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What the CARES Act does for the Self-Employed

Posted by Cody Moore | Apr 08, 2020 | 0 Comments

     Today my partners and I gave a (virtual) talk at the University of Idaho College of Law. During the discussion, a question was raised as to how COVID-19 has affected small businesses. We discussed much of what was covered a couple of weeks ago in my summary of the CARES Act. But, as the conversation developed good questions were raised specific to issues related to self employed individuals in our community. In this post, I'll try to cover those issues. 

Self-Employed Individuals Can Apply for a Forgivable SBA Payment Protection Program Loan

     A 1% interest Small Business Administration (SBA) Payment Protection Program loan (PPP)* is available to businesses with less than 500 employees (some exceptions apply) for up to 2.5 times the employer's average payroll. If the employer uses the funds for things like payroll, rent, mortgages, or utilities, the principal of the loan will be forgiven**.  The borrow must self-certify that current economic uncertainty makes the loan necessary to support ongoing operations and that funds will be used as described above.

     According to the CARES Act, the  loans are available to “individuals who operate under a sole proprietorship or as an independent contractor.” This means the forgivable loans are available to the self-employed, including independent contractors and “gig economy” workers. 

What if I don't have any Employees? How do I Calculate Average Monthly Payroll?

     The goal of the SBA PPP loans is to keep people employed and relieve some stress from the unemployment system and this does include people without employees.  However, the loans are based on average monthly payroll and some people might have difficulty making that calculation. Some self-employed people may use a payroll service or pay themselves a monthly salary making the calculation relatively easy. For many though the calculation may simply mean using the Schedule C from prior year or to-be-filed personal tax returns along with a 1099-MISC for independent contractors. In essence you would divide the annual amount on your schedule C or 1099-MISC by 12 to get your average monthly payroll.  You need to work with your banker and accountant when making these determinations.

Many Self-Employed Individuals Can Apply for Unemployment Assistance Under the CARES Act

     First, there are two provisions of the CARES Act applying to employees generally, but which may not apply to the self-employed:

     Pandemic Unemployment Compensation (PUC). The CARES Act provides unemployment benefits in addition to state unemployment benefits through July 31,        Pandemic Unemployment Insurance in the amount of $600 per week.

     Pandemic Emergency Unemployment Compensation (PEUC). This provides an additional 13 weeks of state unemployment benefits to workers who meet work-            search requirements.

     Luckily, there is an additional program for those left out of the first two:

     Pandemic Unemployment Assistance (PUA). This portion of CARES Act expands the list of people who may otherwise not be eligible to receive state unemployment benefits (varies state-by-state) to include the self-employed, individuals seeking part-time employment, individuals lacking sufficient work history, or those otherwise not qualified for regular UC, extended benefits under state or federal law, or PEUC. PUA benefits are not generally available to those who can telework.

     To qualify a person must self-certify that they are fully or partially unemployed and they cannot work for one of the following reasons:

  • He or she is diagnosed with COVID-19
  • He or she has symptoms of COVID-19 and is in the process of seeking a medical diagnosis
  • A household member has been diagnosed with COVID-19
  • He or she is providing care to a household member with COVID-19
  • A child or other person in the household for which the individual is the primary caregiver is unable to attend school or daycare due to COVID-19
  • The individual is unable to reach work due to a quarantine
  • The individual is unable to attend work because a healthcare professional advised him or her to self-quarantine
  • The individual is scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of COVID-19
  • The individual is the sole wage earner in his or her household due to death of the head of household as a direct result of COVID-19
  • The individual was required to quit his or her job as a direct result of COVID-19
  • The individual's place of employment closed as a direct result of COVID-19
  • Other criteria that may be established by the Secretary of Labor.

For more general information on PUA benefits visit the U.S. Department of Labor.

For more Idaho-specific information and updates, visit  the Idaho Department of Labor or its FAQ page.

For Washington-specific information and updates, visit the Employment Security Department.

* The SBA also has a an Economic Disaster Loan program, which may be available to some. 

**There is risk not all of non-payroll expenses will be fully forgiven according to the United States Department of the Treasury.

About the Author

Cody Moore

Cody Moore is a partner with W+R+M. He practices in the areas of civil litigation, real estate, business, landlord tenant, and collections.


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