Whether Independent Contractors are Treated Like Employees for PPP Forgiveness Purposes
Undoubtedly, one of the unfortunate consequences of the COVID-19 pandemic has been the loss of employment and economic difficulties. The impact has been massive, especially for small businesses, independent contractors, and freelancers. To offer assistance, the US government recently resumed the Payment Protection Program (PPP), whose enrollment extended deadline is May 31, 2021. Read on to learn more about the program. PPP, and if you are eligible, get ready to apply for your loan! You can also contact a Bucks County Business Attorney for help with the details.
What is the PPP Program?
The government recognizes that the pandemic has generated significant economic difficulties, and has launched this PPP program to help you cover the expenses of your company or business. For example, if you need help paying your employees’ payroll, this is what the PPP program is for. Or if you need to pay the rent or the mortgage on your business, you can also use this loan for that. If you’ve had to offer additional benefits to your workers so they can take care of COVID-19, those expenses count too. A Bucks County Business Law Attorney can go over this with you.
Who is Eligible for PPP Loans?
PPP loans are intended to assist specific individuals (self-employed) and businesses. However, independent contractors are also included in this phase of PPP. If you are an independent contractor or Freelancer, you also qualify. Eligible individuals meet the requirements below. If you are unsure of your eligibility, try scheduling an appointment with a Bucks County Business Lawyer.
Requirements for the PPP Program
Sole proprietors, also called a sole proprietorship, that is, it has only one owner such as an independent contractor, and it is he who attends to the business, which may be different categories of work, such as accounting, writing, graphic designing, web designing, gardening or medical billing. Independent contractors are those that provide services for others without having to be controlled by the person who hires them. The independent contractor does projects on a ‘pay as you finish’ scenario and so, there are no vacation or health benefits involved. The workers gig economy, which consist of independent workers who receive payments for work on very short term, such as delivering food or provide shuttle service are also considered. Get help from a good Bucks County Business Lawyer, if you are unsure of your classification.
How Much Can You Borrow?
Borrowers will be able to request up to 2.5 times their monthly payroll expenses, based on their 2019 or 2020 tax information, with $10 million being the maximum amount that they can request. The way to calculate the PPP loan amount varies depending on the type of borrower. However, for independent contractors, the 2.5 times request would be based on their net income or commissions. A tax return would be used to calculate the amount. Many Bucks County PA Attorneys are available to assist with explaining the process including eligibility requirements.
How Does a PPP Loan Forgiveness Work?
Borrowers who are independent contractors may be eligible for the forgiveness of their PPP loan if they meet the following requirements within 8-24 weeks of receiving their loan:
• It manages to maintain the levels of employment and compensation;
• 60% of the profits are used to cover payroll costs;
• The proceeds of the loan are used to cover eligible expenses, such as a mortgage, rent, and utilities for the business.
Documents for the PPP Program: Independent Contractors and
Freelancers
Proof that your business has been operating since or before February 15, 2020, the start date of the pandemic;
• 2019 or 2020 tax return
• Bank account statement
Independent contractors and sole proprietors have 2 months of the loan disbursement automatically forgiven since it is considered a salary replacement. This amount should be three-quarters of the loan with the assumption that you receive the maximum available amount when you applied for the loan.
Legal Consultation
Even though, you can do this on your own, it can get confusing. However, you can consult with a Law Firm In Bucks County PA like Olen Law Office to learn of all the requirements. In so doing, you will have a smoother process. You may also need a lawyer to represent you if it has been determined that you have misused the PPP funds. If you also fail to follow the rules for loan forgiveness, your attorney will assist you.