP Loan Forgiveness Calculator - Estimated your Forgivable Amount

Self-Employed PPP Loan Forgiveness Calculator - Estimated your Forgivable Amount

Use this calculator if you are self-employed with no employees and filed or will file Schedule C for 2019.

Get Estimate

If You Have No Employees

If you are self-employed and have no employees, the SBA provides the following instructions: 

Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net profit amount. If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan. 

Step 2: Calculate your average net monthly profit. To do this, take the amount from your 2019 Form 1040 Schedule C line 31 (net profit) and divide it by 12. That gives you your average monthly net profit. 

Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5. 

This is the amount most self employed borrowers with no employees will use to qualify for PPP.

However, if your business received an Economic Injury Disaster Loan made between January 31, 2020 and April 3, 2020 that you want to refinance with PPP, add the outstanding amount of that loan, minus any advance under an EIDL COVID-19 loan (because it does not have to be repaid). If you have applied for EIDL but it was not made during the time period listed, you can skip this step. 

How to Substantiate Your Income 

The SBA says that if you have not yet filed a 2019 return, you should fill it out and compute the net profit for your business. It also says that regardless of whether you have filed a 2019 tax return with the IRS, you must provide the 2019 Form 1040 Schedule C with your PPP loan application to substantiate the applied-for PPP loan amount.

To substantiate your income (no employees) you must provide a “2019 IRS Form 1099-MISC detailing non-employee compensation received (box 7), invoice, bank statement, or book of record that establishes you are self-employed.” In addition, “you must provide a 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020.” 

If You Have Employees

If you have employees, the SBA provides the following instructions: 

Step 1: Compute 2019 payroll by adding the following: 

  1. Your 2019 Form 1040 Schedule C line 31 net profit amount up to $100,000 annualized, if this amount is over $100,000, reduce it to $100,000, if this amount is less than zero, set this amount at zero; 
  2. 2019 gross wages and tips paid to your employees whose principal place of residence is in the United States computed using 2019 IRS Form 941 Taxable Medicare wages & tips (line 5c- column 1) from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips; subtract any amounts paid to any individual employee in excess of $100,000 annualized and any amounts paid to any employee whose principal place of residence is outside the United States; and 
  3. 2019 employer health insurance contributions (health insurance component of Form 1040 Schedule C line 14), retirement contributions (Form 1040 Schedule C line 19), and state and local taxes assessed on employee compensation (primarily under state laws commonly referred to as the State Unemployment Tax Act or SUTA from state quarterly wage reporting forms). 

Step 2: Calculate the average monthly amount by dividing the amount from Step 1 by 12. 

Step 3: Multiply the average monthly amount from Step 2 by 2.5. 

However, if your business received an EIDL made between January 31, 2020 and April 3, 2020 that you want to refinance with PPP, add the outstanding amount, minus any advance under an EIDL COVID-19 loan because it does not have to be repaid. If you have applied for EIDL but it was not made during the time period listed, you can skip this step. 

How to Substantiate Your Income 

For businesses with employees that file using Form 1040 Schedule C, the SBA explains, “You must supply your 2019 Form 1040 Schedule C, Form 941 (or other tax forms or equivalent payroll processor records containing similar information) and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or equivalent payroll processor records, along with evidence of any retirement and health insurance contributions, if applicable.” 

Since you must establish your business was in operation by February 15, 2020 you must include, “a payroll statement or similar documentation from the pay period that covered February 15, 2020.” 

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If You are a Partner In a Partnership

The SBA clarifies that while partnerships are eligible for PPP loans, a partner in a partnership may not submit a separate PPP loan application for themselves as a self employed individual. “Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.” This includes an LLC filing taxes as a partnership. 

What If I Have Not Filed my 2019 Tax Return for My Business?

The SBA does not state that you must file your 2019 tax return before you apply. However it does state you must fill it out as you will be relying on that information to apply for the loan. You should make sure it is accurate and complete. 

What If My Business Showed a Loss? 

If the amount on your 2019 Form 1040 Schedule C shows a loss, your business will not qualify for PPP.

