What the self-employed need to know about the new PPP loan rules – tech2.org

What the self-employed need to know about the new PPP loan rules

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The Small Business Administration on Wednesday released a new loan application and calculation formula for the Self-Employed and Self-Employed Paycheck Protection Program loans.

For these small businesses, it will mean larger amounts of forgivable loans in the future.

The new PPP application for self-employed and sole proprietors filing IRS Schedule C Form 1040 now asks for the total amount of gross income, which is found on line 7 of the tax form. Previously, Schedule C filers applying for PPP loans were required to give the SBA their net earnings, from line 31 of the form.

Additionally, the SBA released updated guidelines for lenders on calculating loan amounts for Schedule C taxpayers and new eligibility rules for borrowers, including those who had trouble with student loan debt, had convictions for non-fraudulent felonies or were non-citizen business owners.

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The Biden-Harris administration announced updates to the SBA program in late February aimed at helping smaller businesses access forgivable loans. At the same time, the administration announced a priority application period for some borrowers: As of February 24, lenders have only been processing applications from businesses with fewer than 20 employees and will continue to do so until March 9.

But that created confusion for some borrowers and lenders. While the priority window opened in late February, the new eligibility rules and updated loan calculation formula for some borrowers weren’t supposed to take effect until the first week of March.

Now that the SBA has released the updated sole proprietorship application, as well as the interim final rule with revisions to loan amount calculations and eligibility, borrowers should be able to work with their lenders to apply under the new guidelines. Certainly, it will take some time for lenders to assimilate and implement the new information.

The new estimate is important to millions of sole proprietors and the self-employed and the self-employed in the US, as it will lead to larger forgivable loans through the program.

Previously, the SBA used net earnings as a proxy for payroll costs for businesses without employees, although payroll and earnings are different measures.

Additionally, the net income line on IRS Form 1040 Schedule C includes deductions, which reduced or eliminated the amount for some, leading to small loans or making them ineligible for the program. Using gross income, usually a higher number, will solve some of these problems.

This is news in development. Please check for updates.

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