Last week brought great news for freelancers and the self-employed!
From Forbes.com, June 17, 2020 by Brian Thompson: “The SBA filed its 19th Interim Final Rule (IFR), scheduled to be published on Friday June 19th, focusing on revisions made from Paycheck Protection Program Flexibility Act (Flexibility Act) signed into law on June 5th. The unpublished version of the update ensures full forgiveness for self-employed, freelancers and independent contractors who took the maximum loan amount based on 2.5 times their 2019 monthly income. (Under previous rules, the eight-week limitation made it hard to get above the 75% payroll threshold.)
The Flexibility Act made a few key changes to the PPP Program:
• For loans made after June 5th, it extended the maturity date of the loan from two years to five years. The maturity date can also be extended for loans made before June 5th, if the borrower and lender mutually agree.
• The covered period for the loan forgiveness was extended from eight weeks to 24 weeks. However, borrowers with loans taken before June 5th can still choose the eight-week period.
• The Act reduced the amount that you needed to spend on payroll in order to obtain forgiveness from 75% to 60%. Originally, the Act made it sound like if you didn’t get to 60% in payroll expenses, you didn’t get any forgiveness. However, the SBA and Treasury later clarified even if you didn’t get to 60% in payroll expenses you could still obtain partial forgiveness.
• The Act extended the date to replace full-time equivalent employees (FTEs) and restore salaries from June 30, 2020 until December 31, 2020. It also allowed relief for those businesses that have a loss of FTEs because of Covid-19 related restrictions that prevent the same level of business activity through the end of the year. This is a significant help to those businesses who still have not been able to fully reopen because of stay-at-home restrictions.
The newest IFR shows us how to calculate owner compensation under the new rules. It’s either:
• Eight weeks’ worth (8/52) of 2019 net profit (up to $15,385) for an eight-week covered period or
• 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period.”
For the full article as published on Forbes.com please click here.