What Expenses Can I Use My PPP Loan For? 

The SBA has established some very specific guidance regarding the use of PPP loan proceeds for those with income from self-employment who file a 2019 Form 1040, Schedule C. 

These loan proceeds may be used for the following purposes. 

  • Owner compensation replacement, calculated based on 2019 net profit. 
  • Employee payroll costs (as defined in the First PPP Interim Final Rule) for employees whose principal place of residence is in the United States, if you have employees. 
  • Mortgage interest payments* (but not mortgage prepayments or principal payments) on any business mortgage obligation on real or personal property (e.g., the interest on your mortgage for the warehouse you purchased to store business equipment or the interest on an auto loan for a vehicle you use to perform your business), 
  • Business rent payments* (e.g., the warehouse where you store business equipment or the vehicle you use to perform your business), and
  • Business utility payments* (e.g., the cost of electricity in the warehouse you rent or gas you use driving your business vehicle). 
  • Interest payments on any other debt obligations that were incurred before February 15, 2020 (such amounts are not eligible for PPP loan forgiveness). 
  • Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020 (maturity will be reset to PPP’s maturity of two years). If you received an SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan. 

*Note that the SBA specifically says: “You must have claimed or be entitled to claim a deduction for such expenses on your 2019 Form 1040 Schedule C for them to be a permissible use during the eight-week period following the first disbursement of the loan. (Editor’s note: The 8 weeks immediately after disbursement of the loan is the “covered period.”) For example, if you did not claim or are not entitled to claim utilities expenses on your 2019 Form 1040 Schedule C, you cannot use the proceeds for utilities during the covered period.”

Also note that the SBA requires that at least 75 percent of the PPP loan proceeds shall be used for payroll costs. For purposes of determining the percentage of use of proceeds for payroll costs (but not for forgiveness purposes), the amount of any refinanced EIDL will be included. 

What Amounts Shall Be Eligible for Forgiveness? 

By way of background, you can apply for forgiveness with your lender after the eight-week period after the loan was made. The lender then has sixty days to process your request. Since no payments are due on these loans for six months, you should have plenty of time to make your request and get some or all of the balance forgiven (if you qualify) before payments are due. Any balance remaining after forgiveness becomes a loan with a 1% interest rate and two year repayment period. 

Also keep in mind the main purpose of the Paycheck Protection Program is to help employers maintain payroll. (That may include your income as the owner of the business.) Therefore, if you want the loan forgiven, the bulk of the loan must be used toward payroll. 

If you qualify, you may be eligible to have the entire loan amount plus accrued interest forgiven. 

But how much is forgiven will depend on the total amount spent over the covered period— the eight weeks after the loan is disbursed— on the following, according to the SBA: 

  • Payroll costs including salary, wages, and tips, up to $100,000 of annualized pay per employee (for eight weeks, a maximum of $15,385 per individual), 
  • Covered benefits for employees (but not owners), including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums); 
  • Owner compensation replacement, calculated based on 2019 net profit with forgiveness of such amounts limited to eight weeks’ worth (8 divided by 52) of 2019 net profit, excluding any qualified sick leave equivalent amount for which a credit is claimed under section 7002 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116-127) or qualified family leave equivalent amount for which a credit is claimed under section 7004 of FFCRA. 
  • Payments of interest on mortgage obligations on real or personal property incurred before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C (business mortgage payments); 
  • Rent payments on lease agreements in force before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C (business rent payments); and. 
  • Utility payments under service agreements dated before February 15, 2020 to the extent they are deductible on Form 1040 Schedule C (business utility payments). 

How to Document Forgiveness

When it comes time to apply for forgiveness of the PPP loan as a self-employed individual, the SBA says you can use the following information as documentation: 

The 2019 Form 1040 Schedule C that was provided at the time of the PPP loan application must be used to determine the amount of net profit allocated to the owner for the eight-week covered period. 

If you have employees, you should submit Form 941 and state quarterly wage unemployment insurance tax reporting forms or equivalent payroll processor records that best correspond to the covered period (with evidence of any retirement and health insurance contributions). 

