Question: How Do Independent Contractors Get PPP Forgiveness?

How do sole proprietors get PPP loan forgiveness?

Using the OCR, sole proprietors can claim forgiveness based upon 2019 net profit.

It is not necessary to document any payroll.

Borrowers who received loans prior to June 5, 2020, may elect to use the 8-week forgiveness covered period and can claim eight weeks’ worth of OCR..

How is PPP calculated?

PPP loans are calculated using the average monthly cost of the salaries of you and your employees. … If your business existed prior to 2019, you should use your total payroll expenses from 2019, and divide the annual total by 12 to arrive at a monthly average. If your business was new in 2019, there are further nuances.

How do self employed get PPP loan forgiveness?

To apply for PPP loan forgiveness, self-employed individuals can use the simplified Form 3508EZ. As long as you don’t have employees on payroll, this form applies to you. If you do have payroll expenses, you can use the standard Form 3508.

How do I account for PPP loan forgiveness?

In addition to recording a forgiven loan, you may also need to write off accrued interest that is forgiven. To do this, debit your PPP Loan Payable account and your Accrued Interest Payable account. Then, credit your Debt Forgiveness account. Say 100% of both your PPP loan and accrued interest is forgiven.

Who qualifies for PPP forgiveness?

You must maintain at least 75% of total salary. If the employee’s pay over the 24 weeks is less than 75% of the pay they received during the most recent quarter in which they were employed, the eligible amount for forgiveness will be reduced by the difference between their current pay and 75% of the original pay.

Can I apply for both PPP and Eidl?

Yes, you can apply for both. But you can’t use the funds from both loan programs for the same purpose. For the most updated and complete information, read the FAQs on the EIDL and FAQs on the PPP. For more information, visit The SBA has a hotline to help answer questions 1-800-659-2955, 7 days a week from 7:00a.

Should I apply for PPP?

Most small businesses should be able to qualify for the Paycheck Protection Program. If your business is based in the U.S., has 500 employees or less, and if your business is financially affected by COVID-19, you should be eligible for the PPP loan.

CAN 1099 employees be included in PPP?

No, 1099 employees should not be included in a small business’s payroll calculations for their PPP loans. 1099 employees are considered their own businesses under the PPP. As of April 10, 2020, 1099 employees are eligible to apply for their own PPP loan.

Can independent contractors get PPP loan forgiveness?

Answer: Sole proprietors, independent contractors, and self-employed individuals who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form automatically qualify to use the Loan Forgiveness …

Can PPP be used to pay self employed?

Many of you may be wondering if you can use the remaining funds to pay contract workers. Unfortunately, PPP funds can only be used to pay W-2 employees as contractors themselves are self-employed and are therefore considered separate tax entities by the IRS.

When should I apply for PPP forgiveness?

A borrower generally may submit a loan forgiveness application any time on or before the maturity of the loan—including before the end of the covered period—if the borrower has used all of the loan proceeds.

Is there a deadline to apply for PPP loan forgiveness?

There currently isn’t a hard PPP forgiveness application deadline. … The date the SBA remits loan forgiveness to the borrower. 10 months after the end of the covered period (if the borrower doesn’t apply for forgiveness)

How do I apply for PPP loan as an independent contractor?

In order to apply for a PPP loan as a self-employed individual or independent contractor, you have to meet the following criteria:Must be in operation before February 15, 2020.Must have income from self-employment, sole proprietorship, or as an independent contractor.Must live in the United States.More items…•

How long do you have to keep employees for PPP?

24 weeksIf after the 24 weeks the PPP covers, your business’s financial situation has not improved, or the PPP funds have run out, you are able to put employees on furlough or lay them off if necessary. The employees would be eligible to claim unemployment benefits.

What documents are needed for PPP forgiveness?

Documentation Needed for PPP Loan Forgiveness Documentation verifying the number of employees on payroll and pay rates—including IRS payroll tax filings and state income, payroll, and unemployment insurance filings. Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.