11 Mar The Latest on the Federal Stimulus, Including Major Changes to the PPP for Schedule C Filers
ALERT: Please read if you have a business that files taxes as a Schedule C!
President Biden signed a $1.9 trillion coronavirus relief package, known as The American Rescue Package, into law on March 11, with $50 billion going towards helping small businesses. The bill includes:
- $28.6 billion in grant money for the Restaurant Revitalization Fund
- $15 billion for businesses seeking Economic Injury Disaster Loan (EIDL) advance grants
- $1.25 billion for shuttered venue operators
- $7.25 billion added to the PPP program (although it is still set to end on March 31)
- A provision that allows businesses to participate in both the Shuttered Venue Operating Grant and the PPP
- An extension through the end of the year for the Employee Retention Credit (the refundable tax credit aimed at helping employers keep workers on payroll)
- $175 million to create a “community navigator” pilot program to increase awareness of and participation in COVID-19 relief programs for business owners currently lacking access, with priority for businesses owned by socially and economically disadvantaged individuals, women, and veterans.
Meanwhile, the Small Business Administration posted the latest revision to the Paycheck Protection Program (PPP) on March 3. These revisions have MAJOR effects on how sole proprietors, independent contractors, and others who file taxes using IRS Form 1040 Schedule C.
Bottom line? New applicants can now use “Gross Income” (Line 7) as a basis for their PPP amounts. This means that if you had a negative or low amount and could not get a PPP loan, or the loan amount was not worth getting previously, you may now be eligible.
Let’s say you are a Sole-Proprietor with No Employees and your Business NAICS code is not beginning with 72, who made $5,000 in net profit in year 2019 (Line 31) and Gross Income (Line 7) was $100,000.00 and you have filed your 2019 1040 tax return with your Schedule C.
Before these changes, your PPP amount would have been $1,041.68. After the March 3rd revision, the PPP loan amount this taxpayer would qualify for is $20,883.00.
This is a welcome change for sole proprietors, independent contractors, and self-employed individuals. If you have already taken and had approved your PPP loan, sadly you cannot retroactively change to this new calculation. Despite that drawback, even more people can now benefit from this revision and will really be able to help Schedule C Taxpayers, if taken advantage of.
We encourage you to take action as soon as possible and, as always, Reconciled Solutions is here to help.