Application Dates For A Round 3 Ppp Loan
As noted above, applications for Round 3 first draw PPP loans from approved community financial institutions started on Mon., Jan. 11, 2021. Second draw applications began on Wed., Jan. 13, followed by first- and second-draw loans from small lenders with less than $1 billion in assets on Fri., Jan. 15, 2021. All SBA 7 lenders were approved to accept first and second draw applications starting on Tues., Jan. 19, 2021.
Beware of scammers. Just as with the first two rounds, if you are a small business owner you can anticipate hearing from scammers promising to help you obtain a PPP loan. Only go through approved lenders or the SBA.
If I Am Paying My Employees With Ppp Funds Do They Have To Perform Work
Employees do not have to perform work if they are being paid with PPP funds. However, an employer can require an employee to workeven if the tasks are different from what an employee usually does. Bear in mind that even for an essential service business, an employee with a qualifying scenario under the CARES Act can refuse the work and may be eligible to collect UI. All businesses must abide by the Governors four-phased reopening plan which permits certain industries to resume business operations and only if they meet mandatory workplace safety standards.
What Loan Amount Is Available To Sole Proprietors Independent Contractors And Freelancers Through The Sba Paycheck Protection Program
The PPP program looks at the history of payments to your workers during various periods specified under the CARES Act. Typically, for businesses with a substantial history of payroll, the relevant period is the calendar year 2019. For businesses without a standard 2019 payroll, the SBA has specified alternative timeframes that can be used to calculate average weekly payroll . The amount of the PPP loan is determined by calculating the average monthly payroll during the relevant period. Payments to workers exceeding $100,000 have to be excluded from the calculation of average monthly payroll, as do other payments under federal employment laws, although state unemployment taxes can be included.
The PPP permits loans up to 2.5x the average monthly payroll during the relevant period. The maximum loan amount is $10 million.
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More money, more questions.
Many details of the soon to be replenished Paycheck Protection Program remain elusive for small-business owners, both those who are waiting on loans and those who have received PPP funds. Some of the confusing issues related to PPP loans involve unemployment benefits, according to Sarah Jennings, a director at accounting firm Maner Costerisan. “It’s a really tricky situation,” Jennings said during the National Small Business Town Hall, a live webinar featuring a panel of small-business experts hosted by Inc. and the Chamber of Commerce, on Friday, April 24.
Here are five things every business owner should know about PPP loans and unemployment.
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Can I Get Unemployment And Ppp Or Eidl
While there has not been specific guidance released by Treasury, the SBA or the Department of Labor on this point, most experts agree you cant double dip by using similar benefits during the same period of time. Some believe you can file for unemployment for the periods before or after you receive and use your PPP funds to pay payroll, however its important to note that there is no guidance yet from the federal government specifically supporting that position.
Guidance provided by Treasury and SBA states:you should be aware that participation in the PPP may affect your eligibility for state administered unemployment compensation or unemployment assistance programs, including the programs authorized by Title II, Subtitle A of the CARES Act, or CARES Act Employee Retention Credits.
Keep in mind that PPP is specifically designed to help pay payroll, including for self-employed individuals. If you use PPP to pay yourself you may be considered employed during that time period. Also note that the Economic Injury Disaster Loan and grant can be used for a range of purposes explored in this article and not just payroll.
Will You Still Have Any Work To Do
For some sole proprietors, business may be down but not completely gone. If you still have some work coming in and you have the ability to earn some income over the next few months, getting the PPP would be a better option. The amount you receive from the PPP wonât be impacted by working and earning incomeâyouâll still be able to receive 2.5 times your monthly payroll cost.
But if you are receiving unemployment benefits and are still partially working, your benefits may be reduced. Check the rules with your state agency to see how much your unemployment check would be reduced if you continue to do some work.
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What Unemployment Benefits Are Available To Sole Proprietors Independent Contractors And Freelancers
PUA provides up to 39 weeks of benefits to workers, including SPs, ICs and freelancers that were not previously eligible for unemployment benefits. Benefit payments under PUA are retroactive, providing benefits for weeks of unemployment, partial employment, or inability to work due to COVID-19 reasons starting on or after January 27, 2020, and continuing until December 31, 2020.
The calculation of benefits requires a calculation of the weekly base benefit by reference to the two highest pay quarters during the four quarters preceding the application. The earnings during those two highest quarters are added together, and the sum is multiplied by 47%. Finally, that product is divided by 26 to yield a weekly payment.
To take an example, Worker A earned $13,000 , $12,000 , $11,000 , and $13,000 during the four quarters before filing for unemployment benefits. The two highest quarters are Q1 and Q4, during which Worker A brought home $13,000 , and so they are used to calculate the base benefit, using this calculation:
- Add Q1 earnings + Q4 earnings: $13,000 +$13,000 = $26,000.
