The loan calculation formula for those with employees is as follows: Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid). Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between Januand Apthat you seek to refinance. Step 3: Multiply the average monthly net profit or gross income amount from Step 2 by 2.5. Step 2: Calculate the average monthly net profit or gross income amount (divide the amount from Step 1 by 12). If both your net profit and gross income are zero or less, you are not eligible for a PPP loan. (If you are using 2020 to calculate payroll costs and have not yet filed a 2020 return, fill it out and compute the value.) If this amount is over $100,000, reduce it to $100,000. Step 1: From your 2019 or 2020 IRS Form 1040, Schedule C, you may elect to use either your line 31 net profit amount or your line 7 gross income amount. Without Employeesįor those without employees, the calculation is as follows: The new rule provides Schedule C filers with an option to use either net or gross Schedule C income for determining the owner compensation portion of their loan amount. It should be noted that unless Congress changes the law, the PPP is set to expire March 31. The new rule, which applies to first draw and second draw loan calculations, is summarized below. In support of this change, the SBA explains that it is acting within its discretionary authority to “reduce barriers to accessing the PPP and expand funding among the smallest businesses.” On March 3, the Small Business Administration published an interim final rule implementing a new policy President Biden announced several weeks ago: allowing Schedule C filers to receive more financial assistance by revising the Paycheck Protection Program (PPP) loan calculation formula for these applicants. Note: This post has been updated to include new guidance and forms published March 12 and March 18 at the bottom.
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