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Freelancers And The Paycheck Protection Program | Ep 192

Travis Hornsby from the Student Loan Planner joins us to discuss the Paycheck Protection Program.

The Paycheck Protection Program (PPP) is part of the CARES act that was passed to deal with the economic fallout of COVID. PPP allows small businesses to get a forgivable loan for 2.5 times your monthly payroll costs (plus a few other things such as rent and utilities).

The point is to keep people employed during this time. Most businesses are getting hammered in this economy right now. To attempt to avoid massive layoffs the government is offering this forgivable loan to try to allow businesses to keep their employees.

That’s great, however, a lot of businesses work with freelancers and contractors instead of hiring employees. At first, money paid to freelancers was included as payroll for purposes of the PPP. But that changed.

It was determined that because freelancers can apply for the PPP themselves that they shouldn’t be included in payroll costs. But that puts business that hire freelancers in a weird spot. They still need to pay those freelancers if they want work performed.

If you have W-2 employees you should qualify for the loan and if you use the money to pay your payroll costs the loan will be forgiven.

It gets more complicated for freelancers.

How To Calculate Your PPP Amount As A Freelancer

Look at your 2019 income. Take your annual income from 2019 and divide by 12 to get your average monthly income. Then multiply that by 2.5 to get your PPP loan amount.

Keep in mind you can include some of 2020’s income instead if you want. So if using your income from April 2019 – March 2020 gives you a higher average monthly income, you can use that instead.

As a freelancer, to qualify for forgiveness, simply use the money to pay yourself.

Check out this article from PT Money for more details about the PPP and how to apply.

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