Updated December 28, 2020 with information about new PPP loans included in the stimulus and spending legislation.
The Coronavirus Aid Relief and Economic Security Act (CARES Act) includes a number of programs to help small business owners, including Paycheck Protection Program (PPP) loans. By way of background:
- The CARES Act which created PPP loans became law March 27, 2020
- On April 23, 2020 Congress authorized an additional $310 billion in funding for PPP loans. It was later extended through August 8, 2020.
- On June 5, 2020 The President signed the PPP Flexibility Act, which changed some of the original provisions.
- On December 27, 2020 the President signed HR 133, the stimulus and spending package that includes new funding for PPP loans through March 31, 2021.
Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors.
Do I Qualify for A PPP Loan?
To qualify for a Paycheck Protection Program loan for the first time, you must be a small business as defined by the SBA. This includes:
- Small businesses or non-profit 501(c)(3) organizations with 500 or fewer employees
- Small businesses, 501(c)(19) veteran’s organizations or tribal concerns that meet the SBA size standards (See SBA size standards here.)
- Sole proprietors or independent contractors
Businesses in the food or hospitality industry (NAICS codes beginning in (72) may be eligible on a per location basis.
In addition the normal affiliation rules are waived for franchises or businesses receiving financial assistance from a Small Business Investment Company.
The business must be in operation by February 15, 2020 and impacted by the coronavirus crisis.
Do I Qualify for a Second PPP Loan?
To qualify for a second PPP loan, you must generally meet the qualifications above, plus:
- The business may not have more than 300 employees and
- The business must have at least a 25% reduction in revenues in at least one quarter in 2020 when compared to previous quarters (more details below)
Businesses with multiple locations that qualified under the CARES Act may qualify for a second draw provided they employ fewer than 300 people in each location. Affiliation rule waivers from the CARES Act still apply.
Learn more about the revenue reductions and qualifying for a second PPP loan here.
I Don’t Have Employees. Can I Still Qualify?
Yes you may. Self employed individuals and independent contractors may apply.
How Much Money Can I Borrow?
The basic answer is that the maximum loan amount is 2.5 times the average monthly payroll for the 12 months preceding the date the loan is made, up to a maximum of $10 million for first time PPP loans, and up to $2 million for second PPP loans.. Alternatively, businesses may use 2.5 times average monthly payroll for 2019.
Use our free CARES Act SBA Calculator to see how much you may be able to borrow.
However, if you are a seasonal business, you can apply to borrow 2.5 times your payroll for either the 12-week period beginning February 15, 2019 and ending May 10, 2019, or the period of March 1, 2019 through June 30, 2019. Alternatively, the seasonal employer may use any consecutive 12-week period between May 1, 2019 and September 15, 2019.
What if you are a newer business? If you were not in business for the time period beginning on February 15, 2019 and ending on June 30, 2019, then you can use your average total monthly payroll costs incurred from January 1, 2020 to February 29, 2020 and multiply that by 2.5.
Payroll does not include waged or salaries above $100,000 or qualified sick leave pay under the Families First Coronavirus Response Act. That does not mean higher wages are completely excluded; it means that only the first $100,000 will qualify. (See What Does Payroll Include? below.)
I Don’t Pay Myself Payroll. How Do I Qualify?
If you are self-employed you likely report your business income or self-employment income on Schedule C, which you file with your tax return Form 1040. If that’s the case, you can apply based on your net profit for 2019 (Schedule C Line 31).
Read: Self-employed: How to Apply for PPP
Is This The Free $10,000 SBA Grant I Heard About?
No. The advance (or grant) of up to $10,000 is part of the Economic Injury Disaster Loan program, not Paycheck Protection Program Loans. Read about the EIDL grants here.
Where Can I Get One of These Loans?
Individual lenders, including many banks, credit unions and some online lenders make these loans. You are not automatically out of luck if your bank can’t help you. You can apply elsewhere.
Nav matches borrowers to SBA approved lending partners. Sign up for a free Nav account to be matched with lending partners making these loans.
Keep in mind that the cost is the same no matter where you get your PPP loan: 1% interest and no fees for any balance not forgiven.
What Can I Use the Funds For?
You can use the loan proceeds for:
- payroll costs;
- costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
- employee salaries, commissions, or similar compensations;
- payments of interest on any mortgage obligation (but not to pay principal or to prepay a mortgage)
- rent (including rent under a lease agreement);
- utilities;
- interest on any other debt obligations that were incurred before the covered period;
- covered operations expenditure;
- covered property damage cost;
- covered supplier cost; or
- covered worker protection expenditures.
What’s Included in Covered Expenses?
These new categories of covered expenses were created by the stimulus bill but they are retroactive to any PPP loan not yet forgiven.
Covered operations expenditures means “payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses”
Covered property damage cost means “a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation;”
Covered supplier cost means “an expenditure made by an entity to a supplier of goods for the supply of goods that:
- Are essential to the operations of the entity at the time at which the expenditure is made; and
- is made pursuant to a contract, order, or purchase order— ‘‘(i) in effect at any time before the covered period with respect to the applicable covered loan; or ‘(ii) with respect to perishable goods, in effect before or at any time during the covered period”
Covered worker protection expenditure means “an operating or a capital expenditure to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government, during the period beginning on March 1, 2020 and ending the date on which the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et 8 seq.) with respect to the Coronavirus Disease 2019 (COVID–19) expires related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19; may include the purchase, maintenance, or renovation of assets that create or expand
- a drive-through window facility;
- an indoor, outdoor, or combined air or air pressure ventilation or filtration system;
- a physical barrier such as a sneeze guard;
- an expansion of additional indoor, outdoor, or combined business space;
- an onsite or offsite health screening capability; or
- other assets relating to the compliance with the requirements or guidance described in subparagraph (A) as determined by the (SBA) Administrator in consultation with the Secretary of Health and Human Services and the Secretary of Labor; the purchase of—
- covered materials described in section 328.103(a) of title 44, Code 16 of Federal Regulations, or any successor regulation;
- particulate filtering face piece respirators approved by the National Institute for Occupational Safety and Health, including those approved only for emergency use authorization; or
- other kinds of personal protective equipment, as determined by the Administrator in consultation with the Secretary of Health and Human Services and the Secretary of 4 Labor; and does not include residential real property or intangible property;’
How Fast Will I Have to Repay It?
If there is a balance left after forgiveness, the loan will have a maximum term of two years for loans made before June 5, 2020. Loans made on or after that date carry a five year repayment period. You can prepay at any time without penalty.
What Is the Interest Rate and Fees?
The interest rate for these loans will be 1% for all lenders that make them. Normal 7(a) loan fees are waived.
Is there a Personal or Business Credit Check?
None is required.
Is There a Personal Guarantee?
No. There is no personal guarantee required. In addition, these will be non-recourse loans as long as proceeds are used for covered purposes. (Non-resource means the government won’t be able to collect if you default.)
Is Collateral Required?
No. Normally SBA loans for more than $25,000 require collateral. That requirement is waived for these loans.
How Soon Do I Have to Start Making Payments?
As a result of the PPP Flexibility Act, payments are deferred until the lender receives payment for the forgiven amount from the SBA. If a borrower does not apply for forgiveness within 10 months after the covered period, the deferral period for the loan ends on the date that is 10 months after the last day of the covered period.
Do I Have to Prove I Can’t Get Credit Elsewhere?
No. Normally SBA loans require a “credit elsewhere” test to determine whether the borrower can get similar credit at another financial institution. This is waived here.
How Do I Get Loan Forgiveness?
If you get one of these loans, you can request forgiveness of the principal portion of the loan for the 8-24 week period after you get the loan that covers:
- Payroll costs
- Interest on a mortgage
- Rent
- Utilities
However, no more than 40% of the forgiven amount can be attributed to non-payroll costs.
Your loan forgiveness may be reduced if you decrease your full-time employee headcount or decrease salaries and wages by more than 25% for any employee that made less than $100,000 annually in 2019. (Exceptions apply.) You may also receive forgiveness for additional wages paid to tipped workers.
In addition:
- Payroll includes the costs listed under the section “What Does Payroll Include?” below.
- Forgiven debt will not be taxable.
- The mortgage, rent and utilities covered in this section must be in place before February 15, 2020.
Read: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Please note: there are specific and technical calculations included in this section of the law, and you should not rely on this description to determine whether to keep employees, reduce employee wages or to determine your eligibility for loan forgiveness.
Do Independent Contractors Count as Employees?
No. Independent contractors can apply for a PPP loan on their own so they do not qualify for purposes of a borrower’s PPP loan forgiveness. (Unless you are an independent contractor applying for yourself.)
Can I Get More Than One PPP Loan?
No. If you are an owner in multiple businesses, please read: Can I Apply for EIDL or PPP for Multiple Businesses?
What Happens if PPP Loan Funds are Misused?
If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use.
Keep good records of how you use these funds. Sloppy record keeping may prove costly!
What Does Payroll Include?
The CARES Act states that payroll includes:
- Salary, wages, commissions or similar compensation,
- Payment of cash tips or equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips),
- Payment for vacation, parental, family, medical, or sick leave;
- Allowance for dismissal or separation;
- Payment required for the provisions of employee benefits including insurance premiums for group life, disability, vision, or dental insurance;
- Payment of any retirement benefit;
- Payment of State or local tax assessed on the compensation of employees; plus
- For sole proprietors or independent contractors, wages, commission, income, or income from net earnings from self-employment, or similar compensation.
It does not include:
- The compensation of an individual in an amount that is more than $100,000 on an annualized basis, as prorated for the period during which the compensation is paid or the obligation to pay the compensation is incurred;
- Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees;
- Any compensation of an employee whose principal place of residence is outside the United States;
- Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act.
Are Employee Benefits In The $100,000 Salary Cap?
No. The CARES Act excludes from the definition of payroll costs any employee compensation in excess of $100,00 on an annualized basis. According to the SBA, the exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:
- employer contributions to defined-benefit or defined-contribution retirement
plans; - payment for the provision of employee benefits consisting of group health care
coverage, including insurance premiums; and - payment of state and local taxes assessed on compensation of employees.
What Do Utilities Include?
Utilities include electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.
How Do I Document Payroll?
You must submit such documentation such as payroll processor records, payroll tax filings, or Form 1099- MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount. You’ll find full documentation requirements on the Paycheck Protection Program forgiveness application (Form 3508) instructions.
Are There Disqualifiers?
Yes. You are ineligible for a PPP loan if, for example:
- You are engaged in any activity that is illegal under federal, state, or local law;
- You are a household employer (individuals who employ household employees such as nannies or housekeepers);
- An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year; or
- You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.
- The stimulus legislation also specifies that these loans are not available to businesses with greater than 20% ownership by “Chinese entities.” It also prohibits publicly traded companies from getting PPP loans.
What’s the Difference Between PPP and EIDL?
The CARES Act includes a number of relief programs for small businesses. The one we are focus on in this article is Paycheck Protection Program Loans. The Economic Injury Disaster Loan is a separate loan altogether and you apply directly to the SBA, not to individual lenders.
Can I Apply For PPP and EIDL?
Yes but you cannot “double dip” and use funds from both loan programs for the same purpose.
Can I Apply For This Loan and the Payroll Tax Credit?
There is a payroll tax credit of up to 50% of qualified wages for certain businesses whose operations have been fully or partially suspended by a government order or whose gross receipts in a quarter have fallen by at least half compared to a similar quarter the year before.
Your business cannot receive both the Employee Retention Payroll Tax Credit and a Paycheck Protection Program Loan, so if you are considering both make sure you consult with your legal or financial advisor.
However, thanks to the PPP Flexibility Act, businesses and self employed individuals may qualify for payroll tax deferral and PPP.
This article was originally written on March 30, 2020 and updated on January 20, 2021.
I was told I didn’t qualify for a PPP loan when the first rounds started because I was a sole proprietor, I had employees and did my taxes showing what I paid my employees. I became Incorporated in September 2020, am I still able to apply for a PPP loan or anything that helps a small business?
Unfortunately PPP is now closed to new applicants. I’d recommend you contact your local SBA Resource Partner (SBDC or SCORE) to see if there are other programs you may be able to utilize.
Hello,
I received a PPP loan through Cross River Bank as the lender and Scratch as the servicer. The loan has been completely forgiven, however as it states on Scratch’s FAQ page, they will report the loan to all commercial credit bureaus. Both companies have failed to do so. I have been working tirelessly to get this resolved, filed 3 complaints with 3 different entities the SBA, CFPB and the BBB. Any guidance/suggestions would be greatly appreciated.
I haven’t seen anything requiring them to report PPP loans and since it was forgiven I am not sure how it would appear (as no payments were made). Are you trying to build business credit? If so this guide may be helpful.
I applied for a ppp loan back on april 4, and it was smartbiz and customers bank. Well, I gave them a blank check like they had to have and I had said that the routing number on the check is not for ach transactions, please dont send it there.
That is where they sent it and it was rejected by Bluevine. So, I was patient, nothing. Active unduspersed. Smartbiz wont even return my emails, on their end the loan says cancelled,but on caweb it says active undispersed. I have the note i signed, should i call an attorney?
I received a 1st draw PPP loan through Smartbiz & Customers Bank. I applied for the 2nd draw and was approved by the SBA and given a loan number in April. I could not get in contact with either to move forward as it sat “Active-Undisbursed” on SBA’s Capitol Access Financial System portal. Now that PPP is over, the lender said they were unable to provide the loan for ID, manual fraud or documents needed, one of those reasons. How can I access the loan that is still active in my name at this point?
Tracy – the SBA has opened a new PPP hotline. I’d suggest you try that. Call the SBA’s PPP customer service team at (877) 552-2692, Monday – Friday, 8 a.m. – 8 p.m. EST.
Hello I would like to say that I love you guys for being so great to all over the world thank the good Lord for today I promise I would not let you guys down and I’m pretty sure we all feel the same I only have one question please as soon as possible I need to know how to change my banking information on application before I sign my in sign document they just came through today
Are you talking about your PPP loan? You’ll need to contact your PPP lender directly to change your banking information. Congrats on your approval!
Hello Gerri,
My lender is not responding to any emails and it seems that I have an E-tran number associated with and earlier ppp application that is preventing me from applying with another lender. Are there any steps that I can take to have my E tran number cancelled without going through the lender?
Normally the lender cancels the loan in Etran. The only other suggestion I have is to try to get your district SBA office to help if they can. So sorry you’re having these problems. I know many lenders are working 24/7 to try to get these through – hopefully you’ll have some success soon.
I am wondering if we can qualify for the first draw if our income does not meet the 25% threshold for Q4 of 2020? We are at 18% or so. Thank you!!
Great news Cal! You do not have to meet the 25% revenue decrease for a first draw PPP loan. That only applies to second draw loans. We’ve written about the qualifications in more detail here.
Nav will be happy to match you to lenders making PPP loans. You can start here.
Very thorough article! Thank you!
I applied for and received the first PPP loan last year. I am self-employed (single member LLC) with 4 employees. My employees are all paid through regular payroll using ADP. Since I am not paid through ADP (I just pay myself from the income left each month), I never thought about adding myself as an employee. I learned recently that I could have used my schedule C net income, divided by 12, then multiplied by 2.5 – just like the regular PPP calculations for my employees were done – to include my own salary.
My question is: is it too late to amend my PPP loan? Can I apply again for only my income?
Thank you for your time,
Rain
The SBA described the circumstances where a borrower can request a loan increase on their original PPP loan in this Interim Final Rule. It doesn’t appear that your specific situation is addressed there but I’d encourage you to read the IFR (start on page 73) and ask the lender who gave you your first PPP loan asap. Currently the deadline is March 31, 2021.
My gross sales are up because my competitor closed and it’s caused me to not meet the 25% reduction, but we still lost money. Can I apply for a PPP2 loan?
To qualify for the second draw PPP loan you must meet the 25% reduction in revenues in at least one of the comparison periods (or year over year). It is based on revenues not profit unfortunately. This article goes into more detail.
We started a LLC in August 2019, opened business bank account, received startup loan , started making purchases , signed a lease and started paying rent in November 2019.. we had countless delays then finally opened for business April 2020…PPP , grants say – have Had to been in business as of February 15t 2020…Since we had all this activity in 2019 , are we considered in business to qualify for these services?? I can’t find an answer to this..
Thank you
I don’t recall seeing the SBA define “being in operation,” in that level of detail, but you do have to provide certain evidence that you were in business as of February 15, 2020 to the lender in order to qualify. You’ll see those requirements on pages 34-35 of this guidance. The requirements vary depending on how your business qualifies for PPP (as self-employed without employees, or with employees, for example.) I hope that helps.
I don’t think it’s fair if line 31 on my schdule C is negative. Then I don’t qualify. I put everything into getting my business up and going. My start up expenses and Inventory Cost were more than I made in 2020. With all the social distancing rules and shutting everything down. Sales slowed down. I thought this is to help small businesses stay a float.
I understand that! Have you looked into an EIDL? It’s a loan not a grant though the interest rate is low.
From what I understand the new rules from the SBA say that you can now use your GROSS INCOME on LINE 7 of your Schedule C to calculate your PPP loan amount. Hope this helps.
That is correct. We wrote about that in this article.
Hello,
I did not apply for a ppp in the first round. I am about to apply. I have been in business since 2018. I did not have employees in 2019. I have employees now. Should I use what my payroll is now on my application? I plan on spending all of this PPP on future payroll. Thanks in advance for you thoughts!
It is your choice. You can apply based on 2019 or 2020 payroll. Since you didn’t have employees in 2019, for that year you would use your Schedule C net profit (this article explains how to calculate PPP loan amount if you are self employed with no employees). Or you can apply based on 2020 payroll.
I really like you article help to understand more COVID-19 for my life and business is been very difficult Now that my mind my dad passed away I’m concentrating in my new goals and projects they approved me for forgiveness loan I have to find out about the first one, now I’m getting in my normal life I now I need some extra cash to keep going on with my new projects. Thanks for you information . Luz López
Luz – Your local Small Business Development Centers or SCORE can help you for free to identify resources for your business. Find local help here.
I see in the ppp2 for second draw ppp the calculation has a step 4 in the bill that says to add the Eidl u would like to refinance to the loan total and subtract the Eidl grant advance amount from the total since you don’t pay it back. Does this make up for the first round when we had to subtract what Eidl loan we received from the ppp loan for the first round? I have not seen anyone but one person address this step 4 of the calculation for ppp. I also see it says for ppp the calculation could change to request more money according to the changing law in the bill?? Am I missing something? Is this not correct? It is clearly in the bill that I read.
Thank you so much
Yes it was in the original language and on the original applications. But note the very limited time period – EIDL loan made between January 31, 2020 and April 3, 2020 (not 2021!) that you seek to refinance. This applies to very few borrowers as few EIDL loans were made during that time.
Hello!
Reposting a question I had that I asked a while back, but probably too early. If there is no good answer, that’s fine, but I trust you opinion 🙂
I had a question, I can’t find the answer. I’m self-employed with no employees, with an extremely seasonal business (99% of our revenue is in three summer months).
