For each employee, follow the same method that was used to calculate Average FTE on the PPP Schedule A Worksheet. Sum across all employees during the reference period and enter that total on this line. The calculations on lines 11, 12, and 13 will be used to determine whether the Borrower’s loan forgiveness amount must be reduced based on reductions in full-time equivalent employees, as required by the statute. Specifically, the actual loan forgiveness amount that the Borrower will receive may be reduced if the Borrower’s average weekly FTE employees during the Covered Period was less than during the Borrower’s chosen reference period. The Borrower is exempt from such a reduction and should skip lines 11 and 12, if any of the three criteria listed on PPP Schedule A under Full-Time Equivalency (FTE) Reduction Calculation has been met.

The Bottom Line on Applying for PPP When Self-Employed

The SBA has established some very specific guidance regarding the use of PPP loan proceeds for those with income from self-employment who file a Form 1040, Schedule C. Owner-employees with less than a 5 percent ownership stake in a C- or Scorporation are not subject to the owner-employee compensation rule. Finally there is an optional PPP Borrower Demographic Information Form.

Also, you must exclude any qualified sick leave or family leave amounts if you claimed a credit under sections 7002 or 7004 of tax concerns when your nonprofit corporation earns money the Families First Coronavirus Response Act (FFCRA). If you’re self-employed and qualified for a Paycheck Protection Program (PPP) loan, then no doubt you are hoping you can get as much of it forgiven as possible. In the instructions for each form, see the section titled “Documents that Each Borrower Must Submit with its PPP Loan Forgiveness Application” for additional details. All loan offers and qualifications require credit approval and are subject to change with or without notice. Everything you need to know about SBA 7(a) loans, all in one convenient location. They must provide the Schedule C, along with a 2020 invoice, bank statement, or other evidence to establish that they were in operation on or around February 15, 2020.

First Draw PPP Loan If You Have No Employees

1. First-draw PPP loan borrowers that want to use the new gross income calculations rules will now use SBA Form 2483-C.
2. This amount reflects the loan forgiveness reduction required for salary/hourly wage reductions in excess of 25% for certain employees as described in PPP Schedule A.
3. If you applied for PPP as a self-employed individual using net profit, you may discover you could get a larger loan by using gross income.

Under the CARES Act, utility includes payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access. The clock for spending your PPP money starts the day your PPP loan funds are disbursed, or deposited into your bank account. When the PPP Flexibility Act passed in June 2020, the covered period was changed to 8 or 24 weeks.

(a) they were in operation on or before February 15, 2020, and(b) they have self-employment income, and(c) their principal place of business is in the United States; and(d) they filed or will file a Form 1040 Schedule C for 2019. This amount cannot exceed $29,167 for NAICS code 72 borrowers and $20,833 for all other borrowers. We encourage you to review the SBA guidance carefully and discuss it with your tax professional, attorney, or financial advisor to clarify how it applies to your business. Read more about new PPP loans included in the Economic Aid Act (the delivery invoice template “stimulus bill”) here. There have been a number of questions answered by the SBA, and they have been gathered in the Interim Final Rule published January 19, 2021. There are still unanswered questions, however, so more guidance may be coming.

FTE Reduction Safe Harbor 2:

Instead, it may make sense to skip ahead to the PPP Schedule A Worksheet now on page 4 of the application. You’ll need to calculate information about employees’ hours and wages in order to plug that information back into the application. If you’ve already applied for forgiveness for a previous PPP loan or are looking at older versions of forgiveness applications (or articles based on the previous ones) you’ll see a reference to the fact that you must subtract your EIDL advance (grant) from your forgiveness amount.

FAQ: Paycheck Protection Loans and Economic Injury Disaster Loans

The CARES Act became law March 27, 2020 and in the first round of PPP, self employed business owners did not get instructions on how to calculate payroll right away. When the guidance did come out, it did not include instructions for businesses that weren’t in business in 2019 but were in business by the deadline of February 15, 2020 required to qualify. Keep in mind that if you already qualified based on the maximum owner’s compensation of $20,833 based on net profit on your Schedule C there is no need to do anything. (For second draw loans to businesses with a NAICS code starting in 72, the maximum amount based solely on owner’s compensation is $29,167). Enter the amount of business utility payments paid or incurred during the covered period, for business utilities for which service began before February 15, 2020.

SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. From April 3 through April 14, 2020, the Small Business Administration (“SBA”) has guaranteed over one million loans under the Paycheck Protection Program (“PPP”). Over 4,600 lenders throughout the U.S. have been tasked with serving as conduits for distributing $349 billion in federal loan funds made available for the PPP, with approximately $296 billion dollars having already been approved for distribution in eleven days. The average PPP loan amount so far has been $239,000, though the vast majority of approved loans (70%) have been for $150,000 or less. Contact your lender if you have already submitted a loan application based on Schedule C net profits and have what is the meaning of debit questions about the new calculations. If the partnership has employees, a payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the partnership was in operation and had employees on that date.