Whether or not you have employees, you must submit evidence of business rent, business mortgage interest payments on real or personal property, or business utility payments during the covered period if you used loan proceeds for those purposes. 

The Bottom Line on Applying for PPP When Self-Employed

It will be a lot easier to apply for PPP as someone who is self employed if you are current on your bookkeeping and have kept good records of the income and expenses of your business. If you have operated your business with cash payments that you did not report to the IRS, co-mingled personal and business funds, or if you have maximized expenses to the point where your business only shows a loss, you are likely not going to be able to qualify for the PPP loan your business may have been entitled to otherwise. Your accounting professional can prove invaluable in this process so make sure you enlist their help in determining which COVID relief programs are best for your business.

This article was originally written on April 14, 2020 and updated on June 5, 2020.

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ABOUT AUTHOR

Gerri Detweiler

Gerri Detweiler

Education Director for Nav

Credit expert Gerri Detweiler is education director for Nav. She has more than three decades of experience in consumer credit education, has been interviewed in more than 3500 news stories, and answered over 10,000 credit questions online. Her articles have been widely syndicated on sites such as MSN, Forbes, and MarketWatch. She is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has testified before Congress on consumer credit legislation.

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89 responses to “Self-Employed: How To Apply For A Payroll Protection Program PPP Loan

  1. I’m the only employee under my Corp. To-date my earnings have not been impacted by COVID-19.

    I just want make sure- based on the PPP loan guidelines I am eligible to spend the PPP funds, correct?

  2. Question about “impacted” meaning.. I am an independent contractor (LLC), applied, was approved and recvd the loan. Was in a contract that ended naturally 3/31/20. I did get another contract (4/1) but a short term contract (6mo). With the slowdown I was very concerned as to what might happen with the contract and/or that I may not get another anytime soon—-basically very uncertain since things were changing almost daily. Still in the contract thankfully but wondering if this would cause an issue or appear as though I did not need to loan? The total amounts to a couple thousand more than 2 months of my payroll (which is only myself), so it’ll meet the 75% payroll requirement. Just wanted to know if there’s scrutiny for being in a contract (which can be cancelled at any time even during normal circumstances). Any idea?

    1. Laraine, guidance from the Treasury and SBA updated May 13, 2020 states: . Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?
      Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

  3. Hi. I am an owner operator for a trucking company. I do have my corporation and i run my payroll. Am i qualify for the PPP. I do not have no employees and i am the only one in the company. And i do not have no other expenses no rent no utility nothing. Can you advise please. Thank you

  4. We received a PPP loan intend to use 75% or more on payroll costs, any guidance on how the SBA will review my balance sheet before after the 8 week period and determine my true need for the loan and whether my forgiveness was justified.

  5. I’m a independent contractor that started my business at the beginning of the year but was in operation before 2/14/20. How do I go about filling for the ppp loan? I do not have employees

    1. Lee – the SBA and Treasury have not yet released guidance for your situation. The best we can recommend is to contact your Senators or Representative in Washington DC to explain that you need this guidance in order to apply.

  6. I have a question about having more than 1 Schedule C for the PPP & EIDC applications. On my 2019 taxes, I filed 2 forms of income as self-employed (sole proprietor). 1st was a 1099-MISC from a company a work for as an Independent contractor. 2nd for my graphic design company. I filed a Schedule C for both, which do I use for my gross revenue and expenses for on the applications? Or do I combine both?

    1. Heather, I don’t think I’m qualified to accurately answer this question. You should consult with your tax advisor to get the answer to this question.

  7. I am a 1099 independent contractor , and I have always run my business through my personal checking account since 2004. My business expenses are low (generally below $5k/yr), and the IRS and my CPA have never had a problem with me using my personal checking account for business expenses. I applied for the PPP loan on Tuesday morning (5/5/2020), and received the wire of funds to my personal checking account the next day (5/6/2020). I only plan on using the PPP funds on payroll. For documentation, I plan to write myself a check from myself a pay check on May 15 of half the PPP funds. The pay check will be deposited straight back in to the same personal checking account. I plan to write myself another pay check on June 15 with the remainder of the PPP funds. Will keeping the cleared checks written as paychecks be sufficient documentation for forgiveness?