In the first round, I did the Schedule C Net Income divided by 12, and got $X.
Now, I realize that if I used the 12-week seasonal business window, I could get $5X, which would basically get me to breaking even for the year, which would be great.
So my question – are those who are self-employed with no employees eligible to use the 12-week seasonal business time frame election? Or are we locked into Schedule C Income/12?
Thank you so much!
It’s a great question. If you qualify as a seasonal business it would seem you could apply as one, but I don’t see any specific guidance that gives the self-employed with no employees an alternative calculation other than net profit divided by 12 multiplied by 2.5 or (3.5 for 2nd draw loans for businesses with NAICS codes starting with 72). So I’m stymied like you are. I’ll keep my eyes open for any updates.
Hello,
I have a small company in civil engineering.
I like to get in touch with Gerri Detweiler for some advice on improving my credit scores.
Thanks
Hi Najim – I appreciate your request however, Nav doesn’t offer credit repair and while I wish I could help, I personally don’t have time to offer one-on-one credit consultations. However, if you sign up for a free Nav account our Credit & Lending team can likely answer questions for you. Also we have a number of videos on our Youtube channel that may help.
Glad to see this updated! This post helped me a TON back in April.
I had a question, I can’t find the answer. I’m self-employed with no employees, with an extremely seasonal business (99% of our revenue is in three summer months).
In the first round, I did the Schedule C Net Income divided by 12, and got $X.
Now, I realize that if I used the 12-week seasonal business window, I could get $5X, which would basically get me to breaking even for the year, which would be great.
So my question – are those who are self-employed with no employees eligible to use the 12-week seasonal business time frame election? Or are we locked into Schedule C Income/12?
Thank you so much!
Hi Paul – I am so glad to hear you found it helpful. Short answer is I don’t know yet for the self-employed. I think we need guidance from SBA and hopefully this time it will come more quickly. (It’s also not clear how the self-employed who want a second loan will calculate the 25%.) My best suggestion is to make sure your bookkeeping is up to date so when the SBA comes out with the regulations you’ll be ready! I will continue to update articles as we learn more.
Hello Ms. Detweller,
Thank you again so much for this article! I’m getting ready to do my application, and I was just curious if there has been any guidance on this? I’ll try to do my best on the application, but want to try to do it “right” if possible.
I’m sorry the way these comments work I don’t know what guidance you are looking for. Can you submit a question with your full question? (No new guidance has come out since this story was last updated.)
1 more log on the fire. I too am a commision based earner. Where I think I may be different from some others, of course not sure, is that I am a W-2 employee, not a 1099er. I have tried to get input from the SBA and gotten no response. I spoke with a few business accounting firms, both friends and friends of friends. I hear a lot of ” sounds like double dipping to me” when I pose my situation.
My drew verses commision weekly check has been $1,700 per week for the last 11 years. I earn considerably more then that and every quarter we settle up. 99 times out of 100 I am owed money and my boss pays me promptly. So, covid hits. I am put on unemployment and understandably so. We are in the restaurant supply business so business went off a cliff. My boss files in round 2 for PPP and gets it. I have to assume he put my payroll expense at the max of the 100K ceiling and for 9 weeks I was off unemployment and got my full $1,700 a week. As we looked at my first dismal 6 month production at the end of June he said I was paid by the company for 21 weeks. That the half year minus the 5 weeks I was on unemployment for 5 weeks before the govt. money arrived. My contention is although the “payroll check” came from my company it was funded by the feds to make me and other W2 employees of the company whole. I say he paid me for 12 weeks against my earned commision.The office people did not have to payback the boss regardless of the severely reduced hours they worked and minimize production when they worked as salaried, not hourly people. As others have expressed he is telling me I owe the company that money, $15,300 in my case, against future commissions earned. I’m sure his goal is government loan forgiveness. I don’t know if he got it yet but he’s a smart guy. So he gets a loan, pays me under program guidelines, gets the loan forgiven, and I owe him 15,000 bucks of my earnings. The govt. $$ was a program to make ME whole. Looks like he gets the 15 grand in his interpretation of this, not me. I’ve read repeatedly your advice as to who to call. Can I ask your personal view as to which side of this story your thoughts lie? I see it as classic double-dip-syndrome.
Thank you
I’ll be honest Lou – I don’t think Treasury or SBA thought through scenarios like yours and so my guess is you won’t get specific guidance for a situation like yours. Your options at this point as I see it are to:
1. Contact your elected officials in Washington and see if you can get one of their staff members to help you get a specific answer from SBA. (They have staff that are supposed to help constituents having problems with government programs). I’d say it will be a matter of luck as to whether you find someone who can really go to bat for you.
2. Contact the U.S. Department of Labor and/or your state Department of Labor as this is a wage issue. But understand it may raise issues with your employer.
3. Contact an employment attorney.
I wish I could give you a clearer answer but I haven’t seen any scenarios in the guidance that fit your situation. You’re not the only person who has written with a similar scenario unfortunately.
I work for a car dealership in sales. We were paid $300 each week from the stimulus my employer received. Now that we are selling a small number of cars again we are being forced to pay back all of the PPP payments we received during that time period. Is my employer allowed to take back any stimulus funds they distributed to employees?
That sounds like a wage issue. I’d suggest you’d contact your state department of labor or an employment attorney. (That specific issue is not addressed in the CARES Act which created the PPP loan program.)
After being approved and accepting the money how long after will this loan show on your credit report?
Are you asking about PPP? If it is forgiven it may not appear on the credit report. Given we are at the beginning of the PPP forgiveness process, it is my understanding that it is unlikely any have been reported yet. You may want to reach out to your lender to inquire about their policy.
My question is similar to “ Big K’s” (posted June 2020) I work on commission. I received PPP money as Salary for 8 weeks/No commission on my sales. My company said the same thing. They will figure out what my commission was and deduct what they paid me to c if I owe them or they owe me
I called the labor board. They told me that’s not a labor issue. How do we find out if this is correct?
How do we know that our employers did not apply for and were granted loan forgiveness and are now making us pay back the money?
I’ve called the SBA I’ve called the labor board and I’ve emailed the US consumer affairs
Nothing
I’d suggest you talk to an employment attorney if your state department of labor can’t help. Sorry I can’t be of more help but this is not specifically addressed in the CARES Act.
I am a self employed dentist and do not have employee of my own. Do I need to choose zero or 1 employee while filling the ppp loan application? There are some lender’s applications that do not allow putting 0 as number of employee. Your prompt response is greatly appreciated.
Sally my understanding is you are the employee in your business so you put in 1. You can always confirm with the lender.
I work sales at a car dealership we have been getting paid with the stimulus money for the past two month, Im working my full schedule while selling good amount of cars my employer has not paid me any of the commission on them, just the stimulus money. Do they have the right to keep the commission I should of made on the cars sold during the last two month and just pay me with the stimulus money? they said that at the end of the stimulus checks they will take what we should of made on all the cars we sold during that time then take what they paid us in stimulus an pay us the difference if we made more. so long story short they wont pay us what we should of made on the cars
That’s more of a labor law question and I don’t know the answer. You’ll need to review your employment contract and reach out to your state Department of Labor or an employment attorney.
Thank you for this article! We have our PPP loan, and we set up a new business account with only the PPP funds in it. The first month’s payroll just pulled, however it also included some non covered costs- the employer side Federal taxes. I didn’t even think of that. What will the ramifications of that be on loan forgiveness? Would it be prudent to transfer some money into the PPP account to offset the employer side taxes? Thank you so much.
Just to clarify, the payroll pulled directly from the bank account with only PPP money in it.
We’ve since written extensively on PPP forgiveness including this article: How to Apply for Forgiveness for Your Paycheck Protection Program (PPP) Loan
I reserved a $1000 from sba and fund out about it
When I balanced my check book this week. I then reserve a email Friday saying I got it a month later.
I am a self employed freelancer collecting unemployment from Minnesota, do I claim it now on my unemployment this week?
Jim – you need to talk with your state unemployment office. They administer unemployment and would be in the best position to answer your question. (Sorry – I know it’s not easy to get through to many of them!)
.my employer has cut my hours since recieving the loan. Is this legal??
The CARES Act does not require employers to maintain specific employment levels in order to qualify for the loan. Reducing hours and/or wages may reduce forgiveness though.
Do employers need to retain their employees in order to benefit from the cares act? And how long must they retain them, if true?
Donna – we wrote about how reducing hours and/or wages may reduce PPP forgiveness in this article: How to Apply for Forgiveness for Your Paycheck Protection Program (PPP) Loan
My son is a chef at a restaurant in a resort town. The business god a SBL through the CARES program. They said that the employees would have to have 30 hours a week to remain on the payroll. But, they are only doing carry out and delivery, so there aren’t that many hours to make 30 hours a week. Is that true? Can they do this? Thanks, just curious.
Unfortunately the PPP program doesn’t specifically require the employer to retain employees at certain levels of hours or wages. However, reducing hours may reduce forgiveness.
I got a PPP loan of 3500..to pay back rent and utilities on the building I’m leasing for my business….can I apply for unemployment benefits for my personal finances?
It is our understanding that unemployment is not available during the covered period of PPP (the 8 weeks after the loan is disbursed) but the guidance isn’t clear so we recommend you contact your state unemployment agency. We tried to tackle that question in #7 on this article: 7 Questions About PPP and EIDL the SBA and Treasury Need to Answer ASAP
Please expand on “transportation “ as an allowable cost. What items are included? Vehicle costs for instance? Insurance, fuel, maintenance,, depreciation to name a few.
Randall – beyond that language in the CARES Act we haven’t seen it explicitly defined in guidance. However, this legal blog states: A “transportation utility” has been interpreted to mean fuel costs for business vehicles.”
My company got the loan but only paying us for hours we worked not the full40 hours . Hours were cut back so we can’t even work 40 hours . Can they do that?
PPP doesn’t require an employer to pay you for a certain amount of hours. That’s a labor law issue.
I am a partnership we will b getting back to work however My staff is not needed full time because of loss of consumers
we received our ppp loan which was based on staff working full time. this will affect the loan
am i able to use the remaining balance for a pump t for me and my partner
Dan – Have you read this article? How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Would you happen to know what are federal contracts obligations for payroll employees during covid-19 for contractors, if we received the loan? We have Federal contract in Utah, they closed couple of buildings and are requesting we pay 4 of the employees whom worked the building. However, I’m not sure if we are obligated to pay or not. Can you please shine some light my way ?.
The PPP doesn’t require an employer to pay anyone. It simply offers forgiveness for certain uses of loan proceeds. It sounds like you need to understand the requirements of your federal contract which is a separate issue. I’m sorry we can’t advise.
Have received PPP loan funds. My company is a S-corp with 2 employees, work from home, and have very little in the way of rent, utilities, etc. Can I increase salaries so that 100% of the loan is used for payroll and still be eligible for forgiveness? The increased salaries would still be no where near the $100k cap. Thanks
I haven’t seen anything specific in PPP guidance that would prohibit that.
Since the PPP loan amount was based on a 2019 monthly average pay( x 2.5 ), don’t we have to stay within that average during the covered period? I am an s-corp as well with only myself on payroll. I received around $15,000 because I showed that my 2019 monthly average pay was $6000, which is why I thought I received $15,000. Thanks!
I have not seen that specific guidance in terms of paying out payroll to the owner during the covered period.
I am an employee, and my employer received a PPP loan. They are requiring us to return to work, for the average hours we worked the previous year, all be it, we can do it online or at work. Take in mind, this is a restaurant, and I am paid minimum wage, which is what is being offered as my pay for the hours ($13/hr), and I make more like $35/hr with tips. Can they require me to work my average of 26 hours/week? Further, wouldn’t I then lose my Unemployment, because I am now working 26 hrs/wk? even though I am not being paid the amount I used to make.
Cassidy
Our boss brought us back under his PPA loan at first he was paying us but we averaged out before the Covid and keeping all our charge tips now that we are complaining about our charge tips he is only paying us 555 an hour even though we only have an outdoor seating which has nine tables we are not making what we used to can he do this
I’d suggest you check with your state Department of Labor.
My company received a PPP loan. It was used appropriately. Now one of my employees must take a leave as his young children are out of school and he has no one to care for them. Can he still qualify for the new leave act at $200 a day or will this affect the PPP loan.
Pat – According to the Interim Final Rule, “the CARES Act excludes qualified
sick and family leave wages for which a credit is allowed under sections 7001 and 7003
of the Families First Coronavirus Response Act (Public Law 116–127). Learn more
about the Paid Sick Leave Refundable Credit here“
Received my PPP loan. We are a C-corp with only two employees. Work from home with basically no utility expenses for the company. To use all of the PPP funds withing the 8 week period can I use 100% of the funds for payroll by increasing salaries?
I haven’t seen any guidance that would seem to prohibit that but I can’t guarantee you’ll be fully eligible for forgiveness. Still waiting on full forgiveness guidelines from Treasury and SBA.
Hi. I work for a small business who received this loan but I have not received any assistance. I did not apply for unemployment. My brother works for a business in the same neighborhood and has received multiple checks from his employer. My employer has not paid anyone but did offer a few shifts to be worked. Should I be receiving a check as well? They said they are using it for rent and other bills. Any information would be helpful.
If your employer is not trying to qualify for forgiveness then it appears they can use it for other purposes. If they are not going to pay you, you may want to look into applying for unemployment.
I received PPP as an independent contractor, self employed as a consultant in the travel industry. I receive a check once a month from the company I consult. To keep records to request loan forgiveness, do I write myself a payroll check for salary? Everything that I earn is my payroll, business expenses are covered.
From this
Treasury and SBA guidance it appears that you can use the Schedule C you used to apply when applying for forgiveness but we don’t have additional information. (Be sure to pay attention to the part where it talks about calculating forgiveness as 8/52 for owner’s compensation.)
If I closed my business last year will I qualify for ppp or any help from the cares act to restart another business? If so which do I apply?
I don’t believe so. PPP and EIDL are not designed to start a new business.
what if I am still working but only making a percentage of my previous wages? does my boss get to pay me the money i lost since the shutdown?
You may be eligible for some unemployment benefits. Check with your state unemployment agency.
We have several people we use full time through an employment agency. Our bank had us include them in the calculations for the loan and asked us for the 1099 we sent to the agency. Not all of our permanent employees are returning, are we able to bring on additional people through the agency and count them in payroll and in the employee count? If so what documentation would we need since a 1099 would not be issued until year end. Thank you.
Cindie – Current guidance from the Treasury and SBA state you do not include 1099 contractors in your calculation for PPP. You may want to read this article and seek further guidance:
How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I belong to a gym that has been approved for a PPP loan. They have been deducting the monthly membership from my bank account. Are they still supposed to be charging their members?
Hi Lisa, you will need to review your contract with your gym and speak with the them to determine whether or not you can expect them to continue to charge for membership dues.
We have 3 employees who have not been working since 3/23 but have continued to get paid. We now have the need to have them come back to work. We just received our PPP loan. If they refuse to come back how is this handled. Someone said you still need to pay them 80% of their wages regardless if they come back. Others said if they refuse to work then they can resign. The only issue would be is the amount of the loan forgiveness would decrease by the salary you are not paying them. Is there any guidelines listed anywhere ?
Helene, the Treasury came out with new guidance regarding this earlier this week. This article might help you make decisions about what to do: https://www.nav.com/blog/using-ppp-loan-funds-615191/
We own a small business with 2 employees. We just received our PPP loan, have very little overhead, and I just figured out that after being approved for the standard 2.5 times monthly payroll amount for our loan, I will only be able to use approximately 85% of the loan amount. 80% of the loan will go to payroll (so will meet the 75% payroll threshold for forgiveness), and maybe 5% for utilities. Unless I raise payroll we won’t be able to use the last 15% of the loan since we don’t have any other approved uses of the loan money. Do you know if there penalties of any sort for not using the full amount or for returning a small portion of it? Thanks!
There are no prepayment penalties Brian. So you could return it or keep it as a 1% loan for two years.
The small non-profit I work for has received a PPP and set up the money in a separate account from the one normally used to make payroll. We use quickbooks for all payroll and expenses. I am new to quickbooks and am trying to figure out how to add this new bank account to our existing company to make payroll out of it.
I’m sorry Crystal I’m not a Quickbooks expert. You’ll want to ask them.
We are a small business so we do not offer any paid sick leave or personal time off. Our employees are paid hourly. Since we received the PPP loan, do we have to pay them a full 40 hours per week even if they actually worked less hours?
Staci – PPP doesn’t require that employees work at their workplace in order to get paid. You can reduce hours as long as it doesn’t violate any laws or contractual obligations. But doing so may reduce forgiveness eligibility. You may want to read this article:
How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Hi Gerri! Thanks for the great article. I was laid off for 2 weeks due to the covid19, I did not apply for unemployment, then the company I work for was approved for the sba loan and they called me back to work, are they required to pay back pay on the 2 weeks I was laid off?
Sandy – not that I’m aware of (it certainly isn’t a PPP requirement) but you may be eligible for unemployment for those two weeks. You may want to check with unemployment.
If I am qaulified for PUA as Sole proprietor from March 14 until May 4 (when i qualified for PPP), is it ok to still get PUA from before the 8 weeks prior to getting funds of PPP then after it runs out I can go back on PUA as long as I dont get threm both concurrently?
I mean my business stopped March 14th through now, but have been approved for PPP May 4..Can I get PUA retroactively before PPP was approved, and then again after 8 weeks of PPP?
Rob – It seems to make sense and we hope the SBA and Treasury will issue guidance on that but they haven’t yet. In the meantime your state unemployment agency would be the best resource, though we understand how hard it can be to get an answer.
hi i drive for a company, i usually get my 40 and overtime. but since COVID-19 I have been getting 30-35 hours a week. my company has just got the PPP loan, and they are saying i MUST stay for 40 hours. so if im done with my job early i cant go home? it was just frustrating cause when i did come back early i was told to go home. had to use 2 personal days and lost about $100. a week…..hopefully essential workers will be taken care of
When I look at what utilities are included, it doesn’t specify on trash or pest control is that included too?
What Do Utilities Include?
Utilities include electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 202
Charlotte – We haven’t seen that specified by SBA. It seems reasonable but we can’t say definitively one way or the other.
If someone works as a W2 employee and gets UI determined on those contributions, can they also get the PPP loan for the other half of their income which is 1099 work?
We did our best to tackle that topic in this article with
FAQs about unemployment for the self-employed. It appears it could be problematic but we haven’t seen detailed guidance.
Hi- My restaurant was just notified we did receive the PPP today but our lease is over July 1st and we need to relocate the restaurant and we are not sure when we will be able to open for sure. Should we not take the PPP loan offered? We are not sure what to do because we can’t start using it right away for 8 weeks in a row.
Jennifer – Keep in mind the main goal of PPP is to keep employees on payroll and if you don’t think that makes sense it may not be right for your business. Do you have an accountant or similar advisor you work with who can review your specific situation and advise you? Another option would be to talk with your Small Business Development Center (SBDC).
