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SBA Issues PPP Guidance on Schedule C Filers

SBA Issues PPP Guidance on Schedule C Filers

Following up on President Biden’s directive to increase availability of Paycheck Protection Program (PPP) funds to small businesses, the SBA has issued guidance potentially increasing the amount a taxpayer with a Schedule C will be able to borrow.

Previously the amount of the loan for Schedule C borrowers was based on the net income of the Schedule C. Many small businesses that operate as Schedule Cs were either eligible for small loans or were not eligible for a loan because the expenses during the year were greater than the income.

Under the new rules, Schedule C borrowers can compute the amount of their loan based on their gross income or net income. Subject to the applicable loan caps, the loan amount is computed as follows:

  • For Schedule C without employees
    • Gross income or net income, capped at $100,000, divided by 12 then multiplied by 2.5 (3.5 for second draw borrowers with NAICS codes starting with 72). Thus, the maximum amount of the loan is $20,833
  • For Schedule C with employees
    • Gross income minus payroll costs (wages, health, retirement plan) or net income, capped at $100,000, plus
    • Payroll cost (wages, health, retirement plan) subject to the $100,000 per employee limitation
    • Total of the two items above is divided by 12, then multiplied by 2.5 (3.5 for second draw borrowers with NAICS codes starting with 72).

While the above changes are welcome news for Schedule C borrowers, the changes are only effective on a prospective basis. Therefore, if the borrowers that have received a PPP loan based on their net income, at this point there is not an opportunity to re-file their PPP loan application to obtain a higher amount based on the new gross income rules.




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