What self-employed, gig workers need to know about new PPP loan rules

The PPP was established to help businesses during times of financial difficulty caused by the COVID-19 pandemic. The CAA expanded the types of expenses for which a business could use Round 3 PPP funds. This also applied to existing PPP loan funds (unless the business already had obtained forgiveness). The percentage of both first- and second-draw PPP loans that had to be used for payroll expenses. The reduction in revenue test is calculated by comparing the applicant’s quarterly gross receipts for one quarter in 2020 with the applicant’s gross receipts for the corresponding quarter of 2019. Adding to frustration for some businesses that would be subject to the new rules is that the 2-week priority application window for the smallest firms closes on March 9, only a few days after the SBA will be able to process applications under the new rule.

Unlike other SBA loans, PPP loans are designed to be partially or fully forgivable, meaning you won’t have to pay them back as long as you follow certain rules. The money cannot be used for any other purpose or it will not be forgivable. The amount that is forgiven will be equal to the amount that you spend during the covered period on payroll and other permitted expenses.

What Is The Paycheck Protection Program?

They added outdoor verandas to the restaurants, with plastic protection against the wind and rain. Andray Hall credits a PPP loan with keeping his New Jersey kitchen cabinet company afloat during a period when https://simple-accounting.org/bookkeeping-payroll-services/ no one wanted strangers taking measurements inside their home. « I don’t think there’s any way we would have been able to withstand the financial challenges that existed without this money, » Leckie says.

• Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns).
• If you obtain loan forgiveness, you will be able to delay payroll taxes through December 31, 2020.
• The first $350 billion Congress set aside for loans was snapped up in less than two weeks.
• « We really underestimated the ability of lots of not-in-person service businesses to not only continue doing what they’re doing, but even do more of it, » says economist John Friedman of Brown University.
• If you also have W2 employees, include the cost of their salaries, state and local payroll taxes, employer contributions to health insurance benefits, sick pay, vacation pay, and severance.
• When the pandemic hit last year, Andrew Leckie, who runs half a dozen restaurants and a catering company in Edmonds, Wash., was forced to lay off more than 200 employees.

Similar to your first PPP loan, for the second loan you can receive up to 2.5 times your average monthly payroll costs, which are calculated for the 12 months prior to the loan or for the calendar year of 2019. For second draw loans, the maximum amount you can receive is $2 million. The maximum loan amount for Second Draw PPP loans is 2.5 times the average monthly payroll costs for 2019 or 2020 up to $2 million. Businesses with a NAICS code beginning in 72 (generally hospitality businesses) may receive up to 3.5 times the average monthly payroll costs.

Simplified Loan Forgiveness Application

Friedman and his colleagues estimate that in its first four months, the loan program actually saved only about 1.5 million jobs — at a cost of about $377,000 each. Economists have also raised questions about whether the loans actually kept workers on the job or simply subsidized businesses that would have been open anyway. People were outraged when wealthy and well-connected outfits like the burger chain Shake Shack and the Los Angeles Lakers basketball team got loans, while others were left on the sidelines. But despite plenty of success stories like Leckie’s, there’s little consensus on how many paychecks it actually protected, a question that lingers as the PPP is due to wind down in coming weeks after it depletes all of its available funds. Taking advantage of the loans provided by the federal government’s Paycheck Protection Program (PPP), he was gradually able to rehire about three-quarters of his workforce. For those who have yet to apply for PPP funding, there are specific criteria you must follow depending on whether you have employees.

This latest guidance eliminates that safe harbor for certain Schedule C filers. With this change, I’m not really sure what is considered the new “end date” for the Covered Period. Being able to apply for forgiveness Bookkeeping & Payroll Services at a Fixed Price prior to the end of the covered period makes the end date of the covered period seem irrelevant. Maybe the new end date of the covered period is the day that you submit the forgiveness application.

What Is the Maximum Amount of a PPP Loan?

The second type was second-draw loans of up to $2 million for entities that had received PPP loans. The starting date for a 14-day period, ordered by the Biden administration, during which only businesses with fewer than 20 employees could apply for a PPP loan. So far, the SBA is about halfway through the total amount of money they have available in the current round. This year through Feb. 28, the SBA has approved 2.2 million loans equaling more than $156 billion.