Dear clients and partners,
It was only a short time ago that the singular focus in our minds about April 15th was that it is tax day for millions of Americans. In a few short weeks, that has all certainly changed.
To keep you informed, we’re continuing our series of client alerts to help each of you through this period. In today’s alert, we’re focused on SBA help for self-employed individuals and a new grant program for Montgomery County businesses. Here are the details:
SBA PPP Loan Program and Self-Employed Individuals
As the Treasury Department, the IRS and the Small Business Administration continue to clarify key points relating to the CARES Act, a new interim final rule has been released relating to self-employed individuals. Some of the key points include:
Partners in a Partnership
Partners in a partnership whose income is categorized as self-employment income on their Schedule K-1 may not submit a separate PPP loan application as a self-employed individual. Instead, the self-employment income of active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by, or on behalf of, the partnership.
Eligible Wage Compensation
Eligible wage compensation, capped at $100,000 per employee on an annualized basis, is specifically capped at exactly 8/52 of $100,000 for the calculation of forgiveness during the 8-week benefit period.
As a result, each employee or partner who earns more than $100,000 per year will count as $15,385 of eligible compensation when you are calculating the amount of the PPP loan that is eligible for forgiveness, plus any related covered benefits for employees that qualify as payroll costs under the guidelines.
Schedule C Self-Employed Business Filers
If you are a self-employed individual who files a Schedule C for your business as part of your individual tax return, then your own compensation will be based on the net profit reported on your 2019 Schedule C, capped at $100,000 per year.
In other words, for the loan forgiveness analysis, you will be eligible for exactly 8/52 of this same 2019 net profit. If you are a Schedule C borrower with no employees, you will be eligible for a PPP loan of 2.5 x $100,000 / 12 = $20,833 and eligible for loan forgiveness of $100,000 x 8 / 52 = $15,385.
Additional Qualifying Amounts for the 8-Week Period
In the above example, the borrower can also add funds spent during the 8-week period on qualified business rent, interest on mortgages, and utility costs, if any, that are specific to the business (with the exception of home office expenses).
New Montgomery County Emergency Grant Program Begins Today
Montgomery County, Maryland has established a new Public Health Emergency Grant (PHEG) program and the program launches at 2:00 PM EDT today. Eligibility criteria include:
- Business or non-profit either based entirely in Montgomery County or with 50% or more of operations (sales or employees) taking place in Montgomery County
- Employs up to 100 employees (sole proprietors are also eligible)
- Has incurred financial losses directly or indirectly related to COVID-19
Grants of up to $75,000 are available. Please note that the grant application is only online and may not be saved, i.e. you have to prepare all information and documents first, then complete the application in one session.
Details and application instructions are available here:
Please contact us with any questions and we are happy to assist. Your business and financial future is our number one priority.
Matt Brady, CPA