I pay my workers by the hour. Some of them get paid $62/hour and end up making more than $100,000 per year. During the eight week PPP period I know I have to lower their hourly wages so I do not exceed the annual salary of $100,000 set by the CARES Act. What is the highest hourly wage I can pay them? Thank you!
Joe – We can’t advise for specific situations. This article may provide some additional information you can discuss with your accountant or advisor: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
i
i was approved for PPP on Friday
when do i get the funds in my account?
Charles – it depends on the lender. They have up to 10 calendar days to fund. Many are doing so within 72 hours or so.
I need to find out how to pay one of the PPP loans I received. I had two deposited into my account today and I NEED to return one. I can’t find an answer anywhere on the SBA site and all I get are auto replies. Please help
Athena – We haven’t seen that information either. Have you reached out to your lender(s)? If we find more information we will update it here.
Hi,
I filed for unemployment when I was let go and a month later my boss told me that they got a PPP loan and I was paid retroactively for the month that I had filed unemployment for. I’m not sure I would be able to be hired back after the time period, my work is in travel and there’s not really a lot of work happening at the moment.
Additionally, I was a recent hire at the company and had only worked there 2 months when this happened so I didn’t think that this job counted towards my unemployment. To complicate matters, the job is remote and the company is based in a different state than where I live. When I filed for unemployment, I only entered my previous employers within my state (since the most recent job was so short and in a different state).
What should I do regarding unemployment?
It’s definitely a complicated situation and I don’t have the answers. It’s really an unemployment question and you’ll have to deal with unemployment to get an answer. I know it’s hard to get through to them these days and wish I could offer more advice but each state handles unemployment differently. This article may provide some resources: FAQs about unemployment for the self-employed
If I already received a PPP loan and then a few days latter a second one, can I use the second PPP loan for other business related expenses since the first PPP loan was already used for Payroll?
George – The CARES Act is clear that a business can only get one PPP loan. Did you apply using different EINs? Do you have multiple businesses? the SBA system should have kicked back the second application if it was for the same business.
My employer got approved for the PPP this week but when it came to pay day on FriI was still paid the Reduced hours I worked this week. And is saying I can’t file for unemployment for this week because they got the PPP. Do I still file for unemployment for this week since I was paid for reduced hours? They are saying they will not pay us for 40 hrs if we don’t work 40hrs
You may be eligible for partial unemployment if you have reduced hours. Unfortunately unemployment is administered by states and you’ll have to ask them. (Easier said than done I know!)
Do employees still get the $600.00 when they are called back to work due to the PPP my company received? This is causing me problems upsetting part time employees that are making much more being unemployed. Some of them work less than 20 hours will they get under employment? Thanks
Jim – your state may offer partial unemployment for workers whose hours were reduced. You’ll need to check your state’s unemployment benefits. This article may help with some background: FAQs about unemployment for the self-employed
I have all part time workers, does the ppp still cover only part time workers, to receive the forgiveness , as long as I keep them on payroll
Part-time employee payroll can qualify. It’s based on Full Time Equivalent (FTE) not just full-time employees.
My husband is a W-2 employee and he is a self contractor (sole proprietor) for a consulting business. He was laid off by the W-2 and collects unemployment. Can he still use the PPP funds for His own payroll and get unemployment for his W-2 job?
Bree – I don’t know the answer. I haven’t seen guidance on this question.
Bree were you ever able to find an answer on this? My household is in a similar situation.
My business only got $6,300 in funds. I’m the owner and the only employee on payroll. My business it’s been close for the last 2 months so I’m collecting unemployment. I owe rent and utilities which total close to the 6k. Can I use those funds to pay rent and utilities only ? I know I will have to pay it back but I just want to make sure I won’t have any problem if I don’t use the funds for payroll.
Max,
We can’t provide advice for specific situations. I can share the Cares Act and refer you to Section 1102 which lists the acceptable use of these funds. Rent is among them. Also, we haven’t seen clear guidance on how unemployment and PPP interact.
Hello, I am a sole proprietor and my business will remain open but anticipate sales to slow in the next week or so because shipments have been drastically delayed. Can I apply for PPP? If so, will I be able to get the loan forgiven if I paid myself? Thanks for any info you can provide.
If you want to apply for PPP I’d recommend you do so quickly as funds are likely to run out soon. This article may help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Can you accept a ppp loan while being on unemployment? But you choose to take the loan because it’s only 1% and intend to pay it back within the 2 yrs. And will it hurt your unemployment benefits by doing so?
We haven’t seen specific guidance on that yet Duy. The SBA supplement to the Interim Final Rule (self-employed) states:
“In addition, you should be aware that participation in the PPP may affect your eligibility for state-administered unemployment compensation or unemployment
assistance programs, including the programs authorized by Title II, Subtitle
A of the CARES Act, or CARES Act Employee Retention Credits.”
Hello I want to apply for ppp loan I’ve been self employed for 6 years now. I have no employees and I have no bank statements what do I do ? Or since I don’t have a bank statement or voided check can I not get loan?
Tosha – this article goes into detail about how to apply and qualify for PPP if you are self-employed.
Have you reported your business income to the IRS on Schedule C? If so you may qualify based on your gross revenues reported on your Schedule C. The lender may require you to open a business bank account to deposit your PPP funds.
Hi Gerri, Thanks for your article. It is very informative. Gerri, I own a business which is a single member LLC. The LLC chooses to be taxed as a corporation. The business has existed since 2016 and there are three employees (myself and two others which are not related to me). My wife and I own the office space where the business is located and the business pays rent to my wife and I. We have a signed lease agreement dated in 2016 and renewed in 2019. The lease is at market rates and we pay the lease monthly. Do you think my lease payments (rent) will qualify as a use of the PPP loan proceeds?
Oscar – For PPP loans to be forgiven non-payroll expenses may not exceed 25% of the forgiven amount. This article talks about that in more detail. (I can’t comment on the fact that you own and lease the building to yourself however. I haven’t seen guidance on that situation.) How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Please define transportation and telephone. I was told cell phone expenses are part of telephone. Is that true? What is included in transportation?
Keana – We try in these articles to provide information from the CARES Act and subsequent guidance from the SBA and Treasury but we can’t speak for them. I don’t see why a cell phone used in a business would not be considered a telephone expense, but this legislation was written and passed quickly and not everything is spelled out. There was some discussion of this in the SBA supplement to the Interim Final Rule if you want to check that.
I didn’t see a mention anywhere in the link you posted.
Reduction Based on Salary for Forgiveness: Has there been any more update or clarification on this subject? If I pay the same hourly rate for 40 hours, is that good enough? If the employee worked a lot of overtime hours in the previous quarter, and during the 8 week period, I pay the employee straight 40 hours only at same hourly rate, do I have to worry about being 25 % under?
We are still waiting for additional guidance on this topic. When we see it we will update the article. Hopefully soon!
Is it possible to use the Employee retention credit for payrolls prior to our PPP acceptance letter? I realize they can not be run simultaneously however it doesn’t sound like PPP can apply to prior periods and we have not received funds yet.
Janet – You may want to discuss the following with your tax professional:
If you read the CARES Act, it states under SEC. 2301. EMPLOYEE RETENTION CREDIT FOR EMPLOYERS SUBJECT TO CLOSURE DUE TO COVID–19: (j) Rule For Employers Taking Small Business Interruption Loan.—If an eligible employer receives a covered loan under paragraph (36) of section 7(a) of the Small Business Act (15 U.S.C. 636(a)), as added by section 1102 of this Act, such employer shall not be eligible for the credit under this section.
Section 1102 is the Paycheck Protection Act. You can read the CARES Act here.
Hello,
My employer laid us off on March 19th and directed us to apply for unemployment. I got a call on April 17th saying they were getting the PPP loan and they may pay us on April 24th. I had been on unemployment before this. We did end up getting the payment from my employer on the 24th but we have not been asked to come in and work. How do I report this on my weekly claim to unemployment? Would it be considered a severance payment? Can I still receive unemployment?
On my weekly unemployment claim there is no option for reporting this. It only asks if we worked. And on the pay stub I was sent it says the pay period was for 4/6 to 4/19 but I already filed claims for those weeks before I even knew about this. Will I have to pay my UI benefits back? My state is saying that benefit wage charges from the employer are waived.
Help I am so confused and worried.
So I’m still working but my hours have been reduced due to Covid-19 so my employer filed for assistance. From this he is getting assistance to help pay for my commission paycheck. He told me that he will get $1275 assistance per pay period to help pay for me. However, my commission pay will actually be slightlly higher than that at $1330.04 for this upcoming pay period. Does my employer still receive the $1275? Or is the $1275 only given if it is needed. For example if I make only $1000 for a pay period does he get helped out with the remaining $275? Or does he get the full $1275 no matter what? I’m just curious as I’m trying to justify still having to pay for babysitter bills for my kids while working my extra time for my commission pay check that I may not actually have to currently be working. I’m not a free loader by any means and I’ve never personally taken any government assistance but I’m trying to figure out where the money is going as it may be more logical for me to not work my commission pay structure now as I basically break even on what I have to pay for a babysitter vs what I’m actually bringing in with my paycheck. Could my boss just be pocketing the money for himself? Thanks.
Kyle, I’m not sure I fully understand the situation. You may want to read our article to better understand how forgiveness works. If you are owed a certain amount in commission but your employer pays you less than you are owed that would seem to be a labor law question not a PPP question. You may want to contact the Department of Labor either on the state or federal level. How to Apply For Forgiveness for Your Paycheck Protection Program Loan
If my employees were on unemployment and I got the PPA loan to pay. them their regular payroll amount, can they still receive unemployment
No, they cannot take both the unemployment and the money allocated for your business for payroll by the PPP.
During the time you are paying your employees they would not be eligible for unemployment as they will not be unemployed.
We did apply but was told we do not qualify because we had zero profit last year. We are a new business as of July of last year so yes we did not make an overall profit which is very common for a new business. Does this seem correct?
Were you self employed with no employees (W-2 employees) and filed Schedule C Rod? If so, then the SBA guidance has said if you had a loss in 2019 you aren’t eligible unfortunately. If you filed Schedule C and had W-2 employees, or if you file another way then I’d recommend you read the Treasury guidance on how to calculate PPP amounts by business type.
I’m a brand new business and was starting my busy season. I don’t have a lot of the documentation they are asking for? How do I get around that if I’ve only been in business a short time?
When did you start your business Sandra? What is your business structure? Sole proprietor or something else? If you started it in 2020 and file Schedule C the SBA and Treasury have not released any guidance yet on how to calculate eligibility unfortunately.
what happens if you submit an estimated schedule C because your 2019 1040 is on extension and then later – the schedule C actually filed with the return is different.
My understanding from SBA is that you are supposed to complete it and apply in good faith.
As an employee, can I find out if my employer (owner) received a Ioan from the PPP?
Is there a website or an office that I can contact to learn if my employer received money from SBA?
I don’t think so John though I’ve seen some news stories pushing for that.
The lawyer I have an agreement to do legal work for runs the payroll of my paralegals through his law firm. he get s portion of collect fees for handling all the advertising meetings website set up etc. He used the cost of my paralegals’ salary as a basis to get a CoVID Loan for the cost of my paralegals payroll. Through our agreement I have with him I independently pay the cost of that payroll ( and other expenses) prior to receiving the balance of collected fees ( after payroll and other expenses).He told me he needs to keep some money aside in case he needs to pay his mortgage because his finches are hanging by three for the stock market. Isn’t this fraud on the other attorney part because he is essentially making me pay him the money he got for the government to cover the payroll?
I don’t know Andrea. PPP funds may be used up to 25% for mortgage interest, utilities and rent. If he is paying the payroll then I assume he can apply on that basis. But you may need to get legal advice on this one.
Can an employer cut employee hours by 25% after receiving a PPP loan?
Sounds like a possibly if I read the terms correctly.
It does appear that’s the case if other requirements are met. We discuss that in this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
My husband got laid off due to the coronavirus and then his job was granted PPP. They were put on work from home. Now the employer is making them go to the workplace and do trainings there. Is this legal?
This issue is not addressed by PPP. It’s really a labor law question and you’ll need to contact your State Department of Labor for more guidance. I’m sorry I can’t be of more help.
Thank your for the article. Is it a guarantee the loan gets forgiven? For example, y dad owns his own transportation company. He’s the only employee and pays himself. Can he get the loan to pay himself up to his highest earnings of 2019 quarter 2 and then get that forgiven? Can he pay mortgage of his own home with it?
No it’s not guaranteed. I recommend you share this article with your Dad: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Hey Gerri, thanks for the help on this subject it is much appreciated! So, my wife works for a restaurant that just got approved for a PPP grant, they are now calling her to come back to work, but as of right now they are only doing To-go orders because of California’s Stay at Home Order. She had expressed concern for coming back so soon and had asked how they would be working while the dining and bar are still closed. She was leaning towards not going back just yet, so they sent her a “change of employee relationship” form that they want her to sign ASAP. I’m assuming if she signs this she will no longer qualify for unemployment? I’m also curious if the Stay At Home order effects this situation at all. As of today, it has not been extended past May 3rd in our county, but much like the Bay Area that just got their’s extended until May 30th, I’m expecting this to happen. I’m wondering, does she necessarily have to sign this document? Also, if they are basing the schedule off of restrictions being eased, and then they are not loosened at all come May 3rd, I don’t see how they can possibly offer her more than 8-16 hours a week. Is the PPP used to cover the hours she normally would get? Sorry, I know that’s more than one question. Thank you in advance, have a great day!
I understand your concern. The PPP applies to employers who borrow the funds. It seems reasonable for her to explore her options before she makes a decision. I came across this
Department of Labor unemployment insurance guidance that may prove helpful.
Hi, I am a part time employee in a dental office. Only emergency procedures are allowed to be performed. The owner of the office got approved for the PPP loan. Do I have the right to get pay?Thanks
I’m not aware of any employment rights extended to workers via PPP. Eployers are under the obligation to use the PPP funds for specific purposes however.
I am a hotel bartender who was laid off on March 22 due to COVID-19. My employer has received the PPP loan and is recalling us and reinstating our tenure and benefits. However, they are paying us $15 an hour to perform cleaning projects and other duties until our restaurant and bar is able to reopen. I claim all credit card wages and they are documented on my W-2. Also, my claimed tipped wages are far more than the hourly they are paying us. Are employers required to factor in tipped wages when factoring their payroll costs, or are tipped wages factored at their discretion?
Joana, It’s not specifically clear at this point. This article explored how forgiveness works: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
As far as forgiveness is concerned I received my loan on April 27th what date do I go back to to determine the forgiveness of payroll I closed my business March 24th? Does that mean I will get from March 24th until approximately June 7 I’m also seeing February 15th till June 30th in some of the literature.
Steve,
Your 8-weeks started on April 27 to document how you’ve spent that money. Make sure you’re keeping track so you’ll be successful when you apply for forgiveness with your lender.
Steve – Please read our article on forgiveness to better understand how it works: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
It does not talk about part-time employees. Does the employee have to be full-time for their wages to be included in the forgivable portion of the PPP Loan?
We hire a maintenance company to maintain our elevator and a gardener to mow our lawns. Are any of these condered Utilities that can be forgiven in the PPP Loan?
Dennis – it’s based on full-time equivalent employees which is a calculation that includes part timers. This article goes into more detail on forgiveness: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
On your second question I don’t believe so but I don’t have specific guidance on that so I can’t advise one way or the other.
Good afternoon and thanks in advance for any assistance.
My company recently got the PPP loan and I have questions regarding how they are using the funds. All the employees of the company are sales reps essentially and paid through a draw program normally. To clarify we each get paid around $1235 biweekly in a draw and then when we make commissions we pay this draw or “loan” back to the company and then get the additional commission on top of that.
For example if I personally didnt have any commission for 4 weeks I would owe the company $2470 ($1235 every two weeks). So when I had a sale pay out and would make $5000 off of it I would first pay back the company the $2470 and then get the remainder $2530 as my pay.
Anyway, currently the companies plan is to pay employees with this PPP money as a larger draw for each pay period. Over the 8 weeks it would be about 16k total or 4k per pay period. This would mean however that the employees arent benefiting from this PPP grant in anyway because they technically are having to pay this back to the employer before actually making commissions. This seems like a loophole where the company can get this extra money for free by paying it out in payroll without taking it as loan and not truly helping their employees out. This money once it gets paid back from sales each employee makes gets put into the companies profits now. It seems like this should not count as the grant part and have to be paid back since the money goes to the company then instead of its employees. Is this actually allowed? Are there any guidelines currently that prohibits this to qualify for the grant portion?
Thank you again for any information you can provide. I also realize this might be confusing typed out and would be happy to provide any additional information.
That’s a very interesting situation Sammy. My gut says that’s not how it’s supposed to work (pay you, get it forgiven, you pay it back to them later) but I’m not an attorney and I have not seen it addressed specifically in any guidance. I would encourage you to contact your elected officials in Washington. This is a federal program and guidance for questions like this are needed. Will you let me know if you find out anything interesting talking with them?
Thank you! I tried to email the SBA help desk about a week ago but havent heard anything yet. How else could I go about contacting someone?
I honestly don’t know. But your legislators in Washington should at least try to help as this is a federal program.
I have a very similar situation in that I am a commissioned salesperson who receives a weekly draw against anticipate commissions . the draw is in the form of a weekly paycheck and is reconciled quarterly. I receive a W2 every year, not a 1099. My employer received a PPP loan and continued to pay the draw weekly as usual, which has been very appreciated, but he has recently indicated that we salespeople will still be responsible o cover the entire 12 weeks of the quarter, rather than deducting the 8 weeks covered by the PPP. This seems to me to be a dishonest form of ‘double dipping’ on his part, having received the money from the government, having the pay stubs to back up that he used the money correctly, hence having the loan forgiven, but then requiring the sales-force to pay it back when the quarterly sales figures are reconciled. My sales have been decimated by the pandemic which will then leave me responsible for ‘paying back’ the entire amount of money I was paid. Has there been any further clarification on this point? I am a bit desperate as the quarter ends in 5 days and it will leave me as bad off as if the PPP never happened.
Stephen, I truly wish I could help but this is a labor law issue that’s not in my wheelhouse. I’d recommend you contact an employment attorney and/or your state Department of Labor.
I have a similar situation and my company is handling the payments as draw against commission as well, at this point.
Have you found out any further information regarding commissions sales and forgiveness?
The SBA and Treasury have published new guidance which we shared in this article: Does Owner’s Draw Count at Payroll for PPP?
My company was approved for the PPP loan and we will be able to retroactively pay our laid off employees. Does this mean they will have to pay back any unemployment benefits they have received?
Katie – I have not seen guidance on that. Where did you find information about retroactively paying employees? I haven’t seen that guidance and I would be curious where you found that.
