Matt Evans, SCORE DC, compiles resources for self-employed / 1099 contractors

How do I calculate the PPP Loan Amount if I am Self Employed / 1099?

Prepared by: Matt Evans – matt.evans@scorevolunteer.org

Date: April 16, 2020

Sources Used: Reviewed JJ CPA YouTube and download critical documents + confirm per SBA Guidance

Reference Article: https://www.forbes.com/sites/brianthompson1/2020/04/05/how-to-calculate-payroll-costs-for-your-paycheck-protection-program-loan/#24c078973710  

YouTube Video >   https://www.youtube.com/watch?v=GrFBwy6hRYo  |  https://www.jjthecpahelp.com/

COMMENTS:

The SBA has released new guidance on how Self-Employed Individuals can obtain the Paycheck Protection Program Loan. This includes sole proprietorships and independent contractors. Here are the steps:

Step 1: Take your 2019 IRS 1040 Schedule C line 31 net profit (if you have not filed a 2019 return, fill out the schedule C and compute the value). If the amount is over $100,000, reduce it to $100,000. If the amount is zero or less, you’re not eligible for the PPP.

Step 2: Divide that number by 12 to get the average monthly net profit.

Step 3: Multiply that number by 2.5 to arrive at the loan amount.

EXAMPLE: In 2019 you had $90,000 in net profit on line 31 of your Schedule C. What is my PPP loan amount?

Step 1: $90,000

Step 2: $90,000 / 12 = $7,500

Step 3: $7,500 x 2.5 = $18,750 LOAN AMOUNT

NOTE: You are not allowed to add “Benefits” to the total in Step 1 (such as contributions you made to a SEP Plan or money you paid for health insurance)

Calculate Automatic Forgiveness

Step 1: Divide the Net Profits of $ 90,000 (Step 1 previous example) by 52 weeks = $ 1,731

Step 2: Total Forgiveness Amount = Weekly Amount x 8 or $ 1,731 x 8 = $ 13,848

Step 3: Subtract the amount in Step 2 from the Loan Amount to get the Amount to be used for Utilities, Rent, and Interest. $ 4,902 ($ 18,750 - $ 13,848)

NOTE: The SBA has expanded the definition of eligible expenses to include an allowance for transportation expense.

Additional Helpful Videos: https://www.youtube.com/watch?v=WZJ7A91qZAs  |  https://youtu.be/QXYvx58V_iA

https://www.youtube.com/watch?v=F1A7QRmIyTw    |   Start with your existing bank, if you have difficulty go to an Indirect Lender such as Kabbage | Fundera | or a FinTech such as | PayPal | Square | https://youtu.be/qDfzMIdNIUA   |   

Nine (9) additional files accompany this Clarification Release – Please share with your clients ASAP