  8. I am a sole proprietor. I have no employees. I have received my full PPP loan request. Since I have no payroll do I have to follow the 75% rule which seems to be very prominent or do I only pay maybe self the calculated amount after I take my net from my 2019 schedule c and multiple by 8/52. When I do that calculation it does not equal 75% of my loan.

    Just curious what you think

  9. I operate as an independent contractor in the real estate services industry. When the PPP application process was opened to independent contractors on April 10th, the documents required at that time only included the 2019 1099-MISC form to show total wages/commissions earned. It wasn’t until the following week, April 14th, when the Form 1040 Schedule-C became a requirement. I submitted my application on the 10th and was approved the following day, the 11th, prior to the SBA Interim Final Rule. My loan was closed and funded without the additional documentation being required. While the total loan amount that I am/was eligible for would not have changed based on the difference between my 1099 and Schedule C amounts, I wanted to ask if my loan is still “good” and “acceptable” without ever having to submit the Schedule C, or will I need to submit this when it comes time to ask for forgiveness?

  10. I applied for PPP, was approved and got my funds. The question I have is, the lender approved me 4307 which is less than what I my business qualified for. My net gain for 2019 was 28017, so can I use all of 4307 on self employer profit payment, splitting it up over an 8 weeks, or do I have to use 75% towards paying myself and 25% towards rent? Also can I use the fund in less than 8 weeks or do I have to spread it out equally over 8 weeks?
    Thanks!

    1. Alison – The calculation for PPP forgiveness for the self employed is in this document: Interim Final Rule. Look at page 4. It appears, at least from this guidance, they are just requiring the Schedule C from 2019 if you don’t have employees or payroll records.

  11. I would like to add to all the thank you’s for this helpful article and comments. I am in the same boat as Ryan, who posted yesterday that he received a $1,000 EIDL that was applied for a long time ago and came through the day after the PPP loan was funded. I’ve read elsewhere that having funds from both is acceptable if they are used for different things, i.e. the PPP money is replacing my net profit from Schedule C for 8 weeks, but the EIDL money is used to pay my home office mortgage/utilities expenses for some number of months. Perhaps that distinction only applies to EIDL loan funds beyond the grant? Or if I can document that I used (some of) the EIDL grant to pay for non-payroll expenses, does that keep (some of) it from being deducted from the PPP forgiveness amount? If so, how many months’ worth of those expenses are allowable? The same 2 months as PPP? The rest of 2020? I understand if no one has the answers to such specific situations yet, but I thought it couldn’t hurt to ask. Thank you!

    1. Hi Erik – I have been on numerous webinars with SBA personnel and SBDC advisors where they state it is fine to apply for both and that funds can be used for different purposes. It appears to be the case that business owners will have to subtract the EIDL advance (grant) from PPP for forgiveness purposes. So you may get $1000 less forgiven from PPP, but other than that it appears you just have to use each for acceptable purposes which we did our best to describe this article:
      FAQs about applying for EIDL and this article: https://www.nav.com/blog/frequently-asked-questions-about-cares-act-paycheck-protection-loans-for-small-business-587356/

