New Guidance Released
- New guidance released last night for partnerships and schedule c filers.
- This video will build upon the information presented in our original webinar about the PPP released last week.
- If you are not familiar with the initial guidelines for traditional businesses, please find our Paycheck Protection Program recording that covers is in depth.
New Guidance for Partnerships
Partnerships will file for the PPP loan using the partners K-1 income as payroll costs in the calculation of average monthly payroll.
Partners should not file an individual PPP loan application.
Instead the Partnership will report each partner’s K-1 income as part of their payroll costs, as if it were payroll.
New Guidance for Sched C Filers
May apply for PPP if:
- You were in operation on 2/15/2020.
- Filed or will file a 2019 1040 with Sched C.
- Can show Self Employment income through invoices, 1099-MISC, or bank statements.
- If no employees, must have had a profit in 2019.
Max Loan Amount Calculation
If there were no employees:
- 2019 1040 Sched C line 31 – Net Profit
- Averaged over 12 months
- Multiplied by 2.5
If there were employees:
- Employee Wage costs – Form 941 line 5c Column 1 + Pre-Tax contributions by employee for health insurance and fringe benefits
- Plus employer health care contributions from line 14
- Plus retirement contributions from line 19
- Plus State Unemployment tax (SUTA/SUI)
- Plus – 2019 1040 Sched C line 31 – Net profit
- Averaged over 12 months, then Multiplied by 2.5
EIDL loans: taken between 1/31/2020 and 4/3/2020 may be refinanced by adding the loan to the PPP amount.
Approved uses of Funds
- Owner compensation replacement – this means pay yourself 8/52nds of last years net income from line 31. This matches the concept of 8 weeks of payroll costs.
- Payroll costs for employees.
- Mortgage Interest on business property – includes real property and interest on business auto loans. The property must have been claimed on the 2019 1040 as a business expense.
- Rent – for facilities used on 2019 1040.
- Utilities – includes gas for autos claimed as business expenses.
- Interest on Debt incurred prior to 2/15/2020 – not forgivable.
- Not for business expansion or other “windfall” uses.
- 75% must be used for payroll costs (includes your compensation).
Amount eligible for forgiveness
- Only expenses taken on the 2019 1040 Sched C are forgivable.
- 8/52nds of 2019 net income is forgivable as owner compensation replacement.
- Any rent, interest or utilities expenses submitted for forgiveness must have been present on the 2019 Schedule C.
Request a consultation with an expert to understand your Paycheck Protection Program options:
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