PPP and Sole Proprietor

[ATSMAN]

Thank you. I was asking in the context of the initial post of this thread, "the sole proprietor (with no employees)".

So let me rephrase: is a Schedule C filer, with no payroll, required to have already filed a 2019 income tax return? Or is it OK to use accurate data, even if the return itself has not been filed (given that the initial filing deadline is July 15, with extension to October possible).

One of my clients a hairdresser was able to file the loan and grant application through her bank a SBA lender. She needed both 2018 and 2019 tax returns (i think because it was already filed), rent paid receipts, utility bills. She was told that due to the extremely high volume it may take 2 weeks for approval BUT even if she is denied a loan she will be eligible for a $10,000 grant because her shop is closed as per local authorities orders until 5/4.

[Rapid Robert]

All of the PPP documentation required 2019 payroll info. Dont think they are going to accept 2018 tax forms, but who knows.

Thank you. I was asking in the context of the initial post of this thread, "the sole proprietor (with no employees)".

So let me rephrase: is a Schedule C filer, with no payroll, required to have already filed a 2019 income tax return? Or is it OK to use accurate data, even if the return itself has not been filed (given that the initial filing deadline is July 15, with extension to October possible).

[spanel]

Is there a requirement to have already filed TY2019 return before applying for these loans?

One would think so. All of the PPP documentation required 2019 payroll info. Dont think they are going to accept 2018 tax forms, but who knows.

Chris

[Rapid Robert]

Is there a requirement to have already filed TY2019 return before applying for these loans?

[Burke]

Legitimate self-employed small businesses that have been around for a while should be included in this, especially where that is the sole or major source of their income. Most of them are service businesses and are closed down, with no hope of making up that lost business.

[ATSMAN]

I did see that self employed individuals cannot submitted application for PPP until 4/10/20.

Peggy Sioux

Banks are going to have their work cut out. Since it was publicly announced I have 7 of my clients completing the application, getting copies of their 2018 tax return and payroll records to get ready to bang on the bank's door 4/10.

[peggysioux]

I did see that self employed individuals cannot submitted application for PPP until 4/10/20.

Peggy Sioux

[Lion]

Sole proprietors without employees DO qualify for the PPP and also for state Unemployment Benefits. New definitions for a new era.

[ttbtaxes]

Can't a corporation include the salaries of its owner/shareholders up to $100K in the PPP application? If so, it would make sense that a sole proprietor would not be discriminated against and put on level footing.

[ATSMAN]

You may be right but it does not make sense. If it is forgiven then it is free money for the self-employed!

What qualifies as “payroll costs?” Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.

Guess what Monday I am going to visit with my banker to get me some of that (Richard from Gas Monkey Garage!)

[ttbtaxes]

Am I misinperpreting Section III (2)(a)(ii) on Page 6? Also, look at Section III (2)(f), "What qualifies as payroll costs", on page 10....", or net earnings from self-employment or similar compensation."

https://www.sba.gov/sites/default/files/2020-04/PPP--IFRN%20FINAL_0.pdf

[ATSMAN]

I have not read the actual text of the law but from the press releases it appears self-employed with payroll expense qualifies. So if you are solo then you really don't have payroll expense and you can't call your net earnings from self employment "Payroll". This is not free money for solo's without any employees.

You may qualify for the loan and then forgiveness based on mortgage interest, rent, utility and other stipulated payments.

[ttbtaxes]

For the PPP, my understanding is the sole proprietor (with no employees) still qualifies for this relief and can use the prior year "net earnings from self employment" up to $100,000. He/she would divide by 12 then multiply by 2.5. For example, if Schedule C net earnings from self employment was $96,000, then he/she can apply for a loan of $25,000 ($96,000/12 x 2.5).

If that is paid to the himself/herself (the self-employed individual) then it can be 100% forgiven. On other words, the Federal government is paying the sole proprietor for 2 1/2 months of earnings. In my example, the sole proprietor could request $10,000 from the 3-day EIDL then file a PPP application and request the remaining $15,000.

Is this correct?