Another key change, that could potentially impact a variety of taxpayers, is updated SBA guidance on calculating maximum loan amounts for self-employed individuals and independent contractors filing on Schedule C of their individual tax return. Previously, these business owners were limited to the net income from their Schedule C for determining the loan amount for their own earnings. However, the SBA’s updated guidance, released on March 2, provides a revised calculation allowing for these small business owners to apply for their own earnings based on the gross receipts, not net income, of the business. This has the potential to substantially change the calculation and allow these businesses to qualify for a larger loan than they would otherwise be eligible for. A Schedule C with at least $100,000 of gross receipts and no employees would qualify for the maximum PPP loan (per person) of $20,833.

There are a couple of things to note with the updated calculation. First, its only applies to new loan applications. Therefore, if you have a Schedule C and have already applied based on the net income of the Schedule C, you cannot go back to request additional loan proceeds. However, the new calculation can be used for either a First Draw or Second Draw PPP loan. Second, the economic uncertainty safe harbor is different for these loans. With most loans, businesses are deemed to have met the safe harbor for having economic uncertainty if their loan was under $2 million. For these gross receipts calculations, however, any Schedule C that applies will not be able to use the safe harbor if their gross income is greater than $150,000. While this doesn’t mean that larger Schedule C’s should not consider applying for a loan, they should work to document their economic uncertainty and why they determined that they needed to take advantage of the PPP Loan program rather than seeking bank financing or other funding sources.