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IRA Financial Blog

PPP, Free Money And The Self-Employed – Episode 280

Adam Talks

IRA Financial’s Adam Bergman Esq. discusses the latest stimulus package, including the Payroll Protection Program (PPP) loan for self-employed individuals.

If you are self-employed and have been hit hard by the COVID-18 pandemic, we have some good news for you. On March 3, 2021, the SBA made an Interim Final Rule Announcement providing some much needed legislation to help you out. Therefore, free money and the self-employed is a hot topic this month, which Adam Bergman wanted to cover in this podcast.

The New PPP Loan for the Self-Employed

Independent contractors and sole proprietors were unable to borrow enough money because of their net income from 2019. Expenses were still there, even though revenue was way down. The SBA announcement said those who have Schedule C income no longer had to base their PPP (Payroll Protection Program) loans off of their net profit. Instead, they could use their gross income.

Gross income is calculated by subtracting the costs of golds sold from the gross revenue of the business. This does not include any expenses incurred by the business. This especially helpful for the self-employed who don’t have much (if any) net profit when they file their taxes.

Even if you have received money from the prior PPP stimulus package, you can still receive money from the last round of funding. The maximum amount you may receive is $20,833. Further, you must show a loss of at least 25% in revenue quarter over quarter from 2019 to 2020. Of course, if this pandemic has hit you extremely hard, you should look into the new loan rules. But act fast, as you have until March 31, 2020 to get this done.

How it Works

Essentially, if you need a loan of less than $2 million, you are deemed to need it. The first step is to look at your 2019 and 2020 1040 Schedule C and determine either your net profit from line 31 or your gross income from line 7. You may choose to use either amount when calculating. If this amount is over $100,000, you must reduce it to that number. If either of these number are zero, or less than zero, you are not eligible for a loan.

Next, you need to calculate your average net profit or gross income by dividing the above number by 12. You would then take this amount and multiply it by 2.5. Remember, this cannot exceed $20,833.

You would then need to include the Schedule C you used to calculate your final number with your loan application, along with a few other documents. You must also show your business was in operation around February 15, 2020.

The loan should be strongly considered if you didn’t think you had enough net income to warrant applying for a first draw loan. This free money is there for the taking if you are self-employed. It’s also important to note that you cannot receive both a loan and unemployment benefits. The loan is there to help pay yourself wages. It’s important to work with a tax professional to see if the loan option is your best bet.

Stay Tuned

The deadline is right around the corner. Make sure, if you do get the loan, that 60% of the proceeds must be for payroll and the remaining amount should be used for business expenses. If you are self-employed in any way, don’t miss this free money!

As always, thanks for listening to Adam Talks. You can find all our older episodes on our SoundCloud page. You can also check out our podcast network page for a few different shows we host. Get out there and get what you deserve.


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