Kolder Thoughts

CARES Act: Unresolved Issues for Freelancers, a Complete Breakdown Across Programs

Jun 28 2020 | updated: Jul 2 2020

Follow Up Article Published Jul 21 2020 HERE

The programs that were enhanced or introduced by the CARES Act and were carried out by the entities below had debatable success. Most left gaps in benefits for freelancers with mixed income sources and there continues to be confusion and lack of guidance around how various classifications of self-employed individuals can take advantage across the programs overseen by different providers.

Department of Labor Programs

Provider: State Level Unemployment Offices

Extended Unemployment Benefits (UI) 

  • STATUS: Existing program that was enhanced.

  • WHAT THIS MEANS: The number of weeks one can collect unemployment benefits was extended by 13 weeks (up to 39 weeks total in some states, less in total in others).

  • WHO THIS IS FOR: Under most circumstances, traditional employees and freelancers who work any taxed W2 jobs who are no longer getting paid in those positions due to no fault of their own. (For example, your employer no longer needed you after you finished a project with them, or your hours were cut, or your position eliminated.)

  • HOW IS YOUR BENEFIT AMOUNT DETERMINED: While each state varies, for the most part, the benefit amount is calculated by looking at your taxed income from traditional employer-employee W2 reported jobs from last year and giving you a small percentage of your average weekly earnings from the quarter you made the most money.

  • WHY: Traditional UI benefits are not for individuals who only earn money from 1099 work or earnings from a single owner LLC. Employers fund the majority of unemployment benefits. Self-employment taxes do not include any contributions to unemployment insurance. (Note: S-Corps do contribute to unemployment, and are not considered self-employed in this setting.)

Pandemic Unemployment Assistance (PUA)

  • STATUS: New Program.      

  • WHAT THIS MEANS: The federal government is granting each state additional funding to look at other revenue sources individuals earn outside W2 reported income to calculate a base PUA benefit if their loss of work is directly related to the pandemic. It also allowed those who already exhausted their maximum weeks of UI claims to get additional weekly benefits for COVID-19 related reasons.

  • WHO THIS IS FOR: Individuals who do not qualify for traditional unemployment.

  • HOW IS YOUR BENEFIT AMOUNT DETERMINED: The PUA amount should be aligned with how the state would have calculated UI for that individual had the income been from a traditional employer.

Federal Pandemic Unemployment Compensation (FPUC)

  • STATUS: New Program.

  • WHAT THIS MEANS: An additional $600 per week stimulus payment for any individual who qualifies for at least $1 of UI or PUA.

  • WHO THIS IS FOR: Everyone collecting weekly UI or PUA benefits.

  • HOW IS YOUR BENEFIT AMOUNT DETERMINED: When applying for PUA or opening an UI claim, you will provide details about your last employer and your last day worked. PUA benefits are for any weeks of unemployment from January 27 – December 31, 2020. UI will vary by claim depending upon your last day working with your last employer who was not yourself. FPUC started on April 10 and runs through July 31, 2020.


  • Some individuals who primarily earn income through 1099 or other forms of self-employment still qualified for traditional UI benefits through a small amount of W2 reported work. Such individuals receive significantly less in base benefits since the federal guidelines do not allow for the DOL to look at the entirety of the makeup of a freelancer’s income to determine their benefit amount.

  • In most states, unemployment offices were overwhelmed, and those who qualified for PUA, and even some qualifying for traditional UI, waited months to get any aid.

  • Given the requirement to be actively seeking employment and available to work each day while collecting UI, a full-time employed individual who runs a self-employed side business would likely not be able to receive PUA to replace the loss of income from the side business. (No matter how much of a person's annual income the side business earns.)

Small Business Administration Programs 

Provider: SBA and Individual Lenders

Economic Injury Disaster Loan Emergency Advance

  • STATUS: New program provided by SBA as part of an EIDL Loan Application.

  • WHAT IS IT: A grant of $1,000 per employee up to $10,000. 

  • WHO IS IT FOR: Anyone who is self-employed or a business with under 500 people with immediate needs for funds on a first come, first served basis. Receipt of the grant is not contingent upon receiving either the PPP or EIDL Loans.


  • If you do take a PPP Loan, the amount of your Emergency Advance will be deducted from the PPP Loan amount either at time of completing the loan application or when applying for forgiveness on the use of funds for the remaining balance of the loan. (So, in the example of a self-employed individual who receives an advance, but did not report the advance on the PPP Loan application, you may end up owing back $1,000 + interest to the SBA if you use all of the PPP funds and the $1,000.)

  • It appears that the SBA offers no way to pay back the Advance separate from the PPP Loan forgiveness application. This means that individual borrowers now may have a portion of their PPP Loan unforgiven and furthermore owe interest due to a PPP Loan miscalculation that was at no fault of their own.

  • The SBA likely will not notify you of receipt or denial of this grant/advance.