- Next: 47% x $26,000 = $12,220
- Finally, $12,220 ÷ 26 = $470
Worker A would be entitled to the weekly base benefit of $470.
The maximum weekly base benefits are as follows: $484 for individuals, $577 for an individual with a spouse they support, and $669 for an individual and child.
What Is A Ppp Loan
The Paycheck Protection Program loan, effective April 15th, 2020, is a loan designed to provide small businesses with income so employers can pay their employees and keep them on payroll. In fact, employers must use at least 75% of the money earned on payroll. The remainder of the money can cover bills, mortgage, utilities, and other business expenses. The SBA hopes that employers who receive a PPP loan will provide employees with their normal pay and get them back on payroll. This, in result, will mean that fewer employees will have the need for unemployment insurance.
In addition to advantages such as avoiding pay cuts, hour decreases, or termination, the PPP loan also gives employers a chance to get their businesses back to normal. With extra income, small businesses owners can finally have employees on a regular schedule. Employees will achieve their daily work activities and get things up and running, which will benefit the overall business.
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How Do You Apply
Unemployment insurance: You must apply for unemployment through your states unemployment insurance office. Many states are overwhelmed with unemployment filings, so applying via your states online system is probably a better option than applying by phone. For tips on how to file your claimincluding a detailed list of what youll need for the applicationcheck out our Guide to Unemployment Benefits and Eligibility.
PPP: While these loans are federally backed by the Small Business Administration, you must apply for them through a bank or other lender. If you already have a relationship with a lender, start there if not, you can search for participating lenders in your area on the SBA websitebut be aware that large banks and credit unions might not take new customers.2
What Will Lenders Be Looking For
First, you will need to fill out the PPP application available on the Treasury Department’s website .
You also will need all of the following:
- Your 2019 1040 Schedule C
- A 2019 1099-MISC, invoice, bank statement, or book of record that shows you were self-employed in 2019
- A 2020 invoice, bank statement, or book of record establishing that you were in operation on or around February 15, 2020
What lenders will NOT look for
- That the borrower sought and was unable to obtain credit elsewhere.
- A personal guarantee is not required for the loan.
- No collateral is required for the loan.
Loan Terms
- Payments deferred for six months
- 1.00% fixed interest rate
- Loan is due in five years if issued after June 5th
- Loans issued before June 5th are due in two years
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Im A Sole Proprietor Independent Contractor Or Freelancer Am I Eligible For An Sba Paycheck Protection Program Loan
Yes. The CARES ACT states that SPs, ICs and freelancers are eligible for PPP loans, so long as they certify that the loan is needed to pay workers during the COVID-19 crisis. The Small Business Administration has issued as SBA lending banks seek to implement the statute through their loan application portals.
Applicants for PPP loans need to document their payroll history to calculate an average weekly payroll during specified periods. In the case of SPs, ICs and freelancers seeking benefits based on the loss of their own income, the application must document payments to yourself for work you performed. Form 1099s can substantiate your payment history. Without that documentation, you may need to show your business income, less business expenses, from your personal tax returns. In any case, youll need to work with your SBA lender bank for more guidance, at least until the SBA provides specific procedures that apply to SPs, ICs and freelancers.
Preparation For Unemployment And Ppp Loans
Employees and employers should evaluate the pros and cons of PPP loans and unemployment benefits. Business owners must decide whether its a good decision to file for a PPP loan and potentially lose employees. They also might want to think about potential employee retaliation and negativity. Employees, on the other hand, may want to think about the consequences of refusing to work under an employer who has a PPP loan. Although an employee might get more income through the unemployment program, they may lose it all if they refuse employment. Ultimately, there is no right or wrong answer. The decision to stay employed, obtain a PPP loan, offer re-hire incentives, and other factors are entirely up to the person. Every persons situation is different, so make the decision thats best for your future.
Want to learn more about First Draw and Second Draw PPP loans? Read our article now.
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How Long Can I Receive Payouts
Unemployment Insurance: The amount of time you can receive unemployment benefits varies by state. New rules in response to COVID-19 allow for extended benefit periodsup to 39 weeks in some states. And, in most cases, youll have to renew your claim each week to keep state officials up to date on your employment status.
PPP: This loan has a maturity of 2 years and has an interest rate of 1%. And perhaps the biggest perk of the Paycheck Protection Program is this: the debt can be completely forgiven if you use the money for payroll, rent, mortgage obligations, utilities, and other fixed-debt obligations. Specifically, at least 75% of the loaned funds must be spent on payroll, and you must keep your business headcount and wages the same in the first eight weeks after the loan funds.