Thanks Gerri. I read through it. Not seeing anything that covers it. Maybe I can simplify. If a business pays an W2 employee but the business makes very little Net Profit (line 31 Sch C). Where does the W2 payroll come into play? The goal of the PPP is to protect payroll. I’ve looked everywhere for answers. Applications ask for 940s and 941s to be uploaded along with Sch C but they’re not factored into the application, as far as loan amount is concerned. Any deeper thoughts you have would be appreciated. I’m made it a generic question so, it wouldn’t be specific to my business.
John – I’m sorry I didn’t realize you were a Schedule C business with employees. There is a separate calculation for that. It’s in this Treasury guidance on how to calculate PPP amounts by business type. That said if none of those calculations in that guidance work for your situation I would not know how to advise.
do you count wages paid towards 1099s in your expenses on your schedule c if you are a sole proprietor. it seems unfair to me that you cant count it as payroll but you have to count it as an expense.
Britt- This article may clarify it for you: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
thanks gerri,
the article did not help. what I was inquiring about was whether or not I should include or exclude funds I paid out to 1099s. on line 11 I paid out 42,561 in contract labor. long story short my net income for the year was (-) making me unable to qualify for the PPP. since I can’t count contact labor as employees I dont believe I should have to include the labor on my schedule c so that I may qualify, as i would like to keep my 1099s “employed” and can’t pay them and my office rent space both.
1099 contractors are not employees and the SBA guidance says you do not include them in your own PPP calculations. The SBA guidance says they are able to apply on their own. I know that helps them and not you, but that is the way the guidelines read. I’m sorry you didn’t find our information helpful. Here’s our more recent about how to apply for PPP by business type.
Britt. Sounds like we are in similar situations. Please read my post, a few below yours (John A). I’ll post here any solutions I find, hope you can do the same.
thanks John! will do!
Hi. If we laid off our entire workforce, do we have to bring everyone back in order to qualify for the PPP loan forgiveness? Considering some need to stay at home and we have limited work, I wasn’t sure if only hiring back 25% or so would disqualify the loan forgiveness.
Also, if someone makes $125K a year, is the first $100K (prorated) forgiven for payroll and the company must repay the other $25K?
Thank you for answering all of these questions – you’ve been very helpful!
Tiffany – Only the first $100,000 in salary may be used to qualify for PPP. You’ll use that amount to qualify there shouldn’t be an extra $25,000 to be paid back. Forgiveness is more tricky. Here’s our article on that- you’ll see there are a few questions we’re really hoping the SBA or Treasury will clarify soon. How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Thanks for the kind words and I’m glad we can help in some small way.
Hello Gerri,
This question pertains to a Licensed Real Estate agent (Independent Contractor?) that receives compensation via commissions from the RE Broker and 1099s. Would the PPP loan be forgiven if the funds are used for lost income during the Pandemic?
Thank you!
Mimi – That may qualify. I recommend you read this article to understand how that works: How to Apply For Forgiveness for Your Paycheck Protection Program Loan And this article may help too: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I was laid off, I am now collecting unemployment (including the extra $600/week), and my employer applied for the PPP loan AFTER they laid me off. I am actually making a lot more money on unemployment, so if they get the loan and want to bring me back, am I required to take my job back? Thanks!
Sara – I’d suggest you read this
Department of Labor unemployment insurance guidance as it may answer your question.
I an LLC and have a net profit on line 31 of Schedule C of $1797. I have 1 W2 Employee (myself) and I pay myself a wage $2083.33 a month totaling of $25,000 a year. The PPP calculations only factor in my net profits, which shows me receiving PPP of $374.37. Is my payroll not a factor in the calculation of what I should receive?? My payroll is W2 and Federal Taxes, SS and Medicare are all withheld.
.
John – this recently updated article may help: This article talks about how to apply for PPP by business type
Thanks Gerri. I read through it. Not seeing anything that covers it. Maybe I can simplify. If a business pays an W2 employee but the business makes very little Net Profit (line 31 Sch C). Where does the W2 payroll come into play? The goal of the PPP is to protect payroll. I’ve looked everywhere for answers. Applications ask for 940s and 941s to be uploaded along with Sch C but they’re not factored into the application, as far as loan amount is concerned. Any deeper thoughts you have would be appreciated. I’m made it a generic question so, it wouldn’t be specific to my business.
If a restaurant uses the PPP loan for eight weeks of payroll and when the eight weeks are over if business levels are so low that the employees need to be laid off again does that take away from the forgiveness?
David – please read this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
No. That’s not our understanding. Laying off employees after the eight weeks after the PPP funds are disbursed is not part of the PPP guidelines. This may help:
How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I have paid my employees for 2 pay cycles, because I heard I was supposed to keep them on the payroll. I applied for ppp loan . Bank has told me I am approved but I havent received any funds yet. My employees should get paid again tomorrow. I’m confused as what i”m supposed to do as my funds are depleting to pay my employees and I wont have money to pay for my expences.
Gerri – hopefully this article will help: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Can i pay our workers compensation insurance using the ppp funds? I didn’t have employees or payroll i wouldn’t have to pay workers compensation insurance so i feel that this is a payroll expense.
That’s mentioned in the SBA supplement to the Interim Final Rule. You can do a quick search on that document for more information from the SBA.
I am an employee that has been receiving my salary since April 1. My company has applied for PPP funds my question is if I resign on April 31 will there be any repercussions to me four instance will I have to pay anything back. And if my employer gives me a hard time upon resignation do I have a recourse thank you
Employees are not responsible paying back PPP loans obtained by their employers.
Hi there , thank you for answering questions.
I am self.employed with an s Corp. I have 2 employees . I have been waiting for a ppp loan to get approved and it still hasn’t. Am I able to collect unemployment until my loan is granted? I have read that we are unable to file for both unemployment and a ppp loan. My fear is that I won’t see any money from ppp and lose out on potential unemployment benefits. I pay myself annually 96k. We have been shut down since March 19 and I’m unable to collect any money from my business or government.
Chad,
I haven’t seen specific guidance on that yet but I will be sure to update the story when I learn more. I’ve seen some CPAs suggesting business owners may collect unemployment until their PPP funds come through but I can’t advise either way.
I am assistant practice manager for a medical office. We obtained our PPP loan on 4/21. We have payroll that is due 4/28 which inclueds hours from befor 4/21(loan date) can these funds be used to pay the time before 4/21?
Tammy – We can’t advise on individual situations. However you may want to read our article on forgiveness and discuss with your tax or legal professionals: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
My employer reduced my hours and applied for the PPP and was approved. I started the unemployment process but now that they were approved they asked me not to continue (I have not received any unemployment compensation). My question is they have told me they can back pay me for the additional hours I would have been working but it would be taken from my vacation hours. Shouldn’t they be paying me since they were approved and not use my vacation time.
Linda, I don’t know the answer unfortunately. I’d recommend you contact your State Department of Labor since this seems to be a labor law question.
Besides regular payroll , I use independent contractors. One of them , because I keep him so busy has not worked for anyone else.Can I use what I pay him as part of my loan application. Or does he have to apply on his own
He applies on his own. You may want to share this article with him: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan . He will want to apply quickly if he decides to go that route as funds in round 2 will likely go quickly.
I just read an article in the Fort Lauderdale Sun Sentinel that said if you are using a payroll company your loan will be declined. They mention that if your tax forms show zero dollars for payroll the SBA will not approve the loan. Is there any truth to this ?
Ron – The SBA guidance says you can use a PEO and apply for PPP. I also don’t know what the second sentence refers to. Maybe they are talking about if you file Schedule C and had a loss for 2019? Sorry I don’t know enough about what was written to comment.
Would the truck payments which are used in a trucking business forgiven & used from PPP?
Thanks
Not to our knowledge Linda. That’s not an approved use for PPP funds for forgiveness. Please read this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Hello, thank you for this eye opening article.
My question is: if you are granted a PPP loan can you stay closed and just pay your employees a reduced hourly wage or do you have to reopen your business and operate!?
It appears the intent of PPP is to keep workers on payroll even if they can’t come into work. This article may help: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
If I have 5 employees that are all part time and want to bring back 1 employee full time and 1 part time that equal the payroll for the 8 week calculation, will I be able to get this loan and will it be forgiven. My 5 employees had different total hours each payroll, not permanent regular hours but are permanent employees
Marlene – we can’t advise on individual situations. You may want to read this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I have applied for both EIDL and PPP Cares Act programs for my business. We have application numbers confirming filing, have received the EIDL advance and notification that our PPP has been approved and in process of funding. We haven’t heard anything directly regarding our EIDL loan amount, but did receive a notice saying the application was approved two weeks ago.
It seems odd that we received the advance, but still haven’t been notified of EIDL approved loan amount. How much time have most business’s found it takes for notification EIDL loan amount and funding from the date of approval notification?
Joseph – the advance was designed to get funds into the hands of business owners quickly. Many other business owners are reporting experiences similar to yours. There’s a lot of discussion about this going on in the
SBA CARES Act Insights Hub on Facebook.
I’m currently on unemployment my employer got approved for the ppp loan. He stated when the funds come in I can no longer collect unemployment (which I understand) and told me that I will be working 20 hours a week instead of 40 hours a week. I’m a server. I will not be making enough to get by. Will I still be eligible for unemployment?
In some states, workers can be eligible for partial unemployment due to reduced hours but we’re not an expert in unemployment law so we recommend you try to get advice from your state unemployment agency. (I realize how hard that is to do these days and apologize in advance!)
I enjoyed your article but am still confused about my situation.
I own multiple companies that qualify for PPP
I am the owner manager of each company, and I received compensation over $100,000 from each company.
I know the $100,000 limit per employee applies to each individual company, no question but, can I apply thru multiple companies and use my $100,000 limit in each company, or does the $100,000 limit apply to me as an individual, therefore allowing me to apply only once?
Thank you,
I am anxious to hear your answer as I am unable to get clear guidance thru my internet research.
Mitch – From my research it APPEARS that you can apply for multiple companies with separate EINs but I never did find clear specific guidance from the SBA on that question. Did you see our article on that topic? Can I apply for PPP or EIDL for multiple businesses?
Yes I did read it, and I read it again, and I am a little more confused.
I spent an hour googling and I have not gotten a definitive yes/no answer yet. It seems the income limits apply on a per company basis so I should be able to apply with multiple companies.
I will keep looking, and if you stumble across it, let me know.
Thanks again and have a Happy PPP day!
It seems to me Mitch, based on some of the companies that have received more than $10 million you’re probably right. I wish clearer guidance were available!
Hey Mitch (or Gerri) did you end up finding anything else? Really curious about how the $100k limit applies, especially if someone is employed at multiple companies. It seems like the limit is per company, but I haven’t found any explicit guidance one way or another.
I haven’t. My guess is it would be prohibited for an individual to be paid more than $100,000 through two different companies and have both forgiven. I imagine they’d consider that a windfall which they generally try to avoid (at least at the individual level!)
Are employers allowed to reduce your salary to take advantage of the PPP Loan ?
That’s discussed in our article about forgiveness, though please keep in mind our articles are written for small business owners not employees. How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I hired my first employee March 1st, but she had been working for me since early 2019 as an independent contractor.
If I were to calculate my average monthly payroll costs over the past 12 months without the 1099 payments in 2019 then it would be inaccurately low since we’ve only run payroll for March and April. I know typically 1099 payments cannot be counted for the PPP loan, but I feel I’m in a unique situation since this individual now IS an employee.
Any thoughts would be appreciated, thanks in advance!
Barbara – It seems this is one of those situations the PPP doesn’t really accommodate, at least from what I’ve researched. But I can’t provide legal or tax advice so you may want to reach out to an attorney or tax professional. My best advice is for you to reach out to your elected officials in Washington for help. This is a federal program and they have staff who are supposed to help with those kinds of questions.
My employer got approved for the PPP this week but when it came to pay day on FriI was still paid the Reduced hours I worked this week. And is saying I can’t file for unemployment for this week because they got the PPP. Do I still file for unemployment for this week since I was paid for reduced hours?
Can employees that have already signed up for unemployment prior to getting this stay on it?
Our articles are written for small business owners trying to navigate these COVID relief programs, rather than for employees. So as an employee you’ll need to contact your state unemployment office (not easy these days – I’m sorry!) Or you can ask your elected officials in Washington for help if you can’t get an answer elsewhere.
If you were self-employed and trying to understand how to apply for unemployment vs PPP, our answer would be “we’re not sure.” The SBA supplement to the Interim Final Rule says: “In addition, you should be aware that participation in the PPP may affect your eligibility for state administered unemployment compensation or unemployment assistance programs,
including the programs authorized by Title II, Subtitle A of the CARES Act, or CARES Act Employee Retention Credits.” But that’s the extent of what we’ve seen.
My husbands company is providing payment under the PPP program as they received a loan. They are saying the if he works 20 hours but gets paid for 40 he will have to payback those hours later when business picks up….ex: he would work 50 hours and only get paid for 40 so 10 hours be credited back to this time of PPP paid. Is this correct and can businesses do this?
Marcy – That’s not how we understand it to work. Under PPP, employees can be paid for not going to work. Your husband’s question is a labor law question, however, so I recommend he contact his state Department of Labor.
As a sole owner of a business, having only part time employees qualify?
Yes you can apply.
I have received the ppp loan. As a school-age childcare provider, the business was shut down. I applied for the loan and advised my staff to sign up for unemployment while the loan process moved slowly forward. Now, I have the loan and many of my employees are receiving a $600.00 increment which allows them to collect more than if I pay them as usual. The school year has ended and I will not be hiring back until September. I’m confused about my responsibility at this point.
This agree it is confusing Jackie. Unfortunately not hiring back your employees may jeopardize your loan forgiveness. I recommend you read our article about forgiveness then reach out to your elected officials in Washington to share your concerns. How to Apply For Forgiveness for Your Paycheck Protection Program Loan
As restaurant employees, does the staff physically have to go into our place of work and clock in hours in order to get paid? California shelter is still in place and some are not comfortable going into work and risking our families lives. If not, does the employer have to replace a staff member in order to compile with the loan terms?
Garrett – It is not our understanding that employees need to come to work (and risk their health) in order to pay them under PPP. It may seem strange to pay employees who are not coming to work but that seems to be the intention of the legislation. As for your second question, there is still confusion around forgiveness. Did you read our article on that subject? How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Do you charge to process the application? how much?
No. There is no fee for that service. No matter where you get the loan the cost is the same: 1% interest on any remaining balance with no fees.
My boss filed for the ppp loan and I cannot file unemployment this week will I still get my retroactive back pay for the $600 extra on unemployment
Cheryl, it’s my understanding that if you were eligible for Pandemic Unemployment Compensation (PUC) for the time before you were called back to work it can be paid retroactively. But I’m not an unemployment expert and you’ll need to check with your state unemployment agency to find out for sure what benefits you are eligible.
I’m only asking if unemployment will give me my back pay for the $600 extra for when I was filing unemployment
Cheryl – I updated my response. I still do suggest you contact your state unemployment agency for the answer.
The company I work for is behind on state taxes. We are on a payment plan with the state. Unfortunately this has kept me from renewing the Incorporation status. The bank said unless we get the incorporation status fixed, we will not qualify for the loan. I can’t find this listed anywhere in the disqualifications.
Please advise,
Cori
HI,
Filling out loans at this moment and have one Question re clarification of Sole-proprietor vs Self-employed:
(I have already searched the Self-Employed: How To Apply For A Payroll Protection Program PPP Loan page and looked everywhere)
Normally I’m considered either/both, but since we have to pick ONE for the PPP, which should it be – what are the differentiating it based on?
Banks and CPA offering conflicting answers.
I file Schedule-C, but do have a “Schedule-SE” on my 1040.
Only 1099 I received this year was from a sublet-er, but I do get them for work I do on occasion, (in prior years).
Thanks!!
Accordin to the IRS, you file Schedule SE (Form 1040) to figure the tax due on net earnings from self-employment. The guidance from the SBA is to use Schedule C, line 31 net profit from your business to qualify for PPP.
After not getting a PPP loan in 1st round due to excessive applicants, our small company also applied to a 2nd lending institution. If we are lucky and get a loan, will our acceptance automatically cancel our other loan application? Thanks for any advice.
June – You may want to let the first lender know lender 2 submits your loan to the SBA and gets approval. Otherwise they will be spending time trying to process your application.
Would a separate payroll consisting of amount paid for hazardous duty pay be covered under PPP?
I haven’t seen that question answered in any guidance.
Regarding my previous concern or question I want to add:
Can I have future benefit like claiming those months with lost without not sales/revenue because forced to be closed as my business is a nonessential business, it is a massage spa. can I claim those lost on future profitable business under optimist scenery?
I have 22 w2 employees.
I would like to know what would be the economic benefits for my business rehiring and paying employees just to stay home?
PPP is based on average monthly payroll. You will have to determine whether it makes sense for your business. You may want to also look into EIDL as an alternative if you determine PPP isn’t right for you: FAQs about applying for EIDL
I started a new business in January with owners working for no pay. We hired our first employee the end of January and they started work on February 17. Are we excluded since our first payroll was too late? Or is it good enough that we were in business on February 15? Thanks!
Scott the CARES Act states: “(II) CONSIDERATIONS.—In evaluating the eligibility of a borrower for a covered loan with the terms described in this paragraph, a lender shall consider whether the borrower—
“(aa) was in operation on February 15, 2020; and
“(bb)(AA) had employees for whom the borrower paid salaries and payroll taxes; or
“(BB) paid independent contractors, as reported on a Form 1099–MISC.
Is it legal for the employer that has gotten the loan to make their employees do things non-job related? Example putting in sprinker system in his own personal home?
Alisha, You’re asking about the work the employer requires you to do and that’s a labor law question. You’ll need to contact your State Department of Labor.
If I have 10 employees and I do the payroll protection. Do I have to bring the same 10 back . Can leave some on unemployment and hire different people as long as I still have 10 employees will it still be forgiven.
Tonya, We haven’t seen guidance that answers that question specifically. Have you read our article on forgiveness? If so I’d suggest you start there: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I am a sole proprietor. I applied for PPP on 4/09 and was approved and got the money on 4/16. I did not know at that time I could apply for my wages. If I apply for a second loan for my own wages will it be denied?
You can only receive one CARES Act PPP loan.
Thanks for this article. I am a bartender who was laid off March 15th due to the pandemic. My employer qualified for a PPP loan and will be making offers to rehire this week. The pay is the same hourly as before but obviously without tips – which was the bulk of my earnings. This means the offer is for significantly less money – basically minimum wage. Additionally, I live with people who have compromised immune systems and don’t want to be public facing and risk getting sick or getting others sick. If I turn down this offer for re-hire, will I still qualify for unemployment benefits?
Emma, We’ve written a new article about unemployment. Although it’s aimed at the self-employed there are resources in there that may be helpful to you.
FAQs about unemployment for the self-employed For questions about your specific situation, I’d recommend you reach out to your state Department of Labor.
Has the SBA finalized whether or not K1 income is eligible for the PPP? Thank you.
