Self employed PPP

This is where a CPA comes in handy.

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This is where a CPA comes in handy.

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Unfortunately there is a huge lack of guidance from the SBA regarding sole proprietors and partnerships with no payroll.

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Oddly enough I am a CPA, just don’t deal with taxes

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I am a CPA that does taxes

And there is not enough to go by with OP

If she is a 1120s or 1065 and is properly recording officer compensation she can get 2.5 months of her last tax return wages

If she is recording it on her 1040 schedule C directly you are out of luck. No banks are doing that right now.

Single member LLC, haven’t set up as an s Corp yet so it’s all on her schedule C. No employees

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I understand how the calculation is done but she started her business in April of 2019 and business was slow for the first few months, so her average pay is low for 2019.

Specifically what I’m asking is, how are they going to determine what’s forgivable. Are they going to look and see what she made during the next 8 week time period and compare with her 2019 average or just auto forgive whatever her 2019 average was.

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Page 6

Good luck

https://cdn2.hubspot.net/hubfs/2640048/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements-for-Certain-Pledges-of-Loans.pdf

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My wife is a single member LLC. She pays herself in draws but sometimes doesn't pay herself. We applied based on what she made in 2019/12 * 2.5. No problems.

I don't know exactly what the rules were but the general understanding is that if we can show the loan went towards paying herself and up to 25%() on her lease for her office then it should be acceptable. I'm not terribly concerned with it as the interest is basically nil so we will pay back what is not forgivable.

So shouldn't it just be that your wife cuts herself pay checks and is able to show that documentation?

Not in finance.

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Its very much leaning towards beneficial to those that employ other people.

I am getting a couple hundred thousand just to prevent a few dozen people from being destitute even though they (government) have completely fricked us over in the spring season.

Its not going to save the smallest of small sole proprietorships unfortunately. I will be pennies trickling down.

The farmer market type crowd is total fricked. That is my wife.

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No banks are doing that right now.

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???

My bank approved the loan for my wife’s Sch C early this week. It’s not a ton but it keeps her afloat for a bit longer.

Here's the deal. When it comes to Sch C businesses, we are in a round hole / square peg situation. Congress did a poor job of addressing this, and told Treasury basically to deal with it. Treasury is trying to deal with it, but again, square peg / round hole.

It helps to think that Treasury believes all net profit on Sch C results in cash that ends up in the owner's personal pocket. Call that draws or whatever you want.

As such, net profit on Sch C is basically being treated the same as gross wages is an employee situation.

When it comes to the forgiveness calc, 8/52nds of 2019 Sch C net income will be the deemed amount "spent" on payroll. No more, no less (assuming no actual employees).

Maybe some math will help.

Let's say the net Sch C is $75,000. No employees.

Amount of Loan would be (75K/12) * 2.5 = $15,625

Amount assumed used for "payroll costs" is (75K/52) * 8 = $11,538

Percentage of loan considered spent on payroll costs = 11,538 / 15,625 = 73.8 percent. So we are going to hope and pray they consider that good enough for the 75% rule. We may need additional guidance to clarify that.

The remaining amount of the loan can be eligible for forgiveness if it's spent on mortgage interest, utilities, or rent. But, those deductions have to been claimed on the 2019 Sch C to be eligible for consideration in 2020. For example, if you didn't claim a 2019 utilities deduction, you can't get forgiveness on an amount used to pay utilities in 2020.

The end result is that a lot of your smaller Schedule Cs are probably going to end up with some portion of the loan that is not forgiven. So, you can pay it back at 1 percent interest.

Thanks for the clear analysis.