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Important Reminders for Individual and Self-Employed Tax Filers

By Martin Fox, CPA/ABV, CVA

April 10, 2020

In one of our recent emails, we outlined various ways you can access cash for your business during these turbulent times.  Starting today, April 10, 2020, individuals and self-employed tax filers may begin submitting applications for the Paycheck Protection Program (PPP) Loan. PPP loans are available to small businesses with fewer than 500 employees, non-profits, sole proprietors, and 1099 independent contractors.

We have compiled detailed information here. Below is a top-level overview to help you get started.

For businesses and non-profits:

  • The amount of the loan available is 2.5 times your average monthly payroll costs in 2019.

For sole proprietors and 1099 independent contractors:

  • The amount of the loan is based on your average 2019 monthly income from self-employment (limited to an annual amount of $100,000) times 2.5.

The funds are to be used to cover retained employee payroll costs, rent or mortgage payments, and utility expenses. If the loan proceeds are used for those expenses during the 8-week period that begins with the funding of the loan, the debt will be forgiven by the government, tax-free.

Any unforgiven debt is payable over two years at a 1% fixed rate. The debt forgiveness may be reduced if you don’t retain the same number of employees from 2019 or if employee wages are reduced by more than 25%.

If you’re a sole proprietor or independent contractor with no employees, you are eligible to apply based on your 2019 self-employment income as reported on your Form 1040. Again, banks can begin submitting applications for you beginning this Friday, April 10, 2020. We highly recommend contacting your bank today so your application can be submitted as soon as possible. We want to ensure that you are one of the first to receive a portion of the $350 billion the government set aside for this program. There is no way to know how long the funds will last given the likely magnitude of applicants.

Additionally, tax returns and associated payments are not due until July 15, 2020, and no extension request needs to be filed on the original April 15, 2020, deadline. Extensions will be granted automatically.

Federal and California estimated tax payments that would normally be due on April 15, 2020 or June 15, 2020, are not due until July 15, 2020.

If you have any questions, please do not hesitate to reach out to your accountant. We are here for you as your trusted tax and advisory resource. You can also contact Becky Austin at baustin@gccpas.net. Thank you for the opportunity to serve you.