Paycheck Protection Program (PPP) Loan

  • STATUS: New program provided by individual lenders. Deadline to apply with many lenders has already passed. The original latest date an application could go to the SBA from a lender was June 30, 2020. However, a 5-week extension bill (signed on July 5) changed the deadline to Aug 8.
  • WHAT IS IT: A fully forgivable loan to provide funds to employers to be able to keep employees (or the self-employed) off of unemployment (or PUA) and "protect their paycheck."
  • WHO IS IT FOR: Businesses with fewer than 500 employees including incorporated and unincorporated individuals who make their own income through their business and/or self-employment.
  • HOW IS YOUR LOAN AMOUNT DETERMINED: For self-employed individuals, it will be the net income reported on their 2019 tax forms divided by 12 and multiplied by 2.5. Essentially the amount is x2.5 of one's average monthly earnings after business expenses and allows a self-employed individual to pay themselves according to that rate for about 10 weeks. (With a cap at $20,833 per person.)

  • Depending upon one’s net income, PUA + FPUC may be more than your calculated weekly rate you may pay yourself from a PPP Loan.

  • It is being debated in Congress how the use of funds from the PPP Loan will be reported on one’s 2020 income, expenses, and deductions and the tax implications may vary on one's federal versus state taxes depending upon state tax laws.

  • Before the Flexibility Act was passed, the PPP Loan amount was equal to x2.5 the monthly income of a self-employed individual, yet would only forgive 8 weeks worth of pay. Now, with the extension of 24 weeks in which the funds can be used, the PPP Loan can be completely forgiven to pay oneself the full loan amount (assuming the loan was calculated correctly). However, there is no guidance on what an individual can do if they had already started paying themselves from the PPP Loan right away and now wishes to extend their coverage period.

  • There is no formal guidance stating a full-time employed individual who runs a self-employed side business would not be able to receive this loan to replace the loss of income from the side business. However, there is language around the PPP that requires borrowers to certify in good faith that the loan is a necessity for their business.

  • It is unclear if individuals with mixed W2 and 1099 reported income could collect UI and disperse funds to themselves from a PPP Loan during the same period of time. However, it seems this is feasible in any states that allow partial unemployment as long as any days or hours spent on self-employment and paid via the PPP Loan are reported in each applicable weekly UI certification.

  • It seems less likely that PUA can be collected while also paying yourself from PPP Loan funds since both are replacements of the same income source, one’s self-employment earnings. This would be the “double dipping” that many advisors are recommending freelancers avoid. However, no formal federal level guidance has been provided on specific instruction on how the DOL and SBA programs should interact with one another.

  • The lack in clarity around when, how, and if the loan funds could be used if a self-employed person also qualified for PUA caused many freelancers to share that they were uncomfortable applying for the PPP Loan. Most were fearful taking the PPP Loan would prevent them from receiving existing and future aid through the DOL or IRS.

  • The guidance that instructed lenders on how to use an applicant's 2019 tax forms to calculate the applicant's self employment income and PPP Loan amount came after the first round of applications had already been received. Now borrowers from the first rounds of applications may be accountable for interest payments for portions of the loan which may not be forgiven due to a loan miscalculation that was at no fault of their own.

Economic Injury Disaster Loan (EIDL)

  • STATUS: Existing program provided by SBA that opened up nationally for COVID-19 impacted small businesses and self-employed individuals.

  • WHAT IS IT: A loan at 3.75% interest for a 30-year term with payments deferred for one year.

  • WHO IS IT FOR: Businesses with fewer than 500 employees including incorporated and unincorporated individuals who make their own income through their business and/or self-employment.

  • HOW IS YOUR LOAN AMOUNT DETERMINED: The SBA determines the amount based on their evaluation of an applicant’s actual economic injury.


  • Freelancers should pay particular attention to the loan terms and the limitations on what the loan may be spent on. Any individual taking this loan should have a plan for how they will record and justify their spending from the loan amount. However, no formal guidelines exist that explicitly state what records from the self-employed would be used to verify the allowable expenses.

  • The lack of guidance around the EIDL blended with confusing language in the loan documents has led to multiple interpretations across CPAs, lawyers, and freelancers as to how the funds can and cannot be spent by the self-employed.

IRS Programs

Since the SBA and DOL are separate entities, it will not be until we file taxes with the IRS that the federal and state government will have an opportunity to see how and which benefit programs an individual utilized throughout 2020. I predict that we will see more tax reform before the end of the year and it is hard to say if these will positively or negatively impact the self-employed.

Check out this article for more information: https://bench.co/blog/tax-tips/2020-taxes-ppp-eidl-pua/

So What's Next?

There are only hours remaining that the PPP Loan application will remain open, and we’ve yet to see any new legislation as a follow up to the CARES Act. I personally think that freelancers need to examine their own situation and in the absence of specific federal guidance, determine for themselves how they can have access to as many benefits as they need while they are still available.

I give a few examples below of multiple types of freelancers and how they could potentially get the most out of CARES Act programs.