    2. Hi
      Im a business owner with one employee. I applied to both EIDL and PPPL loans.
      I got 1, 000 and my banknote said SB Treasury on April 20 is that EIDL? Was that just an advance or was that the EIDL loan that they are giving me?
      My PPP loan, that was approved last week and I did the Application on April 8. So, I couldn’t ask for that to be forgiven. What will happen?
      When my bank gave me that laughable amount of a loan, I started to question why my line 31 income wasn’t added. She just said I can only ask for payroll amount. X that by 2.50 Is That true?
      I have a friend with a business and asked for the amount she wanted and got it. She said the payroll didn’t come up to the amount she asked for but the bank gave it to her on top of another 30,000 she asked for, she got three times more then what she paid for payroll to her employees while I got exactly 2.50 x whatever my part-time employee payroll is. Nothing less and nothing more.
      Did my bank do my application wrong Or they just give me what they think could be forgiven?
      I just don’t understand? Could it be that she asked for extra money and the bank approved that and whatever she uses will be forgiven, only if she use it on employees, rents, utilities, and etc that could be forgiven? She thinks otherwise. She said, they will forgive all the money she asked for.
      Im so lost and confuse with everything and no one can help me answer these questions.
      I don’t even know if there’s anything else I can do anyways, now that the funds are in my bank. I feel that there isn’t much help for us. Why didn’t SBA made it clear to banks to inform us that, we could ask for extra money and on top of it all we can in turn ask SBA for most of the loans to be forgiven, if used on employee and etc. thats listed.
      My bank said nothing like that to me. They just said, I can only apply for the amount to be forgiven.
      What are your thoughts on my questions and concerns?
      Thank you
      I hope you can give me an answer that no one seems to know.

      1. The $1000 from SBA may have been your grant if you are the only employee. It does appear they are just depositing those funds without any additional information.

        For PPP if you file as self employed with employees then there is a very specific calculation for your loan amount. Did you apply a while back? If so it may have been before that guidance came out. At any rate you can read it in the Treasury guidance on how to calculate PPP amounts by business type. You may need to share that with your lender if you believe they are not calculating your loan amount correctly.

  12. Thanks for the article. When I applied on 4/10 I wasn’t told to specifically use, from my Schedule C, Line item #31 – which would have been helpful. I gave line item # 7 gross income. Thinking that my expense’s that would be covered under the PPP are paid from gross sale and are used as deductions not from my net profit. Anyway, I am self-employed -1099, no employees with a LLC since I have no employees am I able to just use all the funds for payroll, to keep it simple? I am well below the $100,000 annualized, so I’m hoping to keep it simple and have the loan be forgiven. Thoughts?

    1. Jack – You’ll apply for forgiveness in the future with the lender and they’ll require you to submit acceptable documentation. Keep in mind everyone is currently waiting for further guidance about forgiveness from the SBA and Treasury.

      It appears they are limiting forgiveness for Schedule C filers to 8/52 of net profit – plus (not clear) certain qualified expenses. Details can be found in the SBA supplement to the Interim Final Rule (self-employed). You may want to review it and talk with your lender about returning any excess funds. There is no prepayment penalty if you repay early.

      1. Thanks – scary to think that they are giving out loans but all the information in not clear. I just got my documents today to sign. Only had small window and couldn’t call U.S. Bank as they only want email correspondence. Hope for the best and plan for the worst I guess.

  13. I got the PPP money (5/1)once the second round opened, but applied for EIDL in round one but did not get funds or they ran out. I got just got the EIDL 5/4 today 1K and not sure what to do honestly. I am a sole member so it is just me and do not want to mess it up.

  14. I am going to receive a small PPP loan. I am a 1099 independent worker. I work from home and don’t really have many expenses. When I applied for the loan I provided my 1099 from 2019, plus I added by health insurance information. My question is what documentation will I need to submit so my loan will be forgiven, besides my 1099 from 2019?

    Thank you.

  15. I am self employed with NO employees.
    It’s just me. Do I say that I have 1 employee or 0 employees? There is NO clear answer in ALL articles I’ve researched. So frustrating not finding the answer.. HELP. Can anyone answer this question with certainty?

  16. Do I qualify if I just started my business this year and had to shut down due to Covid-19?

    1. Loretta – If you started your business by February 15, 2020 you are technically eligible but if you file Schedule C to report your business income the IRS hasn’t released any guidance for determining how much you qualify. The best I can advise is to contact your elected officials in DC for help as this is a federal program.

  17. I am self employed; no employees otherwise. I submitted my application along with my 2018 schedule C. Have not filed 2019 yet. I realize now that I estimated my monthly earnings based on gross profits.
    Since they approved my loan and provided a fixed amount, am I to believe they reviewed the application and determined the loan amount regardless of my mistake? Your thoughts; recommendations? Thanks!

