We had so many questions come through for our Tips for How Therapists Can Use the Federal Stimulus Offerings webinar that we couldn’t get to them all. Below we’ve compiled some additional questions and answers from the webinar. We will continue to update this information as more details emerge.
PPP Loan for Therapists – FAQ’s:
What does 2 1/2 times your W-2 mean in terms of the loan?
The PPP loan is based on 2 1/2 times your payroll, or if you are a sole proprietor, is based on the average monthly net profit (line 31 on your Schedule C).
Is it the 2019 tax return needed or the 2018?
Either one, but if you haven’t done your 2019 taxes yet, in the context of being ready for the application go ahead and have your documentation prepared – the banks are likely going to ask for it.
Do you have to demonstrate loss of income as sole practitioner therapists? We may not see that drop for month or two?
You do not have to have suffered a financial impact in order to qualify. You being affected by COVID-19 could even mean having to switch your services to telehealth.
What kind of accounting is required if I want to sign up for the EIDL instead of the PPP?
Your bank should provide guidance on what they are requiring to document your calculation.
I have an LLC partnership use Schedule C to report income. I have no employees other than myself. Would I be considered an “applicant with not more than 500 employees?” Or an “applicant who is an individual who operates under a sole proprietorship, with or without employees?”
If you file Schedule C you would use “applicant who is an individual who operates under a sole proprietorship, with or without employees.”
For small business, self-employed sole proprietors, that may have started up in the last six months or so, the Schedule C for 2019 for that business may show a lot more expenses vs. income, so the net income would be less than the current monthly income and won’t reflect anticipated income for 2020. Any ideas on how the PPP might do computations for new businesses?
The SBA should provide guidance to the banks on what numbers to use in your situation. You should be able to use 2020 numbers if you just started this year. Your banker should be able to provide help on that.
What about Subchapter S corporation?
You would file as a business and not as a sole proprietor.
Is it true that only 25% of the loan can be used for rents, health insurance, etc. and the other 75% must go to salaries and wages?
There is a calculation during the “testing period” to determine how much of the PPP loan can be forgiven. Generally that is the case, but your CPA/bank will need to look at the details on how to compute the forgiveness to be sure.
Will the forgiven loan amount then be counted as taxable income on 2020 taxes?
Our understanding is that forgiveness on the PPP loan will not be considered taxable income.
Is landlord/rental income protected by the PPP or EIDL loans?
Rental income is generally not considered self employment income and cannot be used in determining your amount of loan.
I’m not clear how forgiveness is connected to a sole proprietor. I have no employees. A few 1099’s but as you mentioned, they don’t count. What counts toward forgiveness for a self employed sole practitioner?
There has not been clear guidance from the SBA on what they will look at for sole proprietors during the “testing period” to determine the loan forgiveness. This is why we recommend pulling all your documentation so you can be as prepared as possible.
What is there for solo practitioners without employees who pay quarterly taxes but don’t pay themselves a specific salary, and income is way down due to quarantine?
You can apply for the PPP loan as a sole proprietor; you do not need to have employees.
It seems the SBA’s Economic Injury Disaster Loan (EIDL) also provides vital economic support to any small business (less than 500 employees) to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic without penalty. Why do you recommend applying for the PPP instead?
The EIDL package does/did allow for up to $10,000 advance, however we believe this advance would reduce any funds received from the PPP advance though. Additionally, as of Friday, April 10, 2020, the media has been reporting that the EIDL program is running out of funds and having significantly more issues.
We will keep you updated on the latest as new information comes out. Keep checking back here or feel free to reach out to us at firstname.lastname@example.org with additional questions.