The new IFR removes certain admission restrictions and allows more small businesses to qualify for PPP loans, including (a) small business owners who are late or late with federal student loans, and (b) small business owners who have been convicted in the past year, who pleaded guilty or began some form of probation or probation for a crime that did not involve financial fraud. A five-year review always applies to financial crimes such as fraud, corruption, embezzlement or inaccuracy in a loan application or financial assistance application. The SBA and the U.S. Department of the Treasury have taken over the definition of “labor costs” in the CARES Act, which provides in a relevant part that “any remuneration or income of a sole proprietor or independent contractor that is a salary, commission, income, net income from self-employment or similar remuneration” constitutes a “labor cost” that allows sole proprietors to obtain the most PPP loans. by earning their gross income (maximum $100,000). instead of net profit. The new IFR allows a List C applicant who has not yet been approved for a PPP loan for a first draw or a second draw to choose to calculate the owner`s share of remuneration in its salary costs based on the following factors: Significantly, earlier this month, the Small Business Administration (“SBA”) introduced new PPP rules in a new provisional final rule (the “New IFR”). entitled “Temporary Changes to the Business Loans Program”. published; Paycheque Protection Program – Revisions to the Calculation and Eligibility of the Loan Amount” and in a new Frequently Asked Questions (the “new FAQ”). The new IFRs and FAQs (collectively, the “Revised Rules”) reflect the changes made to the PPP by the Consolidated Appropriations Act, 2021 (CAA) and include the Biden administration`s guidelines for creating more PPP funds available to Independent Schedule C filers by basing the calculation of PPP loan amounts on gross income rather than net income. McCarter can help you determine if you qualify for a PPP loan, complete the loan application, gather the required documents to provide to the lender after the application is filed, and maximize credit forgiveness.
Last year, self-employed individuals who operated their business without employees were eligible for a Paycheque Protection Program (PPP) loan of approximately 20.8% (2.5 months divided by 12 months) of their annual net self-employment income in 2019, which does not exceed $100,000, or no more than $20,833 (20.8% capped at $100,000). Since the calculation of net income for self-employment is done after deduction of fixed and other operating costs that a small business must cover to stay afloat, the annual net income from self-employment can often be a very small number, resulting in an extremely small PPP loan amount. For example, an annual net income from self-employment of $5,000 would qualify for a PPP 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 individual tax return on IRS Form 1040 (Schedule C) have not bothered to apply for PPP loans. In addition, 70% of the unpaid sole proprietors belong to women and minorities – underserved groups have tried to be supported by the PPP. .