    1. Rick – I don’t know. The best I can say is to contact the lender. You should try to get your 2019 taxes done as soon as possible though as your 2019 Schedule C line 31 is the amount you are supposed to use to qualify and it can affect your loan forgiveness eligibility.

  18. I am self employed and have a Net Income from Sch C of 95,000
    In addition I have Payroll of 5.000
    and Group Health Insurance of around 24,000
    I went through bank of America and just got approved for $1000
    UNBELIEVABLE
    The SBA decided to only use my payroll and completely ignored my Net Income and Group Health Insurance
    Total Scam

  19. Wow, what a shame, disqualified if you were in the negatives, even though I can show I was only in the negatives because of paying off the business in less than year. Well guess it was a good 10 months while it lasted.

  20. I’m a self-employed Uber and lyft driver. I’m getting unemployment. Can I also apply for PPP loan? Since it’s a loan. Will there be any issues? I looked all over and can’t find anything that says we can’t get both.

  21. I started a new business (sole proprietor) Jan 2020. It is a profitable business with long term agreements with my customers. I have no tax documentation for the business. I have no employees, beside myself. My payroll is essentially the deposits into my checking account. I have applied already but was told I was too late for the first round. I got a response when I applied for the second round that I was basically declined with no conversation with anyone that I could discuss my situation with.

    Do I have any options?

    1. Marlon,

      The SBA has not issued guidance about how to calculate PPP eligibility for those who are self employed, file Schedule C and started their business in 2020. I’d imagine lenders just don’t know how to process that given the SBA hasn’t issued any guidance. I’d suggest you reach out to your elected officials in Washington and let them know the problem you’re experiencing trying to apply, as this is a federal program.

  22. I am an independent insurance broker who gets paid 1099’s under my social security number. Am I able to apply for the loan? If yes how to I prove that I used it toward payroll?

  23. I just applied over weekend fir second round and 1st round said qualify second the lending companies say if don’t make 8000 a month an independent contractor doesn’t qualify. This is garbage big business is getting money left and right. This is fir us the small people that are the backbone of our community.

    1. Shel – Did you try another lender? Some are taking self-employed applications for lower amounts. Fill out the form at Nav.com to be matched to a lender. No guarantees but it’s worth a try!

  24. I did the entire application process, and then toward the end, it asks for payroll documents, which i do not normally use since I am self employed. I don’t use any payroll service. I did the calculation just as it shows above. The amounts were substantial. the only thing I was missing was some kind of IRS documents that had to do with estimated payments for taxes, which I did not ever use. I have not filed my 2019 taxes yet, but I even supplied my bank statements, etc… and I basically was told if I could not supply those documents I was just S.O.L.

    I am so frustrated and frankly -very angry -that i am being cheated out of nearly 20K. I am certainly very qualified.

    What is your recommendation. The rep that replied to me basically told me – THAT’s fine I will just withdraw your app. He showed ZERO interest in helping me get anything done.

    1. Nathan, according to the SBA you will need the documents outlined within this article in order to submit an application as someone who is self-employed. Otherwise, your lender will have no way to help you determine your loan amount. It’s not necessary that that you have filed your taxes to apply, but you will likely need to have them put together. If you file a 1040-C, you will qualify based upon the profits reflected there.

    2. Nathan, I’m sorry to hear of your experience with your lender. We know a number of borrowers who applied as self employed. Have you applied elsewhere? We’ve been recommending borrowers apply with multiple lenders to see who is able to help them first.

      1. I received approval for ppp loan, but I only applied for the amount to cover my employees’ paychecks. Can I apply for a separate ppp loan for myself as a sole proprietor who files 1040 schedule C? I know you can only use tax ID once, can I use my SSN to apply? Thank you!

  25. My line 31 schedule C is not completely accurate since I started my company in July, 2019, It is only 1/2 the year….do I just divide by 6 instead if 12 to determine the monthly rate?

