BIG Changes to Paycheck Protection Program (March 2021) for Schedule C Filers

Hey, my name is Tre Harris and this video is going to be a quick update to the Paycheck Protection Program PPP, and this is regarding some new updates that are effective March first is for borrowers who are Schedule C filers using gross income. So, if you've looked into the PPP program before, you’re a Schedule C Filer; for example, an independent contractor, maybe you are a sign language interpreter who's a freelancer, you don’t receive w-2 wages. You received a 1099 or you could be a gig worker, for example, Uber, Lyft Doordash, or you own a small business and you work and you get income and you report it on your 1040 as a Schedule C, not a S corporation or partnership or C corporation, but on your Schedule C, this applies to you.

So, what will we go over?  We're going to go over a quick overview of what the PPP is, the priority window that ends March 9th for Schedule C filers, and we'll also look at, talk a little bit about the application itself and the forgiveness application.

We'll go through an example, just in case you're nervous about applying and we're gonna walk through and example, so you can look at it, see it. It's very simple, streamlined processes made to be quick fast and to get money into those who needed hands as quickly as possible. So, let's jump right in.

The PPP Paycheck Protection Program, what is it? Well, last year when the coronavirus pandemic hit around April of last year there was the CARES Act, you might remember the stimulus payments that we received, twelve hundred dollars, and then later in the year around December we received additional stimulus payments, around six hundred dollars. Well, with those bills was also funding for the Paycheck Protection Program. They gave money to small businesses and by small businesses that means under 500 employees. You know there were some businesses such as the Los Angeles Lakers, Shake Shack, they received millions of dollars with this PPP Program. A lot of companies received millions of dollars. So just, you're a small business if you have under 500 employees. So with that, there was funds that were allocated to these businesses, but small businesses such as Schedule C's, independent contractors, many of them didn't take advantage of it, or they couldn't take advantage of it. The reason being is for Schedule C's, independent contractors or gig workers, freelancers, things of that nature, they had to use their net income. So the total income they received minus any expenses gives you your net income and for many Schedule C's after their expensive they make very little, or if sometimes they're in a loss, so the application, the PPP proceeds was very insignificant amount. Well the big update as of March 1st is that now instead of using that net income amount, you can use your gross income to calculate your eligible PPP loan amount. So, if you've looked at this in the past and decided not to apply, please watch the rest of this video. We're going to go over the application and an example of how big of a difference this update can make.

So let's go ahead and jump right in. Let's look at the application. I'm going to share my computer screen here and if you want to learn information what you should do is go to sba.gov\ppp. Once you're here, you'll see that this announcement being made about the two-week window for businesses with fewer than 20 employees that is what this video here is about right now, but if you scroll down you'll see that there's information about the first draw, second draw, PPP loan forgiveness. The first draw was basically, you did not have to prove that you lost money in 2020 compared to 2019. Just the economic uncertainty you were eligible to get the funds. That's the funds that Los Angeles Lakers and Shake Shack applieed for. After your first draw you could apply for additional money. For that you had to prove that there was a decrease in your revenue from 2020 to 2019. For this video we're first focusing on the first draw of PPP loans. So if we click here and you scroll down you'll see right here is the application. First draw borrowers they're applying for Schedule C file is using gross income. It's interesting to note that you can also, there's updated application for your second draw also for Schedule C, but we're focusing on the first draw for today's video. After you go there you'll download the application and this is what it looks like. Paycheck Protection Program. You'll see that this is from March 3rd, 2021. This is very, very recent. As of today March 6, you'll fill out some basic information about your business and then the PPP calculation. This is the calculation if you do not have employees and then the calculation for if you have employees.

So let's go over an example Schedule C. Right here says 2020 IRS from 1040 Schedule C line 7. So here goes to Schedule C. This will be filed with your individual tax return. For this example, we're going to look at an interpreter, maybe they made around $50,000 last year, of that they had $30,000 of travel related expenses $5,000 in supplies, $5, 000 in office expense a total of $40, 000 dollars of expenses. This would leave them with $10,000 net income so really quickly, the PPP you're able to get two and a half months of your income as a loan and once you use it for example, if you're an independent contractor and it's only you, you use it for officers compensation basically to compensate yourself then you could go and apply for forgiveness so over the under the laws prior to March 1st, they would have had to use this $10,000 to calculate their PPP loan amount. So whawt they would do is take $10,000 divided by 12 to get their monthly amount, which would be $833 and then times it by 2.5. That would be 2083, So they would be eligivle for PPP loan of $2,083. And if they had a loss for the year they wouldn't be eligible for anything. So now based on the new changes as of March 1st that same Schedule C filer you see, they would use what they say Schedule C line 7. So instead of using $10,000, they would start with $50,000. Their gross income. From that $50,000 they were divided by 12, which would be 4,1666. Times that by 2.5 and now they're eligible for $10,416. So that's a major difference. They went from their eligibility being $2,083 to $10,416.