We haven’t seen any further guidance beyond the email forwarded to us from the SBA that says it is not. I’d recommend reaching out to your Senators in Washington. This is a federal program and that guidance is needed.
Thank you for the reply. So multi-member LLCs taxed as partnerships can apply for PPP, but they cannot use K1 to substantiate payroll. Does that mean only LLCs must have W-2 employees to qualify?
Mark – I’m not 100% sure. Other than the email I shared, this is the only guidance I’ve seen from the SBA Administrator specifically for LLCs: “However, if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself 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 Partnerships are eligible for PPP loans under the Act…that limiting a partnership and its partners (and an LLC filing taxes as a partnership).” I’ve looked and can’t find any more guidance for this situation. I’d recommend you reach out to your Senators in Washington and tell them you need help getting specific guidance from the SBA.
I have a 2nd side job that is a 1099. I am still fully employed for my first job. would I even be eligible for this?
We haven’t seen any guidance that says you cannot apply if you have other income.
When the guidance for the self employed (including 1099 contractors) came out we subsequently published this story: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
One important detail that is not in this article and that I can’t find anywhere is how many hours per week is considered FTE for the purpose of the PPP loan/grant. Do you happen to know?
The SBA has not provided guidance on how to calculate FTE. Did you see our article on that topic? How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I am a 50 hour per week employee. My pay is based on a 10 hour per week guaranteed OT. Under this program is my employer obligated to pay my entire pay or only the 40 hour pay?
The formula for forgiveness is complicated and not completely clear. You may want to read our article on forgiveness to better understand how that works: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Can you please further define Transportation as a utility?
I can’t speak for the SBA unfortunately. You may want to read the SBA supplement to the Interim Final Rule which references it.
If we are cut our hours from full-time to part-time due to slowness or if we have to be home for a current amount of time because of sickness. Is our employer still suppose to pay use our normal pay or can he cut is out until we come back full-time again?
There are still a lot of questions around forgiveness but we did our best to tackle them in this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
My employer just received a PPP loan in the amount of $80,000 last week (week of April 12 – 18). This afternoon, my employer told me that I was being laid off, and that today was my last day of employment. He informed me that my position was being eliminated (I am a litigation paralegal) and that he was hiring an additional attorney in lieu of having a paralegal, in an effort to generate more money for the law firm. My question is: is an employer still eligible for PPP loan forgiveness if he lays off an existing employee (I have been a full-time employee since 2015), but immediately hires a new employee in order to retain the status quo with regard to payroll? I have not been able to find anything online that addresses this issue, so if you are able to provide an answer I would be very appreciative. Thank you.
I’m sorry you were laid off at such a difficult time. PPP forgiveness is based on headcount and salaries. Nothing we’ve seen in the guidance requires them to maintain the same employees.
I have the same problem, my employer doesn’t want to rehire old employees, he is hiring friends and family members using them for payroll, but he will take the money for himself.
Can some one change the law about keeping past employees. I have knowledge that a lot of owners seeding the same taking the ppp loan payroll benefits through friends and family members.
My employer just received the PPP loan . Now she is saying she will no longer be paying into our IRA or paying for our health insurance. Can she do this even though she did this all before the loan?
I own a corporation as a musician/performer, and I pay my band mates as “non-employee compensation.” I have seen conflicting information about whether or not I can use the PPP loan for these purposes. I applied and gave all the necessary information, including 1099 payments from 2019, and was approved for the loan. I got the loan today, but now I’m worried it won’t be forgiven if I use it for my band since they are considered Contract Labor. What are your thoughts?
Thank you!
The SBA has said not to include independent contractors in the business owner’s employee payroll calculations. They are supposed to apply on their own. I’d discuss this with your lender or tax professional. It’s in the
SBA Interim Final Rule:
h. Do independent contractors count as employees for purposes of PPP loan calculations?
No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.
Hi Gerri -thank you so much for this great article and for answering so my questions. It is very helpful. I own a “C corp” with about 70 employees of which some are full-time and some are part-time. I have managed to keep about half on payroll and I just received my PPP loan so I can pay the others now. Unfortunately, we are in CA and have a stay at home order. A handful of employees can work at home but others will be paid not to work. I am totally fine with this and it is why I applied for the loan. I have 2 questions:
1) Can I give a small increase in hourly wage for an employee who is taking on more responsibility?
2) For computing FTE, we use 30 hours per week for our health insurance. Am I required to use this number or can I compute FTE at 40 hours per week?
Thanks Gerri,
John
John, I assume your question about increasing wages is whether that new wage would impact forgiveness. We’ve since written a piece about forgiveness: How to Apply For Forgiveness for Your Paycheck Protection Program Loan I haven’t found any specific guidance regarding your question about calculating FTE. There are still many questions about forgiveness. Senator Rubio who chairs the Senate Committee on Small Business and Entrepreneurship to Treasury and the SBA Administrator asking for guidance on the forgiveness provisions. You can ask your tax or legal professional. You may also want to contact your elected officials in Washington as this is a federal program.
I’m an independent contractor ( realtor).
i was depositing my pay checks into my account at a bank but they tell me that my account was not a business account so i cannot apply for PPP.
Is that correct?
i have my 1099 for last year.
Just because you can’t apply with them doesn’t mean you can’t apply elsewhere. You can apply through the Nav COVID Resource Center when Congress authorizes more funding.
Are employers who get this loan allowed to use it as free labor to have employees do work that they might not be qualified to do? For example, if there isn’t enough work in your job description, they transport you to an off site location to install a personal property cow fence? Or weed eat their property?
The CARES Act doesn’t specify the type of work that has to be done but labor laws may. We recommend you talk with your HR advisor or state department of labor.
I’m confused on how PPP loan forgiveness will be affected by employees furloughed prior to 4/26/2020 and refuse to return to work because they found another job, want to keep collecting unemployment benefits, or just don’t want to work. Assuming we meet the FTE level existing prior to 2/15/20 and payroll payouts equal at least 75% until 6/30/2020 how will these employees not returning affect the loan forgiveness of my PPP loan. I’ve read that individual employed before 2/15/20 wages and salary’s must equal no less than 75% during the 8 weeks following funding of the PPP loan.
The rehiring provision is confusing. We wrote an article where we tried to address this but there are definitely issues that haven’t been spelled out well yet. You want may to read: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Do you qualify for PPP if you are a statutory employee that is on 100% commission, required to pay all your own expenses and file a schedule C?
Thanks!
JT – Did you see our newer article on this topic? Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
We have several employees that feel like they are receiving more money collecting Unemployment Insurance funds with the extra $600.00 per week they are getting rather than receiving their paychecks again. We received our PPP funds yesterday. We are wondering if other employers are hearing this too.
Hi Gerry- thank you for your well written article.
1- I’ve secured a ppl Loan- can I increase salaries (including my own- as long as it stays under 100K- I’ve always been a w-2 employ of our s-Corp)? How about increasing hourly wages?
2- any word if you will have to show a revenue decrease in order to have the ppl forgiven? Everything I read neglects to address that- the difficulties for my business will likely happen later in the year- so I’d like to use ppl to cover my payroll and build a savings to ensure we survive the long term. Thanks!
I don’t know the answer to question #1 unfortunately.
For the second, I can’t answer it for you but I will point you to the CARES Act which requires the borrower to certify that “(I) that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient;” It also states: “It is the sense of Congress that— (1) all borrowers are adversely affected by COVID–19; (2) relief payments by the Administration are appropriate for all borrowers”
At the same time, some attorneys are warning that borrowers should be careful about applying if their business has not been impacted. This article explains why: You Got Your Paycheck Protection Program Loan. Now What? Advice From Small-Business Lawyers
Great article, I hope you can answer this question:
It looks like I am approved and should be getting funded soon, however my type of business (youth sports) is going to take a while to take off again. I do not believe I’ll be even “open” in 6 weeks time…I think I understand the minutia about the payroll, etc, but my question is: what happens if I chose to pay other outstanding bills (landscape services for the sport fields, repairs for the building etc) or issue refunds for the programs that were suspended? Am I not allowed to do any of that? or simply won’t be forgiven?
Pedro: PPP funds are to be used for very specific purposes as described in the article, and primarily for payroll. If you want to use them for other purposes we recommend you get legal advice. The Economic Injury Disaster Loan (EIDL) may be a better fit for working capital needs.
I noticed one of the acceptable expenses in utilities was “transportation”. Does this include fuel, insurance, registration fees and monthly loan payments on vehicles used for business purposes as long as it’s not more than 25%? Also, not to keep beating a dead horse but I too am a single owner LLC that takes draws as I need them for personal expenses. Do I just continue the practice of cash withdraws or do I need to actually write myself a check? Would that be acceptable proof? Thank you for this article! It by far has been the clearest and most concise one I’ve seen during my research.
Chad, we’ve written a story that should be helpful: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan . As for the other purposes for using the funds you may want to read the SBA supplement to the Interim Final Rule which details other expenses.
We had a forced closure, so laid off everyone, and most are now receiving unemployment insurance payments plus the federal supplement of $600. One of our employees was on leave at the time and can’t return because of family need and, now, travel restrictions. Must we re-hire her when we receive our loan (which is about to happen)? Our payroll calculations for the loan included her payroll information. Are we allowed NOT to count an employee? We want her back, but we don’t know when she can return and we don’t want to cut her off from unemployment insurance either. Re-hire and then, if necessary, lay off again? Another employee, a part-timer, prefers to retain her unemployment insurance payment until we re-open. Can we also allow that without risking loan forgiveness?
Sandra, These are great questions but unfortunately the SBA hasn’t released detailed guidance on the forgiveness process. We’ve written an article about it you may find helpful. Beyond that we suggest you get advice from an attorney or tax professional. Read: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Hello-
We are an S Corp and in the last year it was just myself and my husband on the payroll. As our income is sporadic we pay ourselves quarterly whatever we can and take shareholder draws as we need them to cover expenses. Should we include shareholder distributions as part of the annual income? The wording includes similar compensation. It is included on tax returns as income and the appropriate taxes are paid so isn’t that part of our annual income?
Thanks
TJ
An email forwarded to us from the SBA dated April 6, 2020 states the following: “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.” This has not been discussed in official SBA guidance yet, however.
Would it be acceptable if we add the owners to payroll?
Owner’s pay is not necessarily excluded from payroll. If you paid yourself previously then your pay may count toward the PPP loan amount and forgiveness. If you are self employed read this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Our business utilizes an independent contractor who has applied for his own PPP loan (to hopefully be received in the next week). We are planning to hire him into our business, and we are also expecting the PPP loan to come through any day. Do we need to wait until both loans have been “used” (8 weeks beyond the origination of the loans), or could we hire the independent contractor sooner than that date?
It seems to me the decision to hire the independent contractor is a separate decision but perhaps I don’t understand your question. At any rate, we can’t offer specific advice and recommend you consult a legal or tax professional.
I believe the question is what happens if the independent contractor gets PPP and is then hired by the company as a W-2 employee and hence they use their PPP money to pay the now employee?
HI Gerri, my situation is as follows: I am the owner and sole employee of an S-Corp/LLC, and pay myself a regular W2 salary as an employee. My business is editing – I have three corporate clients for which I provide editing services for newsletters and trade publications. As of right now, none of those clients have reduced workflow to me, but anecdotally I understand that it may be in the works. Can I apply for the PPP even though my employment and work hours have not yet been reduced? The idea would be that it is there if and when I need it. If I end up not needing it – if my hours and workflow are not cut – what would my course of action be? I.e. would I get in trouble somehow for taking it out when I did not end up needing it?
Did you see my response to M. Hogan? He asked something similar. I can’t advise you personally but you may want to see what the CARES Act says.
Hi –
I applied for PPP loan for my (3) W2 employees and it appears that the loan was accepted. As an LLC, I do not get a salary from the business and as such I am not counted as an employee.
Can I apply a second time for PPP as an independent contractor? Even though I already applied for my three employees?
Thanks!
I don’t think so John because the CARES Act states a business can only get one PPP loan and you work for your business which obtained a loan. But I can’t say definitively so you may want to talk with your advisors or Small Business Development Center.
I started my business may 30 2019 am I considered a “newer business”?
For PPP loans your business must have been in business by February 15, 2020
My employer, a physician in a private practice, has applied for the PPP. Most of the staff’s workdays have been reduced from 4 days/week to one day/week. We have been informed that we must use up all of our PTO hours during this 8 week period. He will pay that PTO with the PPP funds. Is that correct use of this program? Or should we be paid directly for the missed days of work with the PPP funds, thereby allowing us to preserve our PTO time for the hopeful months ahead?
Great question Connie but I haven’t seen that addressed in any guidance. Here’s our new article on forgiveness:
How to Apply For Forgiveness for Your Paycheck Protection Program Loan At the end I provide some suggestions for getting additional advice.
My wife and I file as a Qualified Joint Venture https://www.irs.gov/businesses/small-businesses-self-employed/election-for-married-couples-unincorporated-businesses we get one 1099 MISC under my wife’s name only and because we are a Married Couple Unincorporated Business (qualified joint ventures) are return has 2 separate schedule Cs , how do we go about applying to the Paychek Protection Loan? 2 separate PPP applications ?
This is one of the best articles if not the best about the PPP
Thanks,
Thanks for the kind comments. We have not seen guidance for your specific situation unfortunately. We did just publish this article that may help:
Can I apply for PPP or EIDL for multiple businesses?
Hello Gerri,
Is the 8-week period for the requirement of payment of payroll based upon payrolls paid, or payroll costs incurred?
For example, pay dates are on the 15th and end of month. Paycheck Protection funds on the 27th of the month (April), so pay dates April 30th, May 15th, May 31st, fall in the 8-week period. Payroll protection covers 8-weeks from date of funding so it covers April 26th to June 28th.
Should a pay check be written on the 28th of June, before the regularly scheduled pay date to ensure all funds are used in the 8-week period?
Thanks,
This is a great question. I would suggest you talk with your tax professional to make sure you qualify for the maximum amount of forgiveness. I’m sorry I can’t be more specific. We talk more about forgiveness in this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I read guidance on this elsewhere that suggests you should accelerate the date of your payrolls in order to get more into the 8 week period.
Elizabeth – You can certainly discuss that with your tax or legal advisors.
I left a rating but it only gave a three star and I had wanted to give a five star
Gerri is there a closing deadline on ppp loans?
The CARES Act states that the covered period for PPP loans closes on June 30, 2019. I saw you left another comment on 10 days and that’s a requirement for lenders, not for you as an applicant.
Hello
I own a small buisness in New Mexico. I’m 50 50 partners with my father in law and we work the buisness ourselves with one other employee. We opened our Buisness on February 1st 2020. When we opened we did not set up a payroll out the gate. What we did was pay ourselves back our initial investment into the business and then started payroll in March.
Does this disqualify us for the PPP?
I am a sole member LLC working as a contract paralegal. Checks are written to my LLC and I in turn pay myself. The LLC was formed mid-2019. My first question is what loan, if any, may I apply for? Second, how do I prove income? From the checks coming in to the LLC or the checks to me out of the LLC? Lastly, I haven’t prepared my taxes for 2019. How does this work? Thank you for your help.
Kris – This article should help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
My company has been around for 10 years and averages around 150k a month in payroll and I have been hit pretty hard by the pandemic. I am a sole proprietor / LLC and my credit is terrible. Will this disqualify me for the PPP loan?
Robert, we haven’t seen any specific guidance from the SBA around credit for PPP loans but it doesn’t appear that banks are requiring good credit.
My husband and I run an LLC and both own 50% of the company. We do not have employees or formal payroll. We don’t receive actual payroll checks but instead just pay ourselves what is left after the bills are paid for the month. Do we qualify for a PPP loan?
Julie – We’ve written an article that explains that scenario: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I am trying to apply for Cares PPP loan on behalf of a Social Club/ Cultural Organization. We are incorporated in State of Ca as a 501C.
There are about 150 members that are proprietary members. We own and operate a Banquet Hall and also restaurant that is open to the public.
I started the application process through Bank of America’s website, that is our financial institution.
I was well into the application process. There was a question that asked how much percent of ownership does the applicant own.
I listed our Manager as the applicant because she is the responsible person and also a signer on the bank account.
No one including any of the members owns 10 percent of the entity.
The application form put up a red check mark and stated that the listed applicant has to own must own at least 10 percent of the entity.
Is there a provision for a responsible party to apply who does not own 10 per centRobert
I’m a single owner LLC. If I get the loan from the PPP, how will I pay myself? Will I write a check for the whole amount or specific amounts each month and pay myself from my business checking account with a business check and then create an income and expenses (profit loss statement) to provide as proof for payroll to have the loan forgiven through the PPP? The loan is for 2.5x my monthly salary. Would I pay myself 1 month + 1 month + 1/2 month, or 1/2 month + 1 month + 1 month, or all 2.5 months? I don’t have any payroll system or processing setup. I pay myself with business checks. Thank you!
Do you file Schedule C? If so read this article. Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
It links to the SBA’s supplement to the Interim Final Rule that may be helpful as well. Finally, it’s a good idea to to consult your tax professional.
My boss told us that her would pay us our 40 hrs for the week, but since we have limited hours we can work due to the loss of clients he told us we would have to volunteer our time to get our money. I made sure they were using this paycheck protection program but I can not find were it says employees have to volunteer their time to get paid
I have not seen anything in the guidance to that effect. Yours seems like a labor law question. I’d recommend you contact your state or the federal Department of Labor.
I have a question I have not seen addressed. If a business gets a ppp loan, he pays his employees and rent etc, is there a program for the owner to receive income. The ppp would seem to pay everyone except the owner.
I haven’t seen anything that would exclude owner’s pay from the PPP. In fact, the guidance for the self employed specifically includes how to calculate owner’s pay. I’d suggest you contact your tax professional for specific advice.
Hi Gerri – thank you for the article. Today is 4/9 and still haven’t seen anything that speaks to my circumstance.
I am a single-person S-corp (flow through). Business has gone down to $0 since March 13. Because my operations go up and down 4x a year I take a generally lower salary (W2 wages) (to ensure I have enough to cover payroll taxes at the time) of about $36K and have distributions that are not on a regular schedule but simply taken out as needed as additional compensation throughout the year totaling maybe $60K. For the PPP calculations I’d expect “salaries” to be “compensation” in my world? That is, essentially looking at my 1040 for what I “make” and not 941s? What are your thoughts?
Thanks – John
John, We haven’t seen the SBA address this in published guidance but an email dated April 6, 2020 from the SBA was forwarded to us says: “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.” Since this is not published guidance (in the Interim final rule) we recommend you get legal advice or call your Senator or Representative in Washington for help.
Please explain a couple of things regarding any tax credits with 1099. My understanding is a 1099 or sole proprietor qualifies making commissions only. Like many small businesses this is the time of year you file and pay taxes. So by delaying the taxes until July, how does
the Care’s Act address paying taxes? It seems like to can qualify for the loan, have it forgiven. But then many small business may still owe taxes. It would be wonderful and helpful to have a tax holiday all together. Including for small businesses, 1099, and sole proprietor.
