The U.S. Small Business Administration (SBA), which is administering the Paycheck Protection Program (PPP) loan portion of the CARES Act, has issued a “new interim final” rule that clarifies eligibility for certain self-employed individuals and partnerships, calculation of eligible loan amounts, and rules regarding use of PPP funds in order to potentially qualify for loan forgiveness.
One of the more important new rules is the requirement that a self-employed individual must provide a 2019 Form 1040 Schedule C when applying for a PPP loan. With the April 15 tax filing deadline pushed back until July 15, many small businesses may have yet to file and thus do not have a Schedule C available.
Up to $100,000 (annualized) of self-employment income of partners in a partnership can be reported as payroll cost. However, individual partners may not apply for separate PPP loans as a self-employed individual.
In order to potentially qualify for loan forgiveness, current guidance indicates that PPP funds must be used only for the following purposes:
- Payroll costs
- Owner compensation replacement
- Mortgage interest payments
- Rent or lease payments
- Utility payments
You can download the full text of the new interim final rule here.
The Paycheck Protection Program is a loan program that is part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress to help businesses with 500 or fewer employees that were damaged by the Covid-19 pandemic to cover certain costs.
NEW WEBINAR JUST ANNOUNCED!
Gray, Gray & Gray will host a “How to Maximize Debt Forgiveness” webinar from 1:00pm-2:00pm EDT on Thursday, April 23rd. This session is designed to help businesses manage, verify and document the spending of PPP loan funds in order to calculate and maximize potential loan forgiveness.
If you have other questions about the PPP loan program or need assistance in managing your business through the COVID-19 pandemic disruption, please contact us at (781) 407-0300.