Are Upworkers eligible for PPP loans? (Schedule C Updates!)

In this 4-minute read:

  • Can Upworkers apply for the PPP loan?
  • Additional eligibility requirements Upworkers must meet to apply for the PPP loan
  • Important updates to PPP loans that can help Upwork freelancers get more funding
  • Helpful PPP loan resources Upworkers and independent contractors

The Paycheck Protection Program, enacted by the CARES Act in 2020, allows business owners, independent contractors, and self-employed individuals to receive funding to help them through the financial challenges of the coronavirus pandemic. 

Throughout this program, however, there has been a lot of confusion as to who is eligible to apply for the loan, especially when it comes to freelancers and independent contractors. The most important thing that you need to take into consideration here is your employment status. 

We’ll discuss which Upworkers are actually eligible to receive these funds and how to know if you aren’t.  

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Can Upworkers apply for the PPP loan?

The answer to this question is a strong “it depends.” Not all Upworkers are eligible to receive the PPP loan, but many are. So, how do you know if you’re in the “eligible crowd”?

Check your employment classification. How do you receive your payments on Upwork? If you are a freelancer and make over $20,000/year, Upwork will send you a Form 1099-K for you to report your income. If that’s the case, then you definitely are eligible to move forward in the application process (see additional requirements below). 

On the other side of the question, some Upworkers receive their compensation through Upwork Payroll. If you fit into this category and receive W-2 from Upwork, then you are not eligible to receive the PPP loan because Upwork has you classified as an employee and they provide you with a W-2 each year for your tax filings. 

What about everyone in between? What if you don’t make that $20,000 or more and you don’t receive your compensation through Upwork Payroll? The answer is, yes, you likely qualify for PPP loans. If you don’t fit into either circumstance outlined above, you are still a freelancer/independent contractor. You just report your income through a different form come tax season—usually Schedule C (form 1040) (even if you don’t realize it because you use some kind of tax software like Turbo Tax). 

In order to apply for the PPP loan, you will need to verify your income and employment status, so you’ll need to provide previous tax filings and your income report from Upwork.  

Also please note, IF you receive a W-2 from Upwork, that just means you aren’t eligible to apply for a PPP loan for THAT business. If you also do contract work on your own, and use a 1099 and Schedule C (form 1040) to report THAT extra contracting income, you can likely apply for a forgivable PPP loan, as long as your income for your additional contracting work was over $4800 in a year, and you were in business (as a contractor or sole proprietor) as of February 15, 2020. Learn more about the $4800 minimum earnings requirement for PPP.

Additional eligibility requirements Upworkers must meet to apply for the PPP loan

Just being an independent contractor isn’t enough to apply for the PPP loan. You must meet additional eligibility requirements depending on which loan you are applying for. If this is your first PPP loan, you’ll be applying for a first draw loan. If you’ve already received a PPP loan, you’ll apply for a second draw loan. 

To be eligible for a first draw loan:

  • You must have been in business by February 15, 2020

Read our First Draw PPP Eligibility FAQ for additional insights. 

To be eligible for second draw loans:

  • You must have received a PPP loan in 2020
  • You must have spent your first PPP loan funds on approved costs before you receive the disbursement from your second draw loan
  • You can demonstrate a revenue reduction of at least 25% in any quarter of 2020 when compared to 2019
  • (You must have fewer than 300 employees)

Read our Second Draw PPP Eligibility FAQ for additional insights and special circumstances that may apply. 

Important updates to PPP rules that can help Upwork freelancers get more funding

Recently, some new updates have been made to the Paycheck Protection Program to give America’s smallest businesses more opportunities to receive funding.  

  • Right now, an exclusive application period is taking place until March 9, 2021. This exclusive period allows only businesses with fewer than 20 employees to apply for the PPP loan, and only applications that fit into this category will be processed during this time
  • Individuals who are delinquent on their school loan payments can now apply for the PPP loan
  • Non-citizen businesses who are lawful residents and have an ITIN can now apply for the PPP loan
  • Most importantly: Those who report their income using IRS Form 1040 Schedule C can now use their GROSS (instead of net) profits to determine their max loan amount. This can increase the amount that you are able to borrow, depending on how your report your income. For more information, read about the latest 1040 Schedule C/PPP loan rule changes

Helpful PPP loan resources Upworkers and independent contractors

With all of the confusion out there about this program, we want to be a resource to help small businesses and freelancers alike during this time. Check out other articles and FAQs that we’ve produced to help you:

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