So what does this mean? If I did not apply before and I was a Schedule C filder, I would be sure to go ahead and apply now. If you've applied already, I would reach out to my bank to see what you can do to get that additional amount that you are now eligible for. A ouple of things to note says tax year used for gross income 2019 or 2020. So you can choose which one you use. Whichever one makes you eligible for the most amount of loan. So, what you can do is take your 2019 tax return go ahead find your line seven. After you find that line seven, do your calculation to find out what your PPP loan eligibility amount will be, then collect all the data for your 2020, even if it's not filed I would go ahead and get accurate numbers as if I were going to file it. Fill out your Schedule C and then take that same number. It doesn't have to be filed, but I wouldn't just make up a number. Here I would use the actual number I plan on using the file compared to whichever one has greater income. That's the number you can use for your application. Another thing to note, the max you can get is based off of a hundred thousand dollars of growth so if your gross is $150,000 here you will be able to use a hundred thousand of that for your calculation and the way that's done is it says divide by 12 if more than 8 33 enter 8333. so that 8333 is a 100 000 divided by 12. So the max is the 100,000. There's some other information here, uh. If you have employees you could get additional funding based on the employees that you have. We're not going to go over that the calculation is not overly complex, but itis a little bit more complex than this video. So this is a huge update for any gig workers, Schedule C filers, independent contractors. This is something that I would definitely look at.

Now the next thing is uh what if you're thinking, "Well am i eligible to apply? My business is still maybe ongoing, can i apply even though i'm still in business?". Well, if your gross income the total amount of income you've received was under $150,000, you are deemed to need the funds. You have the economic necessity for the funds. If it's under $150,000 then you can go ahead and apply. If your gross income is over $150,000 it does not mean that you can't apply, but it means that the SBA has the right to ask you questions to get and understanding of your economic need.

What about the forgiveness portion? What does the forgiveness application look like? Well, let's just preview that really quickly. So, this is what the forgiveness application looks like if you're under $150,000 of PPP loans, which if you're watching this whole video, if you've watched this far into the video, likely you are because for an independent contract, the max you can get was uh, $20,833 and that's based off the $100,000 divided by 12 times 2.5, then you're eligible to use the $8.505 S form. This is a simplified from which basically means you don't have to provide all the different payroll reports to the SBA. What you would do is fill out information about your loan, certify that you used the funds in a way that for eligible expenses, and that the information you're providing is true and then sign. So one page process to apply for the forgiveness. So it's really simple. There's some other information here that you definitely want to read instructions, but there's not much to the forgiveness if you fit under the independent contractor. You are only applying for yourself. No other employees or anything of that nature.

So, I hope this video was helpful, informative and definitely there's a window. So, if you have fewer than 20 employees then the window ends March 9th, this upcoming Tuesday, where you have the priority access to apply for PPP funds to get ahead of the larger businesses. So I will go ahead, I would contact the banks. Obviously this application just came out March 3rd, so they, the banks should be aware. Whether they have their portals or whatever, that's needed to be able to apply up and running now, I don't know, However, I would go ahead and apply.

The funding process has been very quick, within 7 to 14 days, the money can be in your bank. That quickly. With from what I've seen with other PPP applicants the forgiveness process, once you apply that's a little slower. They want to make sure that they get the money into your hands, but it can take a bit more time for the forgiveness to be processed through the bank, through the SBA, and then for you to get the confirmation that the forgiveness has been done, but you have plenty of months after you receive the funds and then after your covered period, which is 24 weeks is done, to be able to apply for the forgiveness, so, no rush there.

Well, thank you very much for watching the whole video. Please, this is very time sensitive. If you know of anyone who fits this criteria, independent

contractor, self-employed please forward this video along. If you have any questions please add them below, we will try to answer them and that way it can benefit all of you.

Thank you so much for watching this video you hope it was helpful

Take care!

Hello everyone! Lillah Harris here. This content was brought to you by LAF Sign Language Solutions. We wanted to present this information because we know that it can be valuable for many independent contractors, and small businesses, as well as interpreters, so we will continue to post content that can be helpful to educational interpreter. If you follow us and subscribe to our Instagram and Youtube pages then you can keep up to date with this information as well.

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