Can any of expenses be carried as a loss? Thank you
Marie, this article is just about PPP. There are tax provisions in the CARES Act that are separate from these loans. I am not a tax professional so please consult one for advice specific to your situation.
Second item under the certifications on Page 2 of the form states that loan request is NECESSARY to support ongoing operations of the applicant. This is on loan application. If a company is financially secure and does not have to receive loan to keep operating does this exclude them? Problem is we do not know how long situation may last and may need the money later on when not available. Please respond. Thanks
Greg, I cannot advise you. I shared some language from the CARES Act in another response to M Hogan that you may want to review.
I own 2 businesses as of February 15 th , 2020. Can I apply for emergency stimulus for each business.? How about PPP?
Roxana, Did you see this article: Can I apply for PPP or EIDL for multiple businesses?
Hey there,
I’m an individual contractor as a personal trainer. I can’t visit clients during this time due to the virus and wanted to know if I could count what my normal monthly income was before this event towards this loan? I don’t have other employees so I essentially would be asking 100% for a loan covering my normal income. Would this count as payroll expense?
Thanks,
Dave – do you normally file Schedule C? If so please read this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I have a LLC with my husband and no employees, how do we apply for the PPP. I have read so much information but everything is for employees or self employed but wants 1099. We file using 1065 and issue each of us a schedule K. I am unsure if we file as business using 1065 or personally using schedule K and unable to really get answers to this. Can you help?
Cari – the guidance for the self employed came out after the application was made available. So it’s no surprise that you didn’t see that information. Here’s the article we wrote about it: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
can a employer pay only wages and medical and not pension contributions and vac/holiday pay?
See the section of the article: Are Employee Benefits In The $100,000 Salary Cap?
I have a few questions.
1. Do the two owners of an S-Corp count as an employee in the “Number of Employees” ?
2. Do these owners salaries also count in the Payroll computation?
3. Do employer paid retirement contributions to owners retirement funds count?
4. For employees that make over $100k, they count but just get capped at $100k for their Payroll computation?
5. We also own a second S-Corp that has one employee. Since it appears that we can’t file for the loan from two different companies, can we include the employee from the other company in the Payroll computation of the applying company?
I opened my business up on February 24th. I run a restaurant with very little employees but i am afraid i have to let employees go or i wont be able to pay my rent. My question is, I am trying to get this application from citizens bank but i recently seen online that your business had to be opened before February 15th and you have to show documentation. Is that just to be reimbursed or am i out of luck and wont get approved for this because i opened about a week after the 15th.
Jason,
For PPP the CARES Act states the business must have been in operation by February 15, 2020.
I am an S-Corp with no employees. I have not filed 2019 taxes because the due date to file is now 7/15/20 and I will owe. I have received one 1099-MISC for 2019 but my other clients do not provide 1099’s to S corporations. Will bank statements and the associated cancelled checks showing the company name which paid them suffice for proof of income? The loan form does not ask for expenses but will I need to submit those as well? Alternatively, I can go ahead and file my return but defer the amount I owe. Suggestions?
Margaret, I’m going to have to recommend you talk with a tax professional.
i work for a store that had a kitchen fire and it was in the middle of repairs to the kitchen when we were told we had to close. Since it would have opened within weeks. Since the virus caused it to close and not continue the repairs so it could reopen when the ban is lifted.
He continued to pay the employees until his money and credit card money were gone. He will also pay them with the ppp until he can bring us back to work. I need to know because if he cannot qualify will have to look for a job.
Thanks for the article. I did a lot of searching and this is the best one I found with information on how the PPP loan works with individuals. I would like to be sure I understand or situation- my wife and I are 85/15 partners in an LLC. As many others, we pay business obligations and just sweep what is left for our personal income, no actual “payroll”. Would I be correct in saying that for the PPP loan we could use our 2019 K1’s as our ‘payroll’?
Thanks for the kind words Josh! Do you file Schedule C? If so read this piece: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I also wrote a second article you may want to read as well: Does An Owner Draw Count As Salary for the Paycheck Protection Program (PPP)?
I haven’t seen any clear guidance for your particular situation unfortunately.
There is one part of the PPP loan that I need clarified. I am co-owner of a specialty prop house. My husband and I are the owners. This is an S corp. We have 6 employees. When we were shut down as a non-essential business in Los Angeles, we had to lay off our 6 employees. We will hire them back when the shut down is over and they are allowed to come back to work. We plan on applying to the PPP loan and once we get the money, we will use 25% of it to pay rent. Then we will hold the rest until we can hire our guys back. At that point we will use the loan money to pay the payroll. So, I am concerned about the “8 weeks” and the forgiveness. What if we get the loan money, but are still shut down for 6 more weeks? In that scenario, by the time we pay our first payroll after the shut down, the 8 weeks forgiveness period would be over.
Shelley,
You’re right to be concerned and careful. There are specific requirements related to payroll as it affects forgiveness. We’ve written about it in this article but the rules around rehiring aren’t clear as you’ll see from our article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan I’d recommend you get advice from a legal or tax professional.
How can new businesses apply. I just took ownership of an established business effective Feb 3, 2020. I have payroll documents but no tax documents yet. Any advice
As it states in the article: If you were not in business for the time period beginning on February 15, 2019 and ending on June 30, 2019, then you can use your average total monthly payroll costs incurred from January 1, 2020 to February 29, 2020 and multiply that by 2.5.
I am in sales and have an LLC where I am the only employee. I get paid my commissions via a 1099. I am applying for a loan where I will borrow 2.5 times my average monthly commissions/income from last year. Will I qualify for the loan forgiveness, and if so how it will be calculated? My assumption is that I will be able to forgive the difference between my average monthly income last year and what I will get for eight weeks after my loan funds.
John if you file Schedule C please read this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
We have an s corp. Are K1 distributions allowed when calculating payroll cost?
David, We have not seen official guidance from the SBA Administrator on this issue. An email from the SBA dated April 6, 2020 stated: “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.” Again that came from the SBA not the Administrator, so you may want to reach out to your elected officials in Washington for help.
Which program should I apply for (EIDL or PPP) if I am a registered LLC, but file taxes as a Sole Proprietor using Schedule C. I am a single-member LLC with no employees. I don’t take draws throughout the year. Am I eligible for lost income for myself?
I also work as an independent contractor and receive 1099s. I file this income on a separate Schedule C. How do I include this lost income in my applications? Am I allowed to have more than 1 applications for each of these ‘businesses?’
Thank you!
This article should help Sarah: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
My husband has a small business with employees who travel in company vehicles to get to jobs. Is gas for the vehicles considered under “utilities” for the company?
Deborah, The CARES Act doesn’t seem to specify that. The
SBA supplement to the Interim Final Rule however, does mention “business utility payments (e.g., the cost of electricity in the warehouse you rent or gas you use driving your business vehicle).” We recommend you discuss that with your tax professional.
Is there a minimum number of hours that employees need to work under the Federal Payroll Protection Plan?
PPP deals with payroll you pay your employees. We have not seen any guidance that specifies how or whether they are to perform certain work while they are being paid. We recommend you consult with your tax professional.
My client is an Owner of a small business operating as a Sub-S ( so all profits get reported on his Income Taxes). His Payroll costs are for himself, and his wife. Does he still qualify?
I have just laid off the employees two weeks ago and payroll is normally done this week for the previous two weeks. Do I start paying the employees right now instead of them filing for unemployment and pay them for being at home or use the loan when we go back to work to have capital to pay their paychecks?
Jack – PPP forgiveness is tied to the payroll you pay them in the 8 weeks after you get the loan. This article may help: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I have a couple of questions:
1. I started my business in April of 2019. I haven’t paid myself any distribution of my net income, but I did rollover my 401ks and IRAs and started a company 401k. Does that count as a benefit expense that could be counted in the PPP monthly expense?
2. It seems you’ve answered this but just to confirm the folks who I’ve paid are paid through 1099s – looks like that no longer qualifies?
3. If the rules changed and I was able to count the 1099s and/or my retirement investment am I able to average the cost by 5 months or 12 months? I’ve read it both ways.
Thank you for all your help – this has been a super informative article.
Mallory – as the article states for PPP your business must be in operation by February 15, 2020. Those who are self employed (including receiving 1099s) should read this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan .
We’re glad you found this helpful.
I am a new business and will be using January and February of 2020 to calculate the total that I can borrow. I put the total payroll from those two months in the CARES Act SBA Loan Calculator, and it is exactly $10,000 more than the average of the two months divided by 2.5. What is the total amount that I can apply for and still have it forgiven? Should I do the actual average multiplied by 2.5 instead of the number that the calculator is giving me if I want the full amount of the loan forgiven?
Also, as the owner, I did not take any pay for about the first 6 months that we were open. We were waiting to file 2019 taxes and then were going to take an larger owner’s draw for the first few months once we knew all other expenses were taken care of. We started taking smaller weekly owner’s draws on Feb. 23. How do I figure out how much to add to the total payroll cost for myself?
Thank you for your help in advance!
Melissa – do you file Schedule C for your business? If so please read this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Hi thanks for the information on PPP. I would like to know if my business in loss from last 2 years and I don’t have any payroll to show because of this. Still I am paying for my store rent, utilities and other expense. Can I eligible to get PPP loan and also if yes, than it’s waive-able ?
Jay – according to the SBA SBA supplement to the Interim Final Rule if you file Schedule C and had a loss for your business you do not qualify.
I co-own an LLC, the other member and myself take out monthly distributions so we are not W-2 employees. We take out a set monthly distribution instead of guaranteed payments. Can we include our distributions in payroll costs for borrowing and ourselves in the # of employees? There was no clarity at the time we completed our PPP application.
Do you file Schedule C? If so this article should help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Hello,
Thanks for the article. I have been looking around the internet, gov’t sites, and SBA sites, to find information for owners of a multi-member (2) LLC. What’s not clear to me is since we take pay as draws, and this is my primary source of income, can we include our salaries as part of the payroll qualifier for the loan? I am hear different things, and its very confusing. Can you provide thoughts or insights?
Thanks,
D
Damon, Do you file Schedule C? If so please read: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I was recently hired at an insulation company right before covid-19 am I eligible for the paycheck Protection Program I haven’t worked yet but I was hired what do I do I was hired two weeks before covid-19 prevented everybody from working.
Parris, For PPP your business (even as a contractor) must be operational by February 15, 2020. If this program isn’t a good fit you may want to look into unemployment instead.
My husband and I own a landscaping company. Due to our town cutting out half the things we can do I think we’re only gonna make about half the money therefore half the payroll. What do I apply for
Barbara, I can’t determine for you what you qualify for but you may want to consider both PPP and EIDL. This article summarizes both: COVID Relief Loans: Economic Injury Disaster Loans Vs. Paycheck Protection Loans
It lists utilities as something that the PPP money can be used for, but there is nowhere on the application to include utilities dollar amounts, so how/where do I include those dollar amounts? I get that I can list 2.5 times the monthly average payroll from 2019, but the only other thing included in the calculation is EIDL amount apparently. So where do I put in the utilities? Or do I have to apply for the EIDL separately in order to include utilities in that different loan, the EIDL? And is it too late to apply for the EIDL since you are talking about it above as if its past tense?
Chris – Utilities are used for forgiveness calculations not to determine the loan amount for which you qualify. The loan amount is strictly based on payroll.
EIDL is a completely different program than PPP.
I know it gets confusing!
I have 5 employees and two owners (S-corp). I receive a W-2 and a K-1, based on weekly salary and monthly draws. Do I count draws as part of payroll for this purpose?
Thanks,
Hi Ann – I’ve mentioned this in several responses to comments.
If an indépendant contractor receives a 1099 from an employer, they can file for a PPP loan as an independent contractor for their 1099 income, however, how would that individual qualify for forgiveness if they are only paying themselves? I.e. they are using the PPP loan to cover lost 1099 wages?
I realize it seems strange at first but that’s the way it works. This article may help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
When submitting payroll items – for calculating the amount of payroll for the 8 week period – how do I calculate the people who are paid over $100,000? In 8 weeks they do not make over $100,000 but will in a year. Do I use the maximum amount ($100,000) and divide by 12 for $8,333.33 x 2 months as their pay or am I allowed to use their entire pay?
The maximum annual salary amount is $100,000 prorated for one year, but qualified benefits can be on top of that. See in the article where it says: Are Employee Benefits In The $100,000 Salary Cap?
I’m seeking clarification on Questions 5 and 6 of the most recent version of the application (updated 4/2/20 per the Treasury’s website). Do these exclusions apply only to those convicted of felonies/crimes of “moral turpitude”, or are misdemeanor convictions/probation also included?
Jim – The information we have on questions regarding criminal records are in this article: 4 Things that Automatically Disqualify You for a PPP Loan
I have only 2 1099 people and the others are all W2 employees. I realize I don’t count the 1099 people on my payroll figure. We did end both 1099 contracts when this Coronavirus started and we have received notice that they both filed for unemployment. Since I don’t count 1099 payroll do they count as someone that has to be brought back to get 100% relief from PPP loan? I wouldn’t think so since I didn’t count them in my loan request figures but need to be sure. Thank you.
Dawn, We’ve since written an article that may help: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Where do I add in (or list) the rent and utilities costs on the PPP form?
Rent and utilities are not used to help determine your loan amount. They only apply to forgiveness.
A sole proprietor in a business That is forced to close during the pandemic can’t earn net income, so would not be eligible for forgiveness of a PPP loan?
The CARES Act doesn’t state anything about whether those employees must return to work while you are paying them and it’s our understanding the intention is to keep them on your payroll – not at your place of work. But we recommend you consult with your legal or tax advisor for specific guidance.
I am applying for a nonprofit private school. No one owns the school. Who do I list as an owner?
Like an earlier person wrote, I have taken draws from my company on a sporadic basis – not under a W2, but under a 1099, which my business (“FCA”) already filed with the IRS. In other words, even though I own the company, I would be classified as a 1099 contractor. However, in order to satisfy the repayment provisions of the PPP, I was planning to pay myself as a W2 employee for the 8 weeks following receipt of the loan to avoid any question that it be classified as payroll. So my question is, can my business still apply for the PPP loan as I planned?
Second question: I have another business (“TSI”) that also paid an outside contractor on a 1099 basis (1099 already filed with the IRS, as with FCA). FCA and TSI are affiliated by virtue of common ownership (me). Moving forward, I am planning to shut down TSI and wish to pay the outside contractor under FCA. Can I use the 1099 from TSI as proof of payment (I’m not even sure I have to show such proof of payment at this early stage of application), and then pay the outside contractor as a W2 employee for the 8 weeks following the loan to satisfy the repayment provisions of the PPP (much like I was planning to do for myself) – even though the payments would be made by the affiliated company (FCA), not TSI?
Should I just get the application process going now and wait for further guidance, or should I just hold off on doing anything for the moment? Thank you for any help and guidance you can provide me.
Hi Jay, realizing that some of these rules have changed over the course of the last few weeks, here are my comments based upon my understanding of having lived with the legislation.
1. If you haven’t been paying yourself as an employee, collect any information you have available that would indicate that you have been paying yourself. That could include the tax forms you would file that reflected the 1099 income, they will likely need your P&L, income statements, and expense statements for the past 12 months to make your application.
2. You cannot claim any independent contractors are part of your payroll. They are able to apply for PPP funds themselves.
I hope that helps.
I’m having a hard time understanding why payroll tax is excluded from the forgiveness amount…Federal payroll taxes are not minimal and due within 3-5 days after payroll is distributed and if a business has to pay those out of pocket how does this program make any sense? Where is the actual relief for the business?
Michelle – The SBA discussed this in more recent guidance. You’ll find it in this document: SBA supplement to the Interim Final Rule
The Application for the “Paycheck Protection Program”, question #6 asks “Within the last 5 years, for any felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation (including probation before judgment)?
My concern about this question is the part that says “any owner of the Applicant” The company i am filling the application out for has a silent 16% owner who pleaded guilty to a felony. Is the client still eligible to apply? How do i answer the question Y / N and what legal backing do I stand on if NO?
I’m sorry we can’t give legal advice for individual situations.
As part of the application we must include all 20% shareholders; in our company we only have one such principal shareholder. Our bankers tell us that we need to include additional shareholders to demonstrate that we can account for 51% ownership in 5 or fewer entities, which we can. But given that each entity holds less than 20% and are not considered principals, do I really need to list them? I have not read this requirement anywhere, so hoping you can tell me this is not the case and we only need to list the single 20% shareholder on the supplemental application
BK – I can’t comment on what your bank is requiring here other than it probably falls under the SBA Standard Operating Procedures for the 7(a) program under which these loans fall. You can read those here: https://www.sba.gov/sites/default/files/2019-02/SOP%2050%2010%205%28K%29%20FINAL%202.15.19%20SECURED%20copy%20paste.pdf
I am in Louisiana, if I get the PPP money now but still can not open my store and get my employees back to work till the stay at home order is lifted on April 30, when do I have till to use the PPP money? I saw it say the money has to be used within 8 weeks of receiving the money but we can not go back to work until April 30?
Gregory – We wrote this article about PPP forgiveness that should help: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
If you receive the PPP loan and have 40 employees can you still have around 10 people work from home or do other duties for your business while getting the funds to pay their payroll ?
What duties you have your employees perform is a labor law question that we can’t comment on. If your business is not operational, however, it appears there is no reason you cannot pay your employees not to work. Please be sure you read this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I am a small LLC. My partner and I both have small distributions. I just received word from my banker that the distribution will not be covered under the CARES Act. Even though, as an LLC, we do not pay taxes on this distribution, we do pay taxes on our W2 income. Why could we not ask for the W2 income to be considered by the CARES Act.
Betty,
I don’t know why he wouldn’t suggest applying for PPP for W2 income.
Do S corp profits count towards the PPP
Jason – I’ve answered this several times in other comments. Look for the comments on distributions and K-1 profits.
I’m a small business owner considered to be an essential employer for service automotive parts. However because a large portion of our business may not be deemed as essential. With this being said we laid off nearly 90% of our staff a couple weeks back. 1. Do we need to call our employers back to work now to qualify? 2. Or do we pay then to stay home until needed to get them off unemployment. If you answer to question 2 is to pay them but don’t need them to report, when should these payments begin.
We’ve written about that as best as we can (absent further guidance from the SBA) in this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
What compensation documentation does a small business S corporation need to provide to allow individual shareholders/stockholders to receive a benefit, if any, under the PPP?
Has it been decided to use 2019 figures as a reference for payroll or the preceding 12 months?
I’m not sure I follow your first question. Are they getting payroll? If not it’s not likely they qualify. See my response to other comments about distributions.
The SBA and Treasury seem to be providing the choice of either preceding 12 months or 2019 except for self-employed Schedule C filers.
If i apply for the loan and right now business is bad no work at all can i send my employees home and pay them with the money from the loan or do i have to keep them at work ? There would be no point to have them at work when there is no business plus where i live it’s on a stay at home order . I just need some clarity
That seems to be the intent Heather – to keep employees on your payroll even if they are unable to come into work.