If you are reading this and have your own personal story to share, or if any of my examples differ from your experience, please feel free to contact me via the form below.


Mix W2 & 1099 Income Worker With Reduced or No Work

Apply and receive UI + FPUC. Apply for a PPP Loan. Calculate your weekly pay rate using your 2019 net income from self-employment divided by 52. Knowing your own typical rates, determine how much time per week is reasonable to pay yourself with the determined weekly allocation. Report any days/hours spent paying yourself with the PPP funds on your weekly UI claim. In NY, for example, working for yourself for 4 days is considered full-time. Anything under that, and you can apply for partial unemployment. Perhaps some states may require you to report the amount earned from self-employment, but many will not because self-employment taxes do not contribute to unemployment benefits.


Why is this my interpretation? …  While many advise that you cannot be on both programs in the same week, it really depends upon each individual’s situation and the typical makeup of their annual income that has now been lost due to the pandemic. In many cases, you may not be “double dipping” because you are entitled to UI AND have a loss of income from self-employment and both made up a portion of your overall annual income in 2019.


Consider this … if someone started collecting UI after being let go from their full-time job, and three weeks into collecting UI is given an offer to spend 1 day building a website for a flat rate as an independent contractor. That individual is only getting paid for 1 day’s work. They will report that day of work on their weekly UI claim, but are still eligible for benefits for the rest of that week. The other days of the week they were still not working and actively looking for work. This would be the case even if they did website work before they got let go, and if they continued getting these types of jobs 1-3 days per week indefinitely throughout the entire period they were receiving unemployment benefits.


Mix W2 & 1099 Income Worker Still Working W2 Job

If your source of W2 reported income is still active, you may still feel a PPP Loan is necessary to make up for the loss of self-employment income you’d typically earn. You are likely ineligible for UI or PUA unless your W2 job is less than 4 days of work per week. This is because a requirement of claiming weekly benefits is that you are available and looking for work every day that you get the UI or PUA benefits. If your W2 job is full-time, then you need to decide if you feel the PPP Loan is necessary for you to maintain the ongoing operations of your business (self-employment income source). Should you apply, see my suggestions below on paying yourself so it is likely to be 100% forgiven.


Someone Who Does NOT Qualify for UI and Makes Self-Employment Income

Apply for UI, get denied. Apply for PUA (for NY, list your last day worked full time as the last day you worked 4 days in a week). Once approved, claim your weekly benefits for every week you were out of work (going back as far as January 27, if applicable). At the same time, apply for the PPP Loan, keep the loan funds accessible (or replenish any money taken from the loan funds), but don’t pay yourself until your last week receiving FPUC.

Once FPUC ends, stop claiming weekly PUA, begin paying yourself weekly from the PPP Loan for 2.5 months. Apply for loan forgiveness.

The PPP Loan can be 100% forgiven if:

  • the loan amount was accurately calculated;

  • any EIDL Advance of $1,000 was deducted from the loan amount at the time of application;

  • you elect to use the 24-week coverage period and pay yourself 100% of the loan amount in regular increments consistent with your net income from 2019.

While the loan can be used for other expenses, in my opinion, the most straightforward way to use the funds is to divide it into weekly payments and provide payments to yourself until it runs out.

Why Is This My Interpretation? … The Flexibility Act came out to correct some of the issues of the PPP Loan program. The main one being that the limited 8-week coverage period fell within times when states were not yet reopened. So, many business owners couldn’t pay their employees to work with the PPP Loan funds because their businesses were still closed. With the extended coverage period, employees can remain on UI and receive FPUC up until when business is ready to reopen. Once things reopen, then the employer pays the employees with the PPP funds in the newly covered 24-week time period. For those that are self-employed, the intent is the same. Go on PUA and receive the FPUC, and then go off of PUA and start paying yourself with the PPP funds when it makes sense to start devoting time once again to finding self-employment opportunities.


Anyone Considering an EIDL Loan

The EIDL application is simple and on the SBA website. You may or may not receive a $1,000 advance from this same application.

After you fill out the online form, eventually you will be notified of the max loan amount you are eligible for. You then can decide how much of a loan you wish to apply for up to that max amount. After that, the full application with your selected loan amount is reviewed, and if approved, the paperwork will be sent to you to sign online to accept the loan funds.

Once the loan is approved, you have 30 days to decide if you want to take the loan or not.

Review the terms. If you have a financial advisor and/or CPA, consult with them as well, or find one willing to work with you.

While you can repay the loan early, interest begins on the loan right away.

About Me
A former Freelancer's Union SPARK Leader with 14+ years experience in various forms of self-employment... while I am not a CPA, Tax Lawyer, or formal representative of a freelancer organization myself, I am well versed in each of the federal updates issued by the SBA. The statements here are my own opinions, based on personal research. Please contact me if you feel any information is inaccurate. 
Corrections or comments?
Please send an email to further discuss the ideas expressed in this article or to send a cited correction for any dated or inaccurate information.