Personal Finance

Self-employed workers face an uphill battle on PPP loan forgiveness


Self-employed people who borrowed from the Paycheck Protection Program may have a tough time getting the full balance forgiven.

The PPP is a federal forgivable loan program that was established by the CARES Act. It’s intended to cover up to eight weeks of wages, mortgage interest and other expenses for business disruptions during the coronavirus pandemic.

The loan is supposed to be forgivable if at least 75% of the proceeds are used to cover payroll, according to the Small Business Administration. No more than 25% can be used for other items.

Borrowers have two years to repay any amounts that aren’t forgiven, at an interest rate of 1%.

Though the Treasury Department and the SBA released an application for forgiveness last week,  additional guidance has yet to arrive.

Currently, the provisions for forgiveness are less generous for entrepreneurs who don’t have employees.

For example, the amounts these individuals pay toward retirement and health-care benefits aren’t counted toward forgivable payroll costs — only the amount they pay themselves.

“It seems like self-employed people won’t get credit for anything other than salary,” said Greg Zbylut, a tax attorney at Breyer Andrew in Burbank, California. “We still have some people who haven’t applied for the PPP loan for these very reasons.”

Expenses that may not be forgiven

Generally, the amount a business can borrow through the PPP is based on a firm’s payroll, including health-care and retirement plan contributions.

It’s a little…


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