  26. Thanks so much for the article. It was very informative. I am self employed and took a loss on my 2019 taxes so it’s saying I’m not able to apply. This virus is affecting my business as things are slowing down tremendously. Why can’t self employed people apply if they took a loss?

  27. Hello and thanks so much for the guidance and webinars! I was hoping to apply for a PPP, but am discouraged by your statement above that if my business and personal expenses are co-mingled, then I’m not a good candidate.

    I can clearly demonstrate my income with the 2019 Schedule C, but as a freelance writer/illustrator working from home, all my income goes straight into a joint checking account [shared with my husband,] and is used for household expenses. I do not pay myself a ‘salary,’ but my income is necessary to paying our bills.

    Is it worth my effort to apply??

  28. 941 & 940 have 2019 but in 2020 I don’t start payroll . I withdrawal each partner from llc wholesale home base business. How can show 2020 . Already applied ppp and sba need 2020 busines 941 1st quarter.

  29. When filing for sole proprietor do we count our self as 1 employee or do we put 0 in the box for number of employees? I AM THE ONLY ONE WORKING IN MY BUSINESS. Do I say 1 for me or 0. Anyone? Bueller, Bueller, Bueller

  30. I was babysitting in my home and was getting paid cash can I apply for the loan and would I qualify for the loan?

  31. I own rental property and have 8 k-1’s on my return. My gross adjusted income is 85k. Do I use this number to apply? The application is confusing because they ask for a company name not a personal name. Can you assist me? I’m kind of confused

    1. Susan, PPP qualification is based on payroll. I haven’t seen any guidance specific to owners of rental properties but an email from the SBA dated April 6, 2020 states, “Only payroll costs in the form of salary, wages, tips, etc. are eligible for the PPP program. Owner draws, distributions, amounts recorded on a K-1 are not eligible for the PPP program.” That’s not official guidance from the SBA Administrator though. I’d recommend you talk to a tax professional familiar with these programs.

  32. Hello Gerri ~

    I believe that, as of today, 2020-04-22, there is something on the SBA’s PPP application that is misleading at best, and at worst, will be causing eligible people to conclude they are not, or be incorrectly rejected.

    There is a section called CERTIFICATIONS, where the applicant must initial their agreement to about eight different statements, including this (CAPITALIZATION is mine):
    “_____ 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.”

    Is this correct? I have sent this question to many, and received one substantive reply, from an accountant. She agrees it is flawed, for multiple reasons:
    1) The requirement of having employees is supposed to only apply to corporations.
    2) With #1 not clarified, how many sole proprietors with no (other) employees will conclude they are indeed their OWN EMPLOYEE, which you are required to affirm to qualify — and how many pay themselves a salary?
    3) The whole part that starts with “OR…” is no longer in effect.

    I have sent this to many folks, and I’m surprised more people aren’t outraged. There are desperate people looking for help, and this erroneous info is on the OFFICIAL APPLICATION from SBA. This could easily cause qualified folks to not submit the app, or submit with an answer that causes immediate, incorrect rejection.

    Thoughts?

    1. Doug – You are not alone in noting these discrepancies. That language came from the CARES Act itself. The SBA guidance subsequently said that you cannot include 1099 contractors in your payroll (unless of course you are a contractor applying for yourself.)

      It’s not the only discrepancy. For example, the CARES Act stated that you use the most recent 12 months of payroll, then the application said 2019 payroll, then the SBA came out and said you can use either…

      Let your elected officials in Washington know!

    2. Doug,
      I totally agree with you!! I have just submitted my concerns on here too.
      I have asked questions after question and I get The minimum, while all these big companies and people asking extra money and getting it!! This is all wrong and nobody knows what they are doing!!

  33. I own a small salon that has other self employed people that pay me to rent a chair. I am currently collecting unemployment for what I pay myself. Can I still apply for help With the rent of the building and utilities (for the salon)?

    1. PPP is primarily for payroll so it gets tricky. It appears you need to limit those costs to 25% of your loan for forgiveness purposes. I’d suggest talking to a tax professional if you want to go that route. Have you applied for EIDL? It may be a better fit for what you need. (Congress needs to authorize more funds for both programs but that will hopefully happen this week.)