I am an independent contractor and have essentially been “let go” until after the crisis is over. I may do a small percentage of my previous work – am I still eligible to apply?
In addition, are the funds from the ppp paid to independent contractors such as me, subject to the forgiveness feature of this program provided we return to work?
PS – great article
1099 contractors who file Schedule C can apply. See this more recent article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Do I get a paycheck protection loan if my business is still open but slower and may need to reduce employees,
Brenda, The purposes of PPP is to keep employees on the payroll. You can apply but keep in mind your loan forgiveness will depend on employment levels. There is an opportunity to rehire employees to qualify for loan forgiveness. I realize this is confusing you may want to read the section above on How Do I Get Loan Forgiveness? –
I am 1099 contractor and my boss who can’t claim me on her PPP loan as an employee wants her three employees to apply for the loan. She wants us to apply for the loan since she can’t pay us right now and keep working for her. We have some work but not a lot. Do we as independent contractors keep working for her if she can not pay us?
Great question Laura. That seems like a labor law question though and I haven’t seen it addressed by the SBA.
I have a trucking business with only 3 drivers I issue them a 1099 at the end of the year. I pay them weekly as full time employees. . Do I qualify for the payroll protection?
Although you qualify for a PPP loan, because you pay your drivers payroll is reflected in a 1099, you may not include them in your payroll calculation. You can count the payroll you pay yourself.
What about if you are self employeed and still working for a Trucking company? Can you still apply for PPP loan?
Tina – This article may help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Are wages for part time employees covered in the payroll protection program – rules refer to full time employees’ salaries only. We have a business that employs 70 plus caregivers, many of whom work between 10 and 30 hours/week. We also have four full time staff and many caregivers that consistently work at least 40 hours.
Pat – Do you pay them via 1099 or W2s? It is our understanding that you can include W2 employees in your payroll calculation but not 1099 contractors. The section above where we talk above about What is Payroll is based on the legislation and final interim rule. We are not able to provide legal or financial advice or specific situations and recommend you talk with your accountant or attorney.
Hello,
We have a winery and have 18 employees. Since we had to close our doors I only kept 2 of my salaried employees on and 2 part-timers to help with shipping orders and had to lay everyone else off. We did already apply for the ppp loan Friday, if we get it, Does this mean I have to bring all 18 employees back onto payroll? Since we are closed though I won’t have work for them, so would they be getting paid to not work, while The others I kept on are working? Or can I increase salaries for those actually working to meet the % of the loan that needs to go to payroll to be considered for forgiveness? For forgiveness to be considered how much of your actual headcount comes into play if we just simply don’t have the work to bring everyone back? I’ve called all employees also to let them know I might be able to bring them back and some want to stay home on unemployment because they say they will be making more (with that extra $600/week) so not too sure what to do there. Thanks so much for your help.
Jenny – We wish we could advice. The only guidance we have to far on questions like yours is the actual legislation and the Final Interim rule from Treasury. Unfortunately we don’t have an answer to your question about employees who do not want to come back to work. Here’s what the PPP Factsheet from Treasury says. You may want to let your Senators/ Representative in Congress know the confusion you’re facing here as no doubt additional rules will be written. ” How much of my loan will be forgiven? You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.
Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
Do I have to have people actually working in order to restore the payroll to qualify for loan forgiveness ? I own a daycare and employ 19 people. A few weeks ago I told them to file unemployment which they have been collecting. Thank goodness they are getting paid unemployment as well as $600 additionally which ends up being more than their regular pay. Also am I going to negatively impact their ability to receive that extra $600 weekly unemployment by putting them back on the payroll? Should I wait until we are able to open again and do I have to wait until we are able to open again? Am I even able to put them back on the payroll before we are able to open again? Our state has a stay at home order until at least April 30 and I am guessing it will be even longer. Thanks so much for your time.
Mary K – there are many questions like your that haven’t been addressed in the guidance from the SBA to date. I suggest you read our new article on that topic and then get advice from a tax or legal professional.
How to Apply For Forgiveness for Your Paycheck Protection Program Loan
we have the same problem…. The extra 600.00 per week on unemployment! our workers dont want to come back if they will loose that 600.00 plus unemployment. They will be making more not to be on payroll!
I am self-employed and receive 1099 income sporadically and quite unevenly throughout the year. I don’t pay myself a set salary, but take regular draws from my net business income to support my family (like any regular employee does with their paychecks). Any idea how forgiveness approval would work for people like me? Bank statements will show my usual monthly draws, but there are no “payroll filings” (I pay self employment tax on my 1040, calculated on Sch SE once a year). “Proof” of the proper use of the loan seems tricky… thank you!!
It is tricky Melinda and we don’t have guidance yet on your specific question yet from Treasury or the SBA. There is a new application that is supposed to come out on April 10th for contractors and self employed. Hopefully it will provide more guidance. In the meantime, you may want to let your Senators and Representatives in Washington know how you are finding the application confusing as more rules are likely to be written to clarify these kinds of questions.
Can i hire my accountant to apply for this lian? Do younknos how much this will coadt me?
Do employees have to come back on payroll if we’re granted the PPP? Do they have a choice to stay on unemployment?
Reduced headcount may affect the ability to get full forgiveness of a PPP loan. We recommend you read our newer article on this topic and consult with your legal or tax advisor for advice specific to your situation: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Great article, thanks! I have 5 full-time people in a property mgmt company. 4 of the 5 are 1099. What are we supposed to do, lay them off so they can apply and then ask them to work? Why on earth would they exclude 1099 from payroll? There is no incentive for the 1099 to even work? We need them and revenues are down as tenants cannot be evicted. SBA at our rescue again!
Craig – that’s a good question that doesn’t seem to be thought through here. You may want to share your situation with your elected officials in Washington.
Can i hire my accountant to apply for this loan? Do you know how much this would cost me?
Do temp employees a company hires frequently from a tem agency get counted towards the 500 size limit that a company can not exceed.
Second question: Everything else being equal: Firm A employs 480 $250,000 compensated professionals and business dropped significantly. Firm A employs 1250 low wage earners (say all in $35K) and live paycheck to paycheck. Is it true Firm A would qualify for the full 10 million loan and Firm B would not qualify for anything??? And say you had 500 low earners, as per above, this firm would only qualify for $3,645,833 loan. I am a CFO/CPA and I must be missing something. Firm A, say a group of wealthy workers (not owners) would get a free loan and the workers on a paycheck to paycheck loose their job. Which will not be there after their unemployment runs out because the company could not hold out for things to return to normal. I must be missing something.
To clarify – firm B is the firm with the low wage earners.
You raise important questions and we don’t have an answer. They have appropriated separate funds for helping mid to large sized businesses. These programs are falling under the SBA loan umbrella which usually helps small businesses based on SBA size standards.
Hi,
I’m an employee who just this week was told my salary would be cut. I asked the owner 3 different times about PPP and he’d convinced the program isn’t forgiven or free. I’m mystified at why we wouldn’t apply or take advantage of the funding. He said there are many calculations and it was complex. I don’t believe any of the legal or loan default disqualifications apply, but that’s my only logical answer at this point. My intuition is they’re preparing to let me go regardless.
Is there anything an individual employee can do?
Unfortunately Aaron not that I am aware of. Maybe share this article with him?
I applied for a loan before seeing that the SBA clarified the rules to not include independent contractor payments. Thus, my payroll is too high. There is no way for me to go back into the loan application to modify, so I emailed the bank to let them know I need to reduce the amount of loan requested. I have not yet heard back from them. I’m sure they must have a thousand emails to respond to . . . At this time, they have not yet requested the 941s, etc, and I’m assuming that will be sent at a later date, once I hear back from them. At that time, I am assuming I can then modify the loan requested amount if I can’t do so before then.. Do you think this is the case? I just want to be sure that we do not request more than what we are entitled to and I don’t know how to modify this amount.
I don’t know how your bank will handle it but I wouldn’t worry too much. If you applied before they had that guidance then they know the issue exists as well. You’ll have to get loan documents at some point and you can likely amend it then. Everyone’s trying to navigate this and changes frequently.
Ok, thank you. I figured I could probably just amend the loan requested once we submit the 941s, etc. They still haven’t asked for those. And ya, it’s been pretty murky and fluid. Thank you for all of your input!
Linda I had the same thing happen. I applied and counted my independent contractors before was known that I could not. Now that those provisions were put in I wanted to make adjustments – I cannot. And then boom, the money is in my account. So now what?
I have a small business that will qualify for the Paycheck Protection Program Loan. The form sent to me has boxes to check for payroll, lease / mortgage interest, utilities, and other.
Does that mean I can include these categories in my calculation of maximum loan OR does it just mean I can use these categories to support the use of the loan I get, as long as payroll is at least 75%?
Those other expenses only apply to forgiveness. They do not affect the loan amount for which you apply.
If I owe back federal taxes to IRS and I’m on an installment agreement for nine years can I still get a ppp loan
One of the requirements to qualify for PPP loan forgiveness is the business must continue to employee all the original employees. How long is the business regard to continue employing the employees once they receive a PPP loan? Is that time frame just two months from when the company is approved for the PPP loan or is the company required to keep everyone employeed the rest of the year to be able to qualify for forgiveness of the PPP loan?
David – that’s in this article:
How to Apply For Forgiveness for Your Paycheck Protection Program Loan
The taxes are from an old business and it’s personal taxes from 2005 and 2006 not business taxes the Leander said you can’t owe personal taxes but. I have a payment agreement for nine years is that sufficient
I’m a single member, LLC. Do I check LLC or sole proprietor? And can I apply now or do I have to wait until the 10th? Thanks!
Do you file Schedule C? If so here’s the article for that: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
The article you link to does not answer this question. The application for a PPP loan requires the applicant to choose what type of entity they are, but it does not say which box to check for a single member LLC that reports income on Schedule C.
If you are an LLC you check the box for LLC.
Thanks for this resource – excellent! One question: I’m a Sole Prop and an Independent Contractor. I recently moved to California from Illinois and planned to build new clients here, but that’s no longer possible – I’m in live events. I’ve filed for unemployment, but I don’t hold out hope for that happening any time soon. I plan to apply for the PPA loan and wonder two things:
1. If I have a single member LLC, do I need to wait for the April 10 deadline? All of my income is 1099 and I don’t have any regular employees.
2. How do I determine Payroll for myself? I had between $7,500-$10,000 / month in various income streams and now that’s $1,500. Is there a place for me to validate the income of the past year and then get that forgiven?
Thanks for any light you can shed on this exceedingly complex issue.
Tyler if you file Schedule C this article will help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan . Apologies we didn’t reply sooner – that guidance came out a bit late.
I am a union contractor in California does this program cover the fringes to the union if we are paying our employees even if they are not working.
Debbie, yes certain benefits may be included and paid.
Do you know when the 8-week period for forgiveness ends? I have seen some claim the 8 weeks must end by June 30th and others claim the 8 weeks must start by June 30th.
See this article Ross: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Hello, I am a single member Llc. I have not done my 2019 taxes. I had a loss on my 2018 taxes due to some big write offs. What documentation will I be able to use to give to the bank for my PPP loan that shows what I pay myself? It is around $100k per year.
Thank you!
Owen
Do you file Schedule C? If so you’ll find the information you need in this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Thank you for this article.
It seems like this line is everything:
“For sole proprietors or independent contractors, wages, commission, income, or income from net earnings from self-employment, or similar compensation.”
I am a single member LLC. I have (1) 1099 contractor that I pay a monthly payment too, but they are not a W2. We opened in November of 2018 so we actually took a loss with everything we had to invest in last year (2019). Last year I did not pay myself. Everything says put 0 in the box for employees and your net profit in the payroll box. Is this correct? What if the new profit is 0?
We are a brick and morter crossfit gym in Las Vegas with rent and other overhead costs due right now.
Do you file Schedule C? If so the more recent guidance from the SBA says if you had a loss (line 31 schedule c) in 2019 you will not qualify for PPP. You may want to look into EIDL.
Hello – we have a professional services business set up as a partnership with employees. Employee payroll calcs, I get. Partners dont get salaries but get K-1 income. Is self-employment income from K-1 (with $100k limit) ok to be added to payroll costs?
thanks,
I’ve answered this in several comments – the answer is it doesn’t look like you can.
I own a small, seasonal business with 3 employees. One is full time and 2 part time. Our “Season” [southeastern resort] essentially runs from about June 15 to Labor Day. The 2 sets of Seasonal periods .. 2/15/19 – 5/10/19 [12 weeks] and
3/1/19 – 6/30/19 [17 weeks] do not cover “Our Season” Is this possible or likely to change – or allow me to pick my 12 week Seasonal period?
Second question. What is the difference between PPP PPA EIDL ?
Michael – You can pick the seasonal period from the choices the CARES Act offers. As for your second question this article may help: COVID Relief Loans: Economic Injury Disaster Loans Vs. Paycheck Protection Loans
My wife is on my company payroll at $3 per hour. Now I moved my business to my house, can I pay my wife $35 per hour and qualify for PPP forgiveness?
Please talk to your tax advisor.
Are employment agencies that have naics code of 561320 and qualify for SBA with annual revenues under 30,000,000 but paid more than 500 employees in 2019 qualified for the paycheck protection program?
CJ – I’m sorry I can’t offer advice for a specific situation. Please check the SBA size standards in this article and if you have question talk to your lender.
Once a business applies for the PP loan r they required to pay a 40 hr workweek to current employees who normally get paid 40 hrs or can they cut their paid weekly hours to 30 hours where the employee cannot get unemployment but is receiving less pay than normal.
CG- Forgiveness is based on payroll and headcount. Please read this article: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Has there been any clarification on draws for partners (partnership)? We have two employees on salary so I think they count, but my partner and I are draw only. I doubt they include that, unfortunately, but I can hope! Thanks!
If you file Schedule C please read this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
In Dec 2019 I added a large contract doubling my payroll. If the paycheck protection is based on last years average how am I to pay the new employees? I have made payroll tax deposits for the first Qtr of 2020. Shouldn’t I be able to present these documents for proof to be able to secure enough to cover all current employees? Please advise?
James, There are many great questions about specific situations like yours but I’m afraid we can’t advise on all of them. You may want to read this article and discuss it with your tax professional: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Thank you for the article, as it answered some questions I had.
But I have a couple more questions. I am a Sole Proprietor business, and I consider myself the ONLY full-time employee. I do have 6 PART-TIME employees on payroll (NOT contractors), whom I pay via direct deposit through a payroll company. My business is considered “non-essential,” so we have all been without work since March 8. But I want to classify them as “paid time off,” because they have a special skill set and training, so I fully expect to put them back to work as soon as the “shelter in place” is lifted and our clients permit us in their buildings again.
>>On the PPP Borrower Application Form, it asks for the average monthly payroll and the number of employees. On Page 2, under “Certifications,” the 4th line we are supposed to put our initials on says the applicant is verifying to the lender the number of FULL-TIME equivalent employees.
1) On the 1st page of the form, then, do I put the average monthly payroll as both my pay AND the pay I give my 6 part-time employees?
2) On the 1st page of the form, then, do I put only “1” next to “Number of Employees,” since the other 6 are part-time?
The forms say you cannot get a loan for over $100k annually for employees, but if I put that I have “1” FULL-time employee (me), but include all 7 of our monthly payrolls, that would look like it’s exceeding $100k for 1 individual, which is not anywhere near the case.
Jane – the guidance for the self employed Schedule C filer with employees came out this past week. We summarized it in this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
There is a contradiction in the Bill v. SBA Loan Application. The SBA Application for PPP loan indicates that 2019 calendar year is the basis to calculate average payroll costs. However, the bill itself says the 12 months preceding the loan date. My business grew a lot in the last 8 months or so of 2019, so the maximum loan amount is drastically different depending on which time period is used. Is there any update on this issue?
Yes we’ve seen that too. It appears from SBA guidance that either period may be used (except for Schedule C filers who must use 2019). You may want to read the
SBA Interim Final Rule
I own a restaurant and am unable to operate in NY at the moment so I had to lay off my entire staff. I can’t have then come back to work without being able to run the business. Can I still apply?
Amie – That appears to be the intent of the PPP: to keep workers on payroll. There is nothing in the guidance that suggests you cannot pay them during the time they can’t return to work.
Hello, I have a question regarding 1099 applicant eligibility. I am a regular employee for a company whoI believe is applying for the PPP loan. Under their application I will be counted as an employee. However. I also do 1099 work on the side and am wanting to apply for the PPP for the side work that I do. My question is, can I apply for the PPP loan for my 1099 work, without it impacting my regular employer’s eligibility for the PPP loan they are applying for?
Aaron – Great question. I don’t see why not but I haven’t seen any specific guidance on that question. I’d recommend you reach out to a tax professional or your elected officials in Washington. This is a federal program so they should have staff to help answer these questions.
How is forgiveness calculated for a 1099 Independent Contractor after the 8 weeks?
We talk about forgiveness for the self employed in this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
“*For annual salaries above $100,000, use $100,000 for the salary of that individual when calculating payroll.”
Is it still applicable when calculating payroll amounts?
Yes for cash compensation only (on an annual basis).
My husband owns and runs our rental property business as a sole proprietor. Our son does all the maintenance and has received a 1099 at the end of the year for the last 8 years. Does he qualify as our employee?
1099 contractors are not included in employer payroll for PPP. They apply on their own.
Can you apply for PPP if you have not paid payroll but have been accruing it for employees with the intent to pay when funds are available to the company? This situation is specific to a company that started business in the last 2 years and has been generating income but has not paid officers (instead income has been used to pay operating liabilities and other business liabilities), but has been accruing payroll due to shareholders.
I own a single member LLC and have no employees. I only have one client and the 1099 from that client was $48k for 2019. I am not sure with the April 3rd or April 10th dates if I am considered a sole proprietor OR self employed? Any guidance would be great. Also I have a relationship with Bank of America with my business for years, but since I don’t borrow $ from them they won’t consider me for a PPP loan. What else can I do?
Do you file Schedule C Doug? If so please read this article: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
My husband and I have five LLC small businesses that we own jointly. We have one full time employee. My husband and myself do the rest of the work and we do not have a salary. We do take draws. Do we include our draws in the payroll amount for the PPP loan? If so, is there a line item on the 1040 that we should be using to calculate monthly income for my husband and myself?
It depends on whether you file Schedule C. If you do this information applies: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Hello,
I’m a sole proprietor LLC with commercial property tenants. Can I capture defaulting rent payments during the window and use loan monies to pay expenses too like utilities and association monthly payments? Will both these components be forgivable?
David, Those payment would be limited for forgiveness purposes. Please read this article and discuss it with your tax professional:How to Apply For Forgiveness for Your Paycheck Protection Program Loan
I’m an independent contractor, can you explain how or what we can do to get this loan? I’m not 100% clear on what independent contractors will need to do to qualify for this loan program.
