PPP repayment -what qualifies for sole proprietor “payroll”

3 weeks ago

Don’t have a payroll…just subcontractors. Can I pay myself–as usual? Can I pay sub-contractors or companies that I don’t give a 1099 to. Do these qualify for my normal payroll as subcontractors so I can writeoff the repayment as much as possible.

Additional info about this contractor
Project Role: General Contractor
Project Type: Residential
Owner The Storrs Law Firm
18 reviews

The Paycheck Protection Program provides a good source of relief for self employed contractors. This program provides a forgivable loan (and if it must be repaid, it offers very favorable terms) and is available to self employed/sole proprietors.

Since sole proprietors and contractors usually don’t have payroll, their loan is based on 2019 net profit divided by 12, to get a monthly “average” net profit. This number times 2.5 equals your PPP loan amount. Which means your PPP loan is roughly ten weeks worth of net profit.

Instead of spending your funds on payroll, you can automatically get eight week’s worth of net profit forgiven, without having to spend it on anything. This is called “owner compensation replacement”—it makes things nice and simple. The remaining PPP funds will need to be spent on utilities, rent, and mortgage interest expenses in order to be forgiven.

The amount of “owner compensation replacement” you’re eligible to claim for forgiveness is calculated by multiplying your reported net income in 2019 on your Schedule C by 8/52 (or 0.154).

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