Do I Qualify For Unemployment If My Hours Were Cut Back But I’m Still Working Part
You might.
“The question isn’t whether you’re employed, it’s whether you’re working,” Andrew Stettner, a senior fellow at The Century Foundation, told Insider. Furloughed workers and workers with severely reduced hours often count as “working,” he said. About half of states offer unemployment benefits for part-time workers, he added.
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What Does Self Employed Mean
According to guidance from the Department of Labor, Self-employed individuals means individuals whose primary reliance for income is on the performance of services in the individuals own business, or on the individuals own farm. These individuals include independent contractors, gig economy workers, and workers for certain religious entities.
Tom Should Refinance The Eidl Into His Ppp Loan
Our reasoning: The EIDL must be refinanced if it is being used for payroll purposes.
Because Tom had an existing EIDL when he applied for the PPP, and he was using the EIDL for payroll, his EIDL will be refinanced. The EIDL will be considered to be fully paid off, and the balance will be added to the outstanding PPP loan amount.
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Can You Use Help Paying Rent And Utility Bills
If you have rent and utility bills to pay, the PPP allows you to use a portion of the money you receive to pay for those costs. So not only do you get funds to pay employees for 24 weeks, you can get money to pay for some of your other expenses.
If you choose to lay off employees instead of using the PPP, you wonât get that extra money to help you pay those bills.
Can I Pay My Employees Under The Paycheck Protection Program While They Are Also Collecting Unemployment Insurance
Possibly, depending on the amount that the employee receives from you and other sources. A worker must report any wages earned during a week to the Department of Unemployment Assistance , which may or may not affect their eligibility for benefits. If the amount of such wages or other income exceeds 1.3 times the weekly unemployment benefit amount, the employee will not receive any UI benefits for that week. Employees may qualify for partial UI benefits depending on total income received in a given week.
Bear in mind, however, that if you pay an employee less than 60% of the wages or salary that you paid the employee during the most recent full quarter in which the employee was employed before you received the PPP loan, your loan forgiveness amount may be reduced.
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Are Unemployment Benefits Taxed
Yes, you have to report any unemployment compensation you receive on your federal tax return and potentially your state return as well. The money will ultimately be included in your gross income and taxed at your ordinary income rate.
You do, however, have a choice of how you’d like to pay the tax you owe either through withholding or estimated quarterly payments.
If you want your taxes automatically taken from your benefit check or direct deposit before you get paid, like they would be from a traditional paycheck, then you need to file Form W-4V . This will instruct the payor most likely your state government to withhold 10% of each payment for federal income taxes. It will also take a portion of the money for state taxes, if applicable.
The other option is to make quarterly payments directly to the IRS for the amount you estimate you’ll owe. Keep in mind that this method requires doing some calculations, meeting payment deadlines every three months, and may result in a penalty charge if you underpay.
Do You Still Have Some Revenue
If your business is still bringing in some revenue and isn’t completely shut down, you should apply for the PPP rather than unemployment. If you are still earning money, your states unemployment department will reduce your unemployment benefits based on the amount that you earn. The PPP, however, is not dependent on the amount that your business brings in as long as you meet the eligibility requirements even if you are still earning revenue, you will still be able to receive 2.5x your usual monthly payroll.
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Unemployment Insurance Vs Paycheck Protection Program: Whats Best For The Self
The tsunami of joblessness created by the coronavirus pandemic prompted the federal government to extend financial relief to the self-employeda segment of the workforce that doesnt usually qualify for help. That includes gig workers, freelancers, independent contractors and sole proprietors.
If youre self-employed and suddenly out of work because of COVID-19, you are now eligible for unemployment insurance. You can also apply for the Paycheck Protection Program , a forgivable loan program designed to help small businesses stay afloateven if your business consists of only one employee.
While uncertainty still exists around who will get approved for benefits and when approved applicants will receive money, both of these assistance programsunemployment insurance and paycheck protectionare historic in scope and could provide the financial lifeline you need right now.
Which option is best for you? This article will help you figure that out.
Can Ppp Loans Affect Unemployment Insurance Benefits
This article was published on May 19, 2020. New information may be available regarding PPP loans and UI benefit packages. Visit the Small Business Administration for more information. For more information about the First Draw and Second Draw of PPP loans, visit this article.
The PPP loan is a valuable resource for many business owners, especially for employers who have employees with unemployment insurance. With the new loan, employers will have the ability to pay their employees as they would normally and can avoid paying unemployment taxes. This all sounds great, but PPP loans are confusing to employees, and many wonder whether their employers PPP loan will alter their unemployment insurance statuses. Do PPP loans affect employees unemployment benefits? Lets find out.
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