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.