Heartland Tax Solutions’ Quick to the Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is a loan plan from the CARES (Coronavirus Aid, Relief, and Economic Security Act). It is an approximately $350 billion initiative aimed to offer eight weeks of cash-flow aid to American small businesses via 100 percent loans backed by the federal government. The Small Business Administration (SBA) funds the loans. You can read the bill more here.

The Payment Protection Program applies to all small businesses. This includes:

• Sole proprietors who report income and pay taxes on Schedule C in their personal tax return.
• Independent contractors gathering 1099-MISC forms.
• Workers who perform gigs with on-call companies like Uber, Lyft, TaskRabbit and Instacart.

The only condition is that your business has been in operation as of February 15, 2020. Your business is not eligible for the program if the business began after that date.

Self-employed People

The salary of self-employed people who have no employees report income by Schedule C is calculated by net profit. Find the amount on either the 2019 tax report on line 31 of Schedule C or on the Net Profit line on the most recent income statement. To calculate the total monthly payroll costs, divide this annual net income statistic by 12. Note: When the taxable net profit reaches $100,000, divide $100,000 by 12. To calculate the size of your PPP loan, multiply the resulting number by 2.5. (Please check with your PPP Bank Partner/SBA Guidelines to confirm exact amount).

Independent Contractors

The Small Business Administration stated that the cost of an individual contractor is not part of the contracting company’s payroll costs.

Independent contractors must submit a separate application. Following the steps above, take the income recorded in Schedule C and 1099-MISC and calculate the salary and loan amount. Include the net salary (income after expenses).

S-Corporations

S-Corporation owners who earn a fair wage from payroll must assess the loan amount at 2.5 times their regular monthly W-2 income. Here are two important points to keep in mind:

• Company distributions or dividends are exempt from salary.
• Independent contractors are not part of the salary.

How do I apply?

You may apply with an SBA-backed lender for the Paycheck Protection Program

Here is the PPP Application Form from the U.S. Treasury with the information needed to submit for your bank. We advise you to submit early before June 30 because this initiative has a funding limit.

Important Financial Records

To show your payroll expenses, you must provide your salary/bookkeeping information. These include:

• Payroll tax filings
• Payroll processor records
• Form 1099-MISC reports
• Sole proprietor’s income and expenses

You can also offer bank statements should you have an inability to view certain kinds of information.