New PPP rules benefit the self-employed
Last year, self-employed individuals who were operating their businesses without any employees could be eligible for a Paycheck Protection Program (P3) loan of an amount equal to approximately 20.8% (2.5 months divided by 12 months) of their 2019 annual net income from employment must not exceed $ 100,000, or not more than $ 20,833 (20.8% of $ 100,000 capped). Since the calculation of net self-employment income is made after deducting fixed expenses and other business expenses that a small business must cover to stay afloat, the annual net self-employment income can often be a very small number. , resulting in an extremely small PPA. Amount of the loan. For example, an annual net self-employment income of $ 5,000 would qualify for a P3 loan of only $ 1,042 (20.8% of $ 5,000).
As a result, many sole proprietors who report their net self-employment income on Schedule C of their personal income tax return on IRS Form 1040 (Schedule C) have not bothered to apply for PPP loans. . In addition, the sole proprietors without employees are 70% women and minorities – underserved groups sought to be helped by the PPP.