fbpx
PPP-Loan-for-Self-Employed Tax Queen

If you missed out on the original funding for the PPP loan, then have no fear. More funding has been approved! Are you ready? Let’s help you understand how to apply for a PPP loan if you’re self-employed.

If you are self-employed, with no employees, you absolutely need to qualify for this loan and its forgiveness.

Hello, free money!!

Here’s what you need to know to help you apply for a PPP loan if you’re self-employed.

PPP loan if you’re self-employed

If you have income from self-employment, no employees, and file a Form 1040, Schedule C, then you are eligible for a PPP loan if:

  • you were in operation on February 15, 2020;
  • you are an individual with self-employment income (such as an independent contractor or a sole proprietor);
  • your principal place of residence is in the United States; and
  • you have filed or will file a Form 1040 Schedule C for 2019.

How to calculate

Without employees, you calculate the maximum amount you can borrow by following these steps.

  1. Find your 2019 IRS Form 1040 Schedule C line 31 net profit. (If you have not yet filed your 2019 tax return, don’t fret, fill out the Schedule C now. You need it for the loan.) If the net profit amount is over $100,000, reduce it to $100,000.
  2. Calculate the average monthly net profit amount (divide the amount from line 1 by 12).
  3. Multiply the average monthly net profit amount from line 2 by 2.5.

In addition to your 2019 Schedule C to solidify your loan amount, you need documents to prove you are self-employed, such as a 2019 Form 1099-MISC, invoices to your clients/customers, bank statements, or bookkeeping records including a profit and loss. You also must establish that you were in operation on or around February 15, 2020, with a 2020 invoice, bank statement, or profit and loss from bookkeeping.

Documents needed

Here’s a list of documents your bank may require to show your income for the PPP loan if you’re self-employed.

PPP loan if You're Self-employed

  • Schedule C from 2019
  • Bank statements
  • Voided check
  • Form 1099MISC, if received
  • Invoices to your clients/customers
  • Proft and loss statement from bookkeeping software or financial records

 

Where to apply

If you have a business bank account or relationship with a bank, that’s your best bet. However, the bank must be an SBA lender. If your usual bank isn’t an SBA lender or aren’t accepting applications any longer, then here are some alternative options for a PPP loan:

What about forgiveness

I think you’ll like this one. With no employees, your loan forgiveness is:

  1. eight weeks’ worth (8/52) of your 2019 net profit (yes, last year—from that Schedule C we used for the loan amount);
  2. rent payments during the covered period on lease agreements in force before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C as business rent; and
  3. utility payments under service agreements dated before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C as a business utility.

For those of us who live in an RV, you most likely don’t have any rent payments. You might, however, have some utilities. Phone and internet expenses that are used for business can count on this one.

Let’s take a look at a couple of examples to help you understand.

Example 1

Loan amount. Say your Schedule C shows $120,000 of net profit. Your limit is $100,000. Divide that by 12, and your monthly amount is $8,333. Multiply that by 2.5, and your loan amount is $20,833.

Loan forgiveness. Your loan forgiveness is $15,385 (8/52 of $100,000) plus qualifying interest, rent, and utilities not to exceed total loan forgiveness of more than $20,513.

Wow!

In this example, up to $20,513 is free money ($15,385 is the minimum free money).

Yes. You read that right.

This is free money.

That means it’s money you don’t need to pay back and you can use to pay yourself.

Example 2

Loan amount. Say your Schedule C shows $50,000 of net profit. Divide  50,000 by 12, and your monthly amount is $4,167. Multiply that by 2.5, and your loan amount is $10,417.

Loan forgiveness. Your loan forgiveness is $7,692 (8/52 times $50,000) plus rent, and utilities not to exceed total loan forgiveness of more than $10,417.

In this example, up to $10,417 is free money with a minimum of $7,692.

Example 3

Loan amount. Say your Schedule C shows $35,500 of net profit. Divide  35,500 by 12, and your monthly amount is $2,958. Multiply that by 2.5, and your loan amount is $7,396.

Loan forgiveness. Your loan forgiveness is $5,462 (8/52 times $35,500) plus rent, and utilities not to exceed total loan forgiveness of more than $7,396.

In this example, up to $7,396 is free money with a minimum of $5,462.

The SBA has a resource center if you’d like to learn about all the resources available from the SBA.

If you still haven’t filed your 2019 tax return, now’s the time to get that done. In the meantime, here are 7 easy ways to reduce self-employment taxes.

Make sure you are ready to apply for the PPP loan because the funds have been approved and loans should start again today, April 27, 2020! You don’t want to miss out on this opportunity especially if your business has been impacted by the current economic situation.

RV Tax Queen

I’m a numbers person—but don’t let that scare you. I’ve been an enrolled agent (EA) since 2014 and a nomadic business owner since 2016. Because I’m a nomad myself, I know exactly how stressful life on the road can be.

Nomad Business Academy offers mini-courses on everything you need to know to run a nomadic business, from which business entity is right for you (and what a “business entity” even is) to how to navigate self-employment taxes to learning if S Corp is a good fit for you and so much more.

 

Disclaimer:

This website is for general information only and is not intended to substitute for obtaining legal, accounting or financial advice. It is not rendering legal, accounting or other professional advice. Presentation of the information on this website is not intended to create a client relationship. For specific tax assistance please consult a tax professional on an individual basis.

While I make every effort to furnish accurate and updated information, I do not guarantee that any information contained in this website is accurate, complete, reliable, current or error-free. I assume no liability or responsibility for any errors or omissions in its content.

Facebook
Twitter
Pinterest
LinkedIn

Have My Tax Write-Off Checklist Sent Directly To Your Inbox