  34. My Schedule “C” Line 31 shows a loss due to some equipment purchases I made and took the Sec 179 deduction. Am I out of luck for PPP or is there some provision to allow adding depreciation back into the net profit calculation? Thanks.

  35. I own 2 separate businesses. Both are Sub S Corps. I do not take a salary but report income at the end of the tax year. I can’t qualify for the PPP for the corporations so what can I do? Also the 2019 taxes for both will not be done until September. Thank you.

  36. My bookkeeper has not yet done our 2019 taxes yet, due to illness. Can I use my 2018 retutn? I am a small florist trying to do everything myself and am quickly losing my 30 year old business and need immediate help. It is the sole support of my family. What can I do,? It’s all too confusing with so many options.

    1. The SBA is specific in its recent guidance that you must use Line 31 from your 2019 Schedule C. You don’t have to file it your 2019 return but you must complete it. I’m so sorry – can you find someone else to help you? Use an online accounting program? Round 2 of PPP (if funding is approved by Congress) could go quickly as well. Alternatively have you looked into Pandemic Unemployment Assistance? That may be an alternative though the amount for which you may be eligible may be different.

  37. Are applications here with Nav still valid even if funds are currently unavailable? I mean, if funds become available again, will our application here be submitted for funding?

    1. Yes Nav will continue to match borrowers to lenders while waiting for Congress to authorize more funding. Be sure to check your email as you may have been matched to a partner. If you’re not sure, reach out to our Customer Service department.

  38. As I read through this I didn’t see if when filing for sole proprietor if we count our self as 1 employee or if we put 0 in the box for number of employees. I am the only one working in my business. Do I say 1 for me or 0?

    1. I agree with Melanie. The Q and A are not clear. I too don’t understand if I am considered 1 as an employee or if because it’s just me in my little business I’m employee 0.

      It’s also still unclear on how to calculate these funds being used for payroll. I AM the payroll. It’s just me. Reading over this just gets me frustrated.. Anyone know that answer to Melanie’s question

      As I read through this I didn’t see if when filing for sole proprietor if we count our self as 1 employee or if we put 0 in the box for number of employees. I am the only one working in my business. Do I say 1 for me or 0?

      1. Victoria, I’m sorry it’s confusing. You are the only employee in your business correct? Then it’s 1. And you file Schedule C? Then according to the SBA SBA supplement to the Interim Final Rule you use the net profit from your business line Schedule C line 31 to calculate the loan amount. See page 6 of that document I just linked to. Unfortunately I don’t know what lender’s application you’re trying to complete so I am not sure what exactly they are asking.

  39. Thank you for posting this helpful info. My bank’s PPP application required proof of payroll (the purpose of my application is to recover some of my income – not for mortgage or utilities) , but I don’t have a payroll. I am a sole proprietor – I own a photo studio in NYC, and it’s just me – I have no employees. As such, I have never kept an official payroll. Am I legally required to have been doing so, and will this prevent me from receiving funds?

    1. Hi, i am very concerned that I missed out already the deadline of applications of financial relief of any kind because of confusing answers from the banks and accounts. I was told that I can’t apply PPP because I am self-employed, owner of a home-based business that provides therapeutic/medical & spa massages. However, two weeks ago I applied as directed by the bank to SBA.gov with DIEL which I still did not hear anything from SBA through email. The funding just got approved today, April 24, 2020. I found out that I should have applied for PPP. Can I still do it? Where and how? Please help me . I need directions. Thank you. I appreciate your valuable assistance as I planned to provide therapeutic medical massages to the Veterans that the government military insurance covers the treatments now.

      1. Congrats for getting approved for EIDL! You can apply for both PPP and EIDL. The self-employed application for PPP opened up later than the one for other types of businesses. You can certainly try your bank and you can fill out a QuickConnect form with Nav (just go to Nav.com) to be matched to lenders making PPP loans. We recommend you do so quickly. When you get matched to a lender make sure you fill out their full application asap. Funding will open Monday and it’s expected to go quickly.