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The Small Business Administration on Wednesday launched a new formula for calculating applications and loans for loans under the Wage Protection Program for the self-employed and concert workers.
For these small businesses, this will mean higher amounts of loan forgiveness in the future.
The new PPP application for self-employed workers and sole proprietors who file IRS Form 1040 List C is now claiming the full amount of gross income, which is in line 7 of the tax form. Previously, Annex C applicants applying for PPP loans were required to grant the SBA the net profit from line 31 of the form.
In addition, the SBA has published updated guidelines for lenders on calculating loan amounts for Annex C applicants and new eligibility rules for borrowers, including those who have struggled with student loan debts, have been convicted of offenses or have been homeowners. non-citizen business.
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The Biden-Harris administration announced in late February updates to the SBA program to help smaller businesses access forgivable loans. At the same time, the administration has announced a priority application window for some borrowers – as of February 24, creditors have processed applications only from companies with less than 20 employees and will continue to do so until March 9.
But this has led to confusion for some borrowers and lenders. While the priority window opened at the end of February, the new eligibility rules and the updated loan calculation formula for some borrowers were not set to take effect until the first week of March.
Now that the SBA has launched the updated application for sole proprietors, as well as the final interim rule with revisions to the calculation of the loan amount and eligibility, borrowers should be able to work with their creditors to submit applications under the new guidelines. To be sure, it will take some time for creditors to digest and implement the new information.
The new calculation is important for millions of sole proprietors and self-employed workers in the United States, as it will lead to greater forgivable loans through the program.
Previously, the SBA used net profit as a support for wage costs for enterprises without employees, even though wage and profit are different measures.
In addition, the net income line on IRS Form 1040 in Annex C includes deductions, which have reduced or eliminated the amount for some, leading to small loans or making them ineligible for the program. Using gross income – usually a larger number – will solve some of these problems.
This is developing news. Please check again for updates.
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