In this 3-minute read:
- Am I eligible for PPP loans if I report income using a 1040 on Schedule E?
- If I report income on a 1099/1040 using schedule C, can I get a PPP loan?
- Can Schedule F businesses get PPP loans?
- Can K-1s, partnerships, S and C corporations get PPP loans?
IMPORTANT PPP UPDATE: As of March 3, 2021, PPP applicants who report their income with IRS Form 1040 Schedule C (i.e., most independent contractors, sole proprietors, and 1099 workers) will be able to use their GROSS (instead of net) profits to determine their max loan amount. This can make a big impact on the amount you can borrow, depending on how much you make and how you have reported your profits. Read more about the latest 1040 Schedule C/PPP loan rules changes, and see the new rules, and the new PPP application form for Schedule C applicants.
At Womply we have helped over 250,000 small businesses, partnerships, sole proprietors, independent contractors, and eligible self employed individuals through the PPP loan process. We love helping America’s heart and soul get the vital stimulus they need to make it through these difficult times.
One of the most commonly asked types of questions we see is regarding self-employment or business income reported on 1040 using schedule C, E, F, and/or on K-1. There’s a lot of confusion about whether you’re eligible to apply.
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The short answer is nearly all types of self-employment income are eligible for application for a PPP loan. 1040 Schedule E income is pretty much the only type that is ineligible for PPP application.
If I report earnings on a 1040 using Schedule E, am I eligible to apply for a PPP loan?
No, unless you also have OTHER income that you report on a schedule C, 1099, or other self-employment or business/partnership income you report on a K-1, for example. Income reported on a Schedule E is “passive income” from rental real estate, royalties, estates, trusts, and residual interests in real estate mortgage investment conduits (REMICs), and doesn’t qualify for support from the SBA under the PPP loan at this time.
If you get income from a Vrbo or Airbnb, you need to be careful about applying for PPP loans. If you used a Schedule E, you likely don’t qualify for a PPP loan for that business.
If I file a 1040 using Schedule F, can I get a PPP loan?
Yes, if your farm or ranch meets the size standards set by the SBA:
(i) the business has 500 or fewer employees, or (ii) the business fits within the revenue-based sized standard, which is average annual receipts of $1 million. Additionally, agricultural producers, farmers, and ranchers can qualify for PPP loans as a small business concern if their business meets SBA’s “alternative size standard.” The “alternative size standard” is currently: (1) maximum net worth of the business is not more than $15 million, and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million. For all of these criteria, the applicant must include its affiliates in its calculations.
Read our article about PPP loans for self-employed farmers for more details.
If I’m in a partnership and file a K-1, can I get a PPP loan? Do I report my self-employment earnings as part of the application?
Partners’ self-employment income should be included on the partnership’s PPP loan application. The partnership should submit a single PPP application for the partnership. Individual partners may not apply for separate PPP loans as part of the partnership.
Partnerships with less than 500 employees (or meets the SBA’s size standard) can apply for PPP loans, whether a general or limited partnership, as long as the organization meets all legal restrictions for U.S.-based organizations and was in force before February 15, 2020. You will need to provide evidence of payroll prior to that date.
Specifically: The partnership’s 2019 (and 2020 if available) IRS Form 1065 (including K-1s) and other relevant supporting documentation if the partnership has employees, including the 2019/2020 IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements) along with records of any retirement or health insurance contributions, must be provided to substantiate the applied-for PPP loan amount. If the partnership has employees, a payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the partnership was in operation and had employees on that date. If the partnership has no employees, an invoice, bank statement, or book of record establishing the partnership was in operation on February 15, 2020 must instead be provided.
Read our article for full details on how partnerships can apply for PPP loans.
If I file a 1099/1040 using schedule C to report my self-employment or contract work income, am I eligible for a PPP loan?
Yes, many types of independent contractors, gig workers, and self-employed individuals are eligible for PPP loans as long as they are based in the U.S. and the organization doesn’t fall under the prohibited outlined by the SBA.
(Some ineligible businesses include those engaged in illegal activities, loan packaging, speculation, multi-sales distribution, gambling, investment or lending, or where the owner is on parole. There are certain exceptions; see our PPP eligibility FAQs for details.)
If you reported over $4800 in income last year and were in business before February 15, 2020, you probably qualify.
Read more: If I had 1099 income can I get a PPP loan?
You may also like: if I had a W-2 as well as 1099 income, can I get a PPP loan?
Go deeper: Does PPP check credit?
Can I get a PPP loan if report revenue as an S or C corporation?
Yes, as long as your corporation was in place before February 15, 2020 and doesn’t fall under the “ineligible business types” outlined by the SBA (see our PPP eligibility FAQs for details).
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