As an independent contractor you can apply for the Paycheck Protection Program loan. You will be treated as any other sole proprietor by the SBA. You can start the application process at Nav and a lending specialist will help you make sure your app is ready and help you choose the right lender for your SBA loans based upon your needs.
I have 2 employees that are 1099 workers. What does this mean for me? Can they file for their own PPP loan with their 1099s?
You will need this information regarding your 1099 employees. You must also submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099- MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.
Crissy – Just to add to what Ty said. Your 1099 employees can apply on their own. The application for contractors is not available from the Treasury Dept yet (as of today April 3, 2020) but if you fill out our
Payment Protection Program loan form we’ll let you know as these become available.
Hi, In regards to paying rent, I pay myself rent for doing business on a property that I own. I simply write “Rent” on my check and pay myself would this count as a rent expense for my business?
Norma I’d recommend you read the SBA supplement to the Interim Final Rule which talks about owner’s rent.
If a business has delinquent payroll taxes, does that disqualify them from getting a PPP loan?
I have read the SBA guidance issued yesterday, for businesses it uses the language “from the last 12 months” in step 1 of question c- How do I calculate how much I can borrow? In the section for lenders, it tells them in iii of question b -What do lenders have to do I. Terms of loan underwriting- to confirm average payroll costs for the preceding “calendar” year. The instructions to the sample application also refer to 2019 as the period for calculation. What is the 12 month period business eases should use to calculate average payroll costs?
Kathryn, We’ve noticed this discrepancy as well. It seems based on the SBA Interim Final Rule they are giving employers the choice. But check with your lender.
Thanks for the article.
I run a business employing 15 staff. All paid weekly. I bought the company as part of the E2 (Investor) Visa application. So I am not a permanent resident. Am I eligible? The early application form that I have seen says that only Permanent Residents are eligible.
Thanks for you advice.
Jack
Jack – I’d recommend you get legal advice on this question.
In order for the loan to be forgiven it says that you can’t decrease an employees wages by more than 25%. I have an hourly worker who regularly gets significant overtime that she is obviously not getting now. I am currently just paying her regular rate. This may very well end up being 25% less over the course of these 8 weeks. Do I need to pay her more than her regular hourly rate in order for her wages to be forgiven? Thank you, this is the most informative article I have found so far. I appreciate your insight.
Theresa – Thanks for the kind words. This more recent article may help: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Gerri,
I had the same question as Theresa above and I subsequently read through the link you attached on April 19th, but it did not provide any clarity on the topic. Do you have any additional thoughts on her comment as follows:
In order for the loan to be forgiven it says that you can’t decrease an employees wages by more than 25%. I have an hourly worker who regularly gets significant overtime that she is obviously not getting now. I am currently just paying her regular rate. This may very well end up being 25% less over the course of these 8 weeks. Do I need to pay her more than her regular hourly rate in order for her wages to be forgiven?
I wish I knew Kevin. The guidance isn’t completely clear on a variety of issues. Please let your Senators in Washington know that you need this guidance asap. We’ll keep monitoring for additional guidance as well.
Theresa,
Did you find the answer to this question. I have the same question. Thanks for your insights.
Hi – I am a 100% S corp business owner and I pay myself a salary as the only employee. Do I still qualify to apply for both PPP and EIDL .
thanks
Sam – You may qualify since you pay yourself as an employee.
I have not filed the 2019 taxes, thus I don’t have the net income for my sole proprietorship for 2019. Can i used my 2018 Schedule C as documentation for the PPP amount calculation? I also have 5 employees and I can use the 2019 payroll reports. Can I mix the years 2018 for Schedule C and 2019 for my employee payroll and and the two figures to come up withe the average payroll amount? If not what can I provide to report my sole proprietor net income? Thank you.
No the SBA is clear you must use information from your 2019 Schedule C. It doesn’t have to be filed but you must complete it. We’ve since published another article on this topic: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I own a small business (a single-member LLC). I have about 15 full time and 5 part people that work for me as contractors they are all sent a 1099 each year.
Would the wages paid to these contract workers be considered “payroll” for the purpose of the PPA, and therefore be eligible for loan forgiveness? If yes, can you provide a link or passage to something official that makes this clear?
Thank you so much !!
Contractors are not included in your payroll. It’s in the SBA Interim Final Rule.
My wife and I have an LLC with 2 full time employees. We are both 50% members and do not take a regular paycheck through payroll, we only take draws. Are we eligible for assistance for the loss of our income or just for the employees on payroll? Thank you for your help!
Mike – do you file Schedule C? If so this article should help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I have a contractor who invoiced me 2x monthly on her personal LLC instead of being a straight 1099. Would this qualify towards my payroll expenses?
Contractors are not included in your payroll.
Thanks for the thoughtful article. So I have an LLC which is used to run my consulting business. All of my income is 1099 consulting income. In my tax filing for 2018 I made more than 100k and I haven’t file yet for 2019 and plan on filing anytime soon but my 1099 income was also more than 100k. This year my income has been hit hard and most of my clients have either stopped working with me completely or put my assignments on hold until they open shop again in a few months. A few questions:
1) If I’m reading this correctly I’m able to borrow about $21k and have it forgiven. Is this correct?
2) Do I need to file my 2019 taxes prior to getting the loan or prior to having the loan forgiven?
3) My wife is a yoga instructor and was making around 2-3k per month. Her classes have been completely stopped. She has her own LLC. Is she able to also get a loan based on her monthly 1099 income?
4) while I understand I can only get 2.5 months of income forgiven, can I get one of these loans for more than that to help my business in these rough times?
Do you or your wife file Schedule C? If so this article will help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Emergency advice needed!
Every single job I had on my calendar for 3 months has been canceled.
I am a photographer specializing in event and portrait photography for the Los Angeles business community.
I’m not certain if I’m a small business owner or self-employed. On my W9, the Federal tax classification that is checked is “Individual/sole proprietor or single-member LLC” (I do pay a LLC fee of $800 per year to the California Franchise Tax Board). My business is only me.
This uncertainty makes it unclear how I can participate in much needed emergency funds.
I make less than $50, 000 per year giving myself distributions and my wife receives Social Security. We are both over 65.
What agencies should I turn to?
What do I qualify for… unemployment benefits, a grant, a loan, a one-time check??
Any information or advice would be greatly appreciated!
Do you file Schedule C? If so this article will help as far as filing for PPP goes: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
However, unemployment may prove the better option. You’ll have to compare the two.
Hello, so my husbands job still has his employees working however the owners are planning to apply for the payroll protection and keep the employees working from home. Is this allowed? They are saying he is going to keep his employees working and just keep the money. Is this possible? Are there consequences?
Tara, I am in the same situation. We’ve not missed a day of work. I believe the owner is also planning on requesting reimbursement for our wages. Free labor. I don’t believe this is how it was intended to work.
I think this is one of the clearest explanations the CARES act PPP for self employed I have found in the past few weeks! Thank you!! I am Self Employed and this is all very new to me. Here are few questions I still have or would like clarification on. 1- Lets say for ease I made 12000 a year, 1000 a month.. Does this mean I could pay myself that $1000 a month as “Payroll” and not have to pay it back with the forgiveness plan? 2- When it says mortgage and utilities, does this apply to my home mortgage and utilities since I don’t have a separate business location. (I don’t write off a business office in my home. Does that make difference?) 3- April 10 is the date for self employed to apply. Do I have to wait to fill out the forms and only send them in after the 10th or can I send them in and they will be addressed only after that day has passed? 4- Can I also apply for PUA if NC ever sets it up? Or is it a one or the other kind of thing? Thanks Again for your time answering these questions!!!
Beth – Thanks for the kind words but we wrote a new article when the guidance came out for the self-employed. You will find it here: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Thank you for your article,
I own a small S corp with two employees and about 16 independent contractors.
Should I include the independent contractors in the Average Monthly Payroll calculation? Or should only the two W2 employee salaries should be calculated?
Thanks!
Independent contractors should not be included in your payroll calculation. Only employees.
Which program should I apply for if I own a single-member LLC with no employees (pass through entity for tax purposes)?
Follow up: Does the single-memeber LLC with no employees have to take any draws to be eligible? Thanks!
Do you file Schedule C? If so then this article will help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
You mean EIDL for PPP? This article may help: COVID Relief Loans: EIDL Vs. PPP Loans
I get a 1099 Misc do i qualify?
This article should help Angela: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I have two (2) businesses that I am the Sole Managing Member (the 2 businesses are not similar in nature or NAICS codes). Both businesses have taken a significant loss. Can each business/EIN be eligible to apply?
Thanks for the detailed article
Tiffany – hopefully this article will help: Can I apply for PPP or EIDL for multiple businesses?
I have a seasonal business that opens every year on April 1st. How do I get started to file for help through the CARES Act? I did file taxes this year.
nobody answer John’s question- but I own a LLC with one other member. But more important all 1099 workers that we are dependent on for our business operation. Will the act protect me and the contractors. WE have all the consistent documentation. 2109/2020- Nobody answer that question with any clarity.
John SotirakisApril 1, 2020 at 3:13 pm
Item included in payroll, “Payment of State or local tax assessed on the compensation of employees;” Does this mean State and local withholding for income taxes and for disability payments?
Item excluded from payroll, “Certain taxes imposed or withheld during the time period” Is there any contradiction with the above included taxes in terms of state and local taxes imposed or withheld or does the exclusion just apply to federal withholding, FICA and Medicare taxes
Thank you for your detailed and crystal clear article
Richard – I wish I could be crystal clear! The guidance has been coming out over time so we’ve had to try to update as we get new information from the SBA. I think the payroll tax question should be addressed in this document: SBA supplement to the Interim Final Rule
It’s also mentioned in this newer piece: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
Hope that helps!
I am a physician who owns a medical practice. I am a W-2 employee of the practice earning in excess of $100,000 and my cosmetic surgeon is a 1099 employee who works solely for the practice and earns over $100K. I’ve been told that employees earning over $100K are not covered at all under PPA, but other info suggests that we would be included for wages up to $100k. Which is correct?
Ross – Yes you can include cash compensation up to $100,000 plus certain benefits. Review the part in the article under the heading: Are Employee Benefits In The $100,000 Salary Cap?
My question is about the forgiveness part for sole proprietors. I work as a draftsman and project manager in construcion, with my own FEIN. I understand that I’ll take the Sched C Line 31 x 2.5 for the loan amount, potentially getting 80% of that forgiven. My question is how can I understand how much will be forgiven. There is no doubt that jobs are being delayed, or outright cancelled now, but that won’t necessarily affect my income in the next two months. Because of how long the construction track takes, I am normally working now on jobs being built three months from now but am instead closing projects.
In order to have forgiveness, do you have to show less monthly sales or ??? I don’t understand how to make that calculation. ;?
PPP forgiveness is based on how you spend the funds in the 8 weeks after you get the loan. Lost sales is not part of the equation. This article should help: How to Apply For Forgiveness for Your Paycheck Protection Program Loan
And this one is for self-employed individuals: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I am a sole proprietor with employees. I do not pay myself a regular monthly salary, since all the monthly net profit is my taxable income. Will the amount of the Paycheck Protection loan be based just on the wages I pay my employees or can I also include my average monthly net income (up to 100k annualized)? Thanks so much.
Sebastian – this article should answer your question Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
I see rent listed on the application. Does rent figure into the calculation for the amount of the loan or is it limited to payroll and payroll related expenses
Rent can be covered but it is not part of the calculation of how much you can qualify for. The legislation is primarily to keep employees on the payroll. Treasury has said that “due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.”
If they amount you are given is based on your payroll, how do they figure the amount loaned to an independent contractor with no employees or payroll? I’m a freelance video producer — I subcontract other 1099 freelancers, but don’t have any employees – so how do they calculate how much they loan me?
You do not include 1099 contractors. They apply on their own. This article may help: Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
Hi – I am a 100% LLC business owner and pay myself a salary of about $60K a year, and also take consistent draws of about another $2K a month. Under the PPP, can I also include my draws? Wondering if we know how this would work. Last, how certain are we that someone could apply for the $10K Advance EDIL, and also the PPP. I am reading that you can as long as there for different purposes. For example, someone could use the EDIL to pay for contractors that they use to run their business. Am I correct in these thoughts?
We do not have an answer on the draws. That guidance has not been provided. Currently, it appears you can get both EIDL and PPL for different purposes. (No double dipping.) The PPL application will ask you whether you have received an EIDL.
It does not make sense. I own a LLC with my husband. We both receive distributions, but because we are not an S corp, we do not receive salaries and have no guaranteed payments. So, why should the LLC member who receives a salary be treated differently than the LLC member who receives distributions? In addition the language in the regulation on not including 1099-MISC into the payroll calculation directly contracts the CARES Act. The statute trumps the regulation.
I agree it’s very confusing. I’m quoting here from the Final Interim rule that came out 4/3/2020 from Treasury. I’d recommend you talk with your elected officials in Washington and share your concerns. No doubt more rules are coming!
I would venture to guess that LLC members receiving draws or distributions will be able to participate. Many Republican and Dem donors have LLCs (attorneys, accountants, consultants) and they’ll insist on being included.
Item included in payroll, “Payment of State or local tax assessed on the compensation of employees;” Does this mean State and local withholding for income taxes and for disability payments?
Item excluded from payroll, “Certain taxes imposed or withheld during the time period” Is there any contradiction with the above included taxes in terms of state and local taxes imposed or withheld or does the exclusion just apply to federal withholding, FICA and Medicare taxes
Thank you for your detailed and crystal clear article
What you quoted is from the legislation and we have not seen specific guidance on your question yet. As soon as we do we will post it. Sorry we can’t be more specific yet John!
We are wondering the same thing as John. We are LLC and pay independent contractors. I’m so confused how we are supposed to calculate our amount?
Sorry for the late response – we’ve been inundated with questions. You do not include contractors in your PPP calculations. They apply on their own.
I found an article by Forbes stating the state and local tax assessed would pertain to state unemployment cost.
Thank you for the article.
I own a small business (a single-member LLC). I have 12 people that work for me as contractors (i.e., they are sent a 1099) each year.
Would the wages paid to these contract workers be considered “payroll” for the purpose of the PPA, and therefore be eligible for loan forgiveness? If yes, can you provide a link or passage to something official that makes this clear?
Thank you in advance for your help.
I would so appreciate the exact same info that you have requested John. Thanks!
Same question here!
I have the same question, but I don’t see that anyone has replied to this comment.
John – the Interim Rules that came out yesterday specify that you will not count contractors you pay by 1099 in your payroll. They can apply on their own. I updated the article last night to reflect that latest information.
How do we go about compensating the independent contractors if we want them to work for us again, during our 2 month period, if they receive the PPP and we receive it as well? Can we pay them, and then they pay us back with money from their PPP loan (which should then be “forgiven”)? The only way my IC can work if he works for other doctors/business owners (such as myself).
Unfortunately I don’t have an answer to that Amber. It does seem to have created an odd situation for business owners like yourself.
But the CARES Act says the opposite. The Statute trumps.
I am on unemployment and my employer got the ppp loan and is trying to pay me less then what I make on my 52 week base of 2019 and also what I have worked in 2020 based on the 12 weeks I worked and it is better to stay on unemployment also this is only good for 8 weeks can they do anything about it
Josh,
We’ve written a new article about unemployment. It includes some resources you may find helpful: FAQs about unemployment for the self-employed
What about people who own multiple businesses? Can this be applied for both? Let’s say someone owns a dental practice but also owns a restaurant.
The SBA has affiliation rules that may affect your ability to get a loan for multiple businesses.
Can you apply for just one of multiple businesses?
This article should help: Can I apply for PPP or EIDL for multiple businesses?
My gross payroll for 2019 was $551,930, my tipped employees claimed $198,118 in tips received. For the calculation, do I use $551,930 (without claimed tips) or $750,048 (with claimed tips)? While we are closed, I would be paying my tipped employees their pay plus an average of what tips they would have made, correct?
Michele – Absent further guidance from the SBA or Treasury the only information I can share right now is what the legislation says. I’ve included language from the legislation in the article. In addition, it says: (4) TIPPED WORKERS.—An eligible recipient with tipped employees described in section 3(m)(2)(A) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)(A)) may receive forgiveness for additional wages paid to those employees. I truly wish I could be more specific. As new information comes in we will continue to update these articles!
Here’s an update Michele. The Interim Final Rule came out yesterday (4/2) and included the following language:
What qualifies as “payroll costs?”
Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips);
Hope it helps.
We have temps that work 40 to 50 hours and week through an agency that we pay the addition of 35 to 40% for their workers to that agency. How do we get reimbursed. Who would be filing the ppp application
Thank you for the information. As a contractor we have many 1099 subcontractors, we those be considered “employees” or does “employee” mean only those receiving W2s?
I am in the same situation and wondering if our workers that are paid with 1099’s count for my business payroll ?
As the employer, you do not include contractors for whom you issue 1099s in your calculation for payroll. They are supposed to apply on their own.
Thanks for the super clear article. As a sole proprietor, it appears that your explanation says that my income, even though not employee payroll per se, is a qualified “payroll” expense for this loan and thus for the Loan Forgiveness. Is that correct?
In the CARES Act, it doesn’t seem to be so clear. I just wanted to be sure. Thanks. Here’s the CARES reference I found :
SEC. 1102. 7(a) LOAN PROGRAM. // (d) Allowable Uses Of Program Loans.— // (1) IN GENERAL. //
(A) payroll support, including paid sick, medical, or family leave, and costs related to the continuation of group health care benefits during those periods of leave;
(B) employee salaries;
Yes sole proprietor income (not to exceed $100,000 annually) is included. Have you tried out our new calculator? The SBA Cares Loan Act calculator will help you understand what you may qualify for.
I have s small business I opened in January this year, it’s an online but I sell 80% locally through new type, selling out of other businesses. My products are bath and body, since it is new I did not do taxes yet and I am a sole proprietor and pay myself. Thanks for any help on if I qualify or where to turn to. I also have not setup a business account and see every bank requires you to have a business account with those banks to be able to do anything.
Melanie – Are you trying to get a PPP loan? I updated this story last night with the latest from SBA. But keep in mind the application for self employed individuals is not yet available. If you fill out the
Payment Protection Program loan form we will let you know when they become available. In the meantime, I’d recommend you read this article so you understand the differences between the two programs that may be available: COVID Relief Loans: Economic Injury Disaster Loans Vs. Paycheck Protection Loans
I am trying to apply for the loan that will help my business, since I started it in January with cash on hand, I DID NOT have a business account under any bank yet, so because I am a sole proprietor I was wondering how do I go ahead and apply when my local bank tells me I need a business account with them to apply for the PPP? The government did not make it easy for us who do not have business accounts with our banks as sole proprietors!
Melanie – your bank may require you to have a business bank account but that doesn’t mean every lender will. You can look for other lenders, including those we are working for at Nav. However, if you are self-employed and file Schedule C you may have trouble qualifying at this time as the IRS hasn’t issued guidance for Schedule C filers who started their business in 2020.