SBA: Non-citizen owners with ITIN can get PPP loans (important rules updates!)

In this 2-minute read:

  • Biden administration has announced major PPP changes
  • Non-citizen owners/principals who pay taxes using ITINs CAN apply for PPP loans
  • What is an Individual Taxpayer Identification Number?
  • Important considerations for Schedule C filers

On February 22, 2021, the Biden administration released a briefing announcing important changes to the PPP loan program intended to provide more meaningful assistance to America’s smallest businesses and underserved communities struggling with the impact of the COVID-19 pandemic.

On March 3, 2021, a new application was released, and a new Interim Final Rule was published detailing the new rules, application calculations, etc. You can read about all of the PPP rule changes here, see the new IFR here, and see the new PPP application forms here

However, one important clarification has been made by the SBA and the Biden administration that was not included in the March 3, 2021 IFR: Non-citizen business owners, independent contractors, self-employed individuals, and sole proprietors who are lawful U.S. residents and pay taxes using an Individual Taxpayer Identification Number (ITIN) may apply for PPP loans.

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New PPP guidance clarifies that applicants who use ITINs to pay their taxes cannot be denied on that basis

According to the White House briefing, “The PPP statute is clear that all lawful U.S. residents may access the program, but a lack of guidance from the SBA has created inconsistency in access for ITIN holders like Green Card holders or those here on a visa. The SBA will address this unfair inconsistency by issuing clear guidance . . . . that otherwise eligible applicants cannot be denied access to the PPP because they use ITINs to pay their taxes.”

You may also like: PPP loan application help

What is an ITIN (Individual Taxpayer Identification Number)?

An ITIN or Individual Taxpayer Identification Number is a 9-digit number assigned to non-U.S. citizens who are lawful residents who cannot get a Social Security Number (SSN) and who pay U.S. taxes. The ITIN is a tax processing number only available for certain nonresident and resident aliens, their spouses, and dependents. 

What does an ITIN number look like?

An Individual Taxpayer Identification Number is a 9-digit number, beginning with the number “9.” in the following format: 9XX-XX-XXXX.

Why is this SBA clarification for ITIN applicants important?

Previously there was some confusion about whether non-citizens could apply for and qualify for PPP loans, particularly if they used ITINs to apply. The new clarification will allow and encourage many struggling non-citizen owners to apply for vital stimulus funding under the PPP loan program.

ITIN applicants who use Form 1040 Schedule C have even more reason to apply for PPP loans ASAP

In addition to clarifying that ITIN applicants can’t be denied PPP acceptance on that basis, the new rules can have a dramatic impact on sole proprietors, self-employed individuals, independent contractors, and small businesses that file their taxes using Form 1040 Schedule C. These applicants previously were restricted to using their net profits (line 31 on the form) to calculate their maximum loan amounts, and many people were unable to qualify for PPP stimulus loans.

However, the new rules allow for these people to choose to use their GROSS INCOME (line 7), rather than net, to determine how much PPP funding they may qualify for. This can mean the difference between qualifying and not qualifying for a PPP loan in many cases. 

Read more about the new Schedule C PPP changes and the new calculations.

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