woman with mask on phone
Independent workers and the self-employed were allowed to begin submitting applications for the PPP on April 10, 2020. Here's what you need to know. — Getty Images/martin-dm

The U.S. government passed important new laws in March 2020 in order to help businesses of all sizes attempting to mitigate damage from the coronavirus pandemic. While much of the discussion has focused on providing relief to small and medium-sized businesses, America’s growing number of self-employed earners were also thrown a lifeline of sorts with this legislation.

With the Coronavirus Aid, Relief, and Economic Security (CARES) Act being signed into law in late March, the government approved $350 billion in forgivable loans that could be obtained by small businesses, including 1099 earners. These Small Business Administration (SBA) loans are part of the Paycheck Protection Program (PPP), one of the largest sections of the CARES Act.

Here are some things freelancers, contractors and self-employed individuals need to know about the CARES Act and the PPP.

You can check out the U.S. Chamber of Commerce’s guide for 1099 earners here.

How can the Paycheck Protection Program help 1099 earners?

The PPP provides loans to businesses in order to keep employees on payroll or to rehire laid-off employees. These loans are forgivable if at least 75% of the loans are spent on payroll, with the remaining amount spent on things such as mortgage, lease and utility payments.

Importantly, self-employed workers, sole proprietors and freelance/gig economy workers are also eligible for PPP. In the case of self-employed workers, they can get a loan to cover about two and a half months of their average earnings. Payroll in their case is equal to average net earnings from self-employment. In general, an amount equal to eight weeks of average net earnings (plus other certain business-related expenses for which the borrower claims a business deduction) will be forgiven from the loan.

Am I eligible for a Paycheck Protection Program loan?

Nearly all self-employed American business owners qualify to take part in the PPP loan program, and most American 1099 earners are encouraged to apply for PPP loans immediately.

How to calculate the PPP loan amount

Contractors, sole proprietors and 1099 earners are eligible for PPP loans up to $100,000 in annual income. Earners can calculate what they should ask for by adding up all 1099 revenue for 2019 (up to $100,000), divide that number by 12 (months) and then multiply that by 2.5 (months). For example, if an independent contractor earned $100,000 in 1099 revenue in 2019, then that individual should apply for roughly $20,800 from a PPP loan.

How to apply for a Paycheck Protection Program loan

Independent workers and the self-employed were allowed to begin submitting applications for the PPP on April 10, 2020. To apply, workers should first talk with any bank they have an existing relationship with to see if that bank can help them apply. If they do not, workers should talk with local community banks or apply with newly-approved fintech companies that are helping small businesses.

The Treasury Department has not yet released a revised application form designed for 1099 earners, so these individuals should use the same form that small businesses are currently using to apply for these loans. However, they would substitute their net income in place of the “average monthly payroll” that a small employer would write in on the application.

Additionally, the Treasury Department said in recent guidance that independent contractors should have the following documents in hand when they are applying for PPP loan:

  • 2019 Form 1040 Schedule C
  • 2019 IRS Form 1099-MISC detailing non-employee compensation received
  • A 2020 invoice, bank statement or book of record to establish you were in operation on or around February 15, 2020

Receiving a PPP loan may impact a 1099 earner’s ability to collect unemployment insurance, so be sure to check with a financial advisor or state office.

Coronavirus Guide for Small Businesses

CO— is working to bring you the best resources and information to help you navigate this challenging time. Read on for our complete coronavirus coverage.



Some independent workers may qualify for unemployment insurance

On top of the PPP program and tax changes, the CARES Act also opens the door for some 1099 earners to receive unemployment benefits from the Pandemic Unemployment Assistance (PUA) program. The Department of Labor says contractors “with reportable income may also qualify for PUA benefits if he or she is unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his or her ability to continue performing his or her customary work activities, and has thereby forced the individual to suspend such activities.” 1099 earners can find their state unemployment offices here.

Receiving a PPP loan may impact a 1099 earner’s ability to collect unemployment insurance, so be sure to check with a financial advisor or state office.

Who to reach out to if you need advice

The Treasury Department released a recent Q&A about PPP loans that may be helpful for 1099 earners. Contractors and self-employed individuals who are looking to apply for PPP loans also have community resources they can tap if they need help with their applications. These organizations include:

If 1099 earners have an existing relationship with a trusted CPA or financial advisor, those are also worthy options for seeking clarification or advice.

Watch out for scammers

On a final note, 1099 earners should explicitly keep an eye out for bad actors in this process. Scams have been targeting businesses and individuals, suggesting that their services can help you get to the front of the line for a PPP loan when this is not possible. Also, loans given out under the PPP are set up in a way so workers should not have to pay any kind of related fees — including application fees, package fees and closing fees — so do not pay extra for help.

For more resources from the U.S. Chamber of Commerce:

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Want to read more? Be sure to follow us on LinkedIn!

Published April 21, 2020