3/8/21 UPDATE:
This update is provided for educational purposes only. Please direct questions to a qualified tax advisor or consult the IRS.
Good news! The U.S. Small Business Administration (SBA) recently issued new Paycheck Protection Program (PPP) rules that allow eligible self-employed individuals who file Form 1040, Schedule C, to calculate their maximum loan amount using gross income instead of net profit. This may increase the amount of funding most eligible self-employed individuals can qualify for.
A common challenge many self-employed individuals face is that they may not have yet filed their 2020 taxes. Some lenders may accept a copy of your 2020 Schedule C that you will file with the IRS per SBA guidelines.
Five Steps if you want to use 2020 information for your PPP loan application prior to filing your taxes
1. Download the Schedule C from the IRS website.
2. Fill in the top section with your relevant information. If you don’t have a business name or EIN, leave that blank. If you don’t know what to put on line B, here is an article on industry codes common for gig workers.
3. Fill in Part 1 – Income.
• Line 1 is Gross Receipts or revenue. Gig workers should use their 1099s to calculate gross receipts (see box 1a on 1099-K's and box 1 on 1099-NEC's ). Some companies, like Uber, may provide a helpful tax summary of gross receipts.
• Lines 2-6 includes returns, allowances, cost of goods, and other income. They do not include expenses (that’s in Part 2 of the Schedule C). Some gig workers may have $0 of returns, allowances, costs of goods and other income.
• Calculate Line 7 – Gross income. Self-employed individuals will be using this line to calculate their eligible PPP loan amount. The SmartBiz PPP loan application can help you calculate this figure.
4. Fill in Parts 2-5 on the Schedule C.
5. Upload your Schedule C in your PPP application. Your lender will need it per SBA guidelines; however, check with your lender first if they accept copies of what you are going to file in 2020, and if so, what type of copies they accept.
If you have not filed your 2020 taxes and need assistance, there are firms that can help like H&R Block or online services like Turbo Tax. The IRS has a detailed guide on how to fill out your Schedule C. Please note 1099-misc has changed to 1099-NEC for self-employed individuals.
Ready to get started?
Apply today before the funding runs out or the May 31st deadline is reached: Apply for a PPP Loan Now.
SmartBiz has helped tens of thousands of American small businesses apply for the funding they need during the pandemic crisis. We know this new round of the PPP program can be a lifesaver for hard-working entrepreneurs. Our streamlined, online application helps you easily apply.
What You Need to Know
The availability of PPP loans remains subject to SBA guidance and other factors, including the amount of funding available to banks and the quantity of eligible applicants considered on a first-come, first-served basis. The information provided above is for educational purposes only. Please consult the SBA website for actual rules and the most current guidance.
