Financial Relief During CV19, Pt 2 - 1099 Independent Contractors + Sole Proprietors and a Summary

This week’s blog is Pt 2 to last week’s “Financial Relief Options For Your Small Business During CV-19.” Today I am calling out relief options ($$) for 1099 Independent Contractors and Sole Proprietors. If you are a worker at a business and paid as a contractor - this one’s for you. These rules + caveats also apply to my business owners who file as a Sole Proprietor, and possibly have a business Tax ID number, but are not a formal entity (LLC, Corporation, Partnership). 

To round up this 2-part series I have a short, 5-minute video for you, courtesy of today’s IGTV sponsored by Year of Ours. It’s a brief summary of ALL relief options, and hope for a brighter, stronger tomorrow. (In case you’re dying to see it- the full version of this video can be found on both Year Of Our’s Instagram, my Instagram page, or my YouTube channel.)


CARES ACT - INDV STIMULUS $$


What is it?


The CARES Act is the name of the $2 trillion federal stimulus package that was recently passed in response to the economic crisis we face in light of CV19. As part of the CARES Act, an Individual Stimulus was approved, granting most adults a one-time payment. 


How Much Do I Get?


Most adults are eligible for a one-time $1,200 payment; adult dependents (parents) will receive $500 per child. To be eligible you must:

  • Be a US resident with Social Security Number 

  • Have filed personal income taxes in 2018 and possibly 2019

The $1,200 payment is a sliding scale based on your income:

  • For those whose annual income is up to $75,000, you will receive at least $1,200. 

  • For those who annual income is more than $75,000, but less than $99,000, you will receive a reduced amount. 

  • For those who earn more than $99,000, you are unfortunately not eligible .

For couples who file jointly, the numbers are simply doubled. 

  • You will receive $2,400 if your combined salary is at or below $150,000. 

  • If between $150k and $198k your stimulus will receive a reduced amount. 

  • If you jointly earn more than $198k you are not eligible. 

How Do I Get It?


If your 2018/2019 tax returns have a bank account direct deposit linked to them, your stimulus check will be deposited into that account. If you did not include a direct deposit option in your tax returns, you will receive a hard-copy check by mail. 


It’s been reported that the first individual stimulus checks were sent out Thursday, April 9 via direct deposit. It is also reported that the government will be working from the “bottom, to the top”, meaning that those in the lowest income levels (who presumably need the $$ most) will receive their money first. 


It’s being estimated that it will take months (think - summer) before all stimulus relief checks and deposits have been made. 


Do I Have to Repay It?


No - this is free money to help cover costs incurred by loss of work. You also do NOT have to apply for relief. 


UNEMPLOYMENT 


What Is It?


Pandemic Unemployment Assistance (PUA) for those self-employed, like fitness instructors and wellness professionals (!) who can demonstrate that they are otherwise able to work and available for work, except they are unemployed, partially unemployed, or unable to work because of COVID -19 related reasons. 


**this also applies to those who have been furloughed!


SOUND LIKE SOMEONE YOU KNOW!?!?


In addition to unemployment benefits ($$) you are eligible to receive up to an additional $600/week for the next 13 weeks. 


How Can It Be Used?


Like normal money from your paycheck. 


Do I Have to Repay It?


Nope. 


How Can I Apply?


Head to your state’s Employment Division website (here in California we call ours the Employment Development Department, or EDD) and file for Unemployment Insurance. Note that it takes at least 3weeks to process an unemployment claim and issue funds to those who are eligible.


What Do I Need For My Application?

  • Your personal information, including SSN

  • Paystubs

  • Possibly your W2 or 2019 Tax returns

PAYROLL PROTECTION PROGRAM


What is it?


Almost 2,000 lenders are incentivizing small business employers to maintain payroll during the crisis. For Indp Contractors and Sole Proprietors, this relief allows you to continue “earning” your income that you would otherwise earn being self-employed.


How Can It Be Used?


These federally-backed loans cover payroll costs up to 2.5x your average monthly income. While this loan requires that 75% of the loaned money must be used to cover income costs, the other 25% can be used for business expenses that you are still responsible for. 


Do I Have to Repay It?


The PPP is thought of as a forgivable loan for business owners - if f after 8 weeks from the time of the loan you haven’t laid off any employees, kept employees at a comparable salary, AND used the loan for the above expenses - your loan is eligible to be forgiven, though you will have to apply for loan forgiveness


For Indp Contractors and Sole Proprietors - you clearly aren’t going to be laying yourself off! So what is your burden of proof to ensure that loan is forgiven? 


We’re not sure yet. 


My advice to you would be to keep very accurate record keeping of how you’re spending the money (paying yourself, paying bills, etc) so that you can show the money was in fact spent on legitimate purposes, and not, buying something frivolous. 


**Note - the PPP is often referred to as a “grant” and not a loan. The reason being tied to it’s potentially forgivable nature. However, there is NO guarantee that any PPP money will be forgiven or “free money” so I advise you spend appropriately. 


How Can I Apply?


As of April 10, the PPP Loan Application was updated with the SBA and individual lenders to provide for the option of “Indp Contractor” or “Sole Proprietor.” The information on the loan application is otherwise the EXACT same as the one a business owner filled out. 


It’s been recommended that you go to the banking institution where you maintain a business bank account; however for most of my IC’s and SPs you don’t have a business bank account. Your next best bet is going to the bank where you have a personal account. If they cannot help you, the SBA has 2,000 lenders, including federal credit unions that might be able to!


What Do I Need For My Application?


The application took me 5 minutes max (once I got through the site crashing a handful of times). You’ll need: 

  • Entity information 

  • Tax ID number (ICs - your social security number; SP - your business tax number)

  • Avg monthly income 

  • Proof of average monthly income - bank statements with deposit statements, 2018/2019 Business Tax Return  

The threshold for showing your income as IC or SP might be higher; be prepared for the bank to require additional supporting documentation of your income, including copies of checks, third-party payment processor (Venmo, Zelle, PayPal, Stripe) statements. 


What Do I Need For My Application?


As of last week (April 7), it was an approximate 2-week wait time for business loan applications to be approved. I haven’t heard an update since then, but I am assuming a 2-3 week wait period before your bank notifies you of approval. 


TAX EXTENSION


The federal tax deadline for personal and business returns is pushed back to July 15, 2020. You get three extra months to get your finances organized and filed, BUT if you’re entitled to a tax deduction (especially if you were savvy and you used this tax deduction guide) then you want to file those business taxes ASAP and get the refund you are owed!


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