Schedule C Tax Filers Eligible for Additional PPP Relief

On Monday, February 22, the Biden-Harris Administration announced changes to the PPP program that focus on small businesses. These changes included expanded eligibility and a fourteen-day period during which only businesses that employ fewer than 20 people could apply for a PPP loan. This period ends on March 9.

In addition, the Administration announced that sole proprietors, independent contractors, and self-employed individuals could be eligible for more financial relief. At the time of the announcement, no specifics regarding how to calculate the larger loan amount were released.

On March 3, SBA issued an Interim Final Rule detailing this new calculation. Now, Schedule C tax filers with or without employees can apply for a PPP loan based on the net income or the gross income reported on their Schedule C. By using gross income, some Schedule C filers who were excluded from the PPP could now be eligible to apply for a PPP loan while others could receive substantially larger loan amounts.

Schedule C filers seeking to apply using their gross income should consider the following:

• Borrowers whose loans were approved before March 3 cannot modify their loan amount. Only Schedule C tax filers who are eligible for a first or second draw PPP loan and who have not applied for that loan may now apply with this new calculation.
• SBA released revised loan applications for first draw and second draw applications using this calculation methodology. Interested borrowers may choose to discuss any revised processes regarding the submission of this application version and related documentation with their PPP lender.
• If a first draw PPP Borrower who applies for a loan using the gross income calculation has Schedule C gross income that exceeds $150,000, they will not be automatically deemed to have made the certification concerning the necessity of loan in good faith. SBA has determined that these borrowers may have other sources of liquidity and is committed to reviewing a sample of these loans. This does not apply to second draw loans since those applicants are required to certify a reduction in their gross receipts.
• The period to apply for a loan has not been extended. Loans must be approved by March 31, 2020.

For questions regarding your PPP loan, please contact your HBK Advisor.