CARES Act for Self-Employed | Unemployment Benefits

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CARES Act for Self-Employed

While there is a lot of information being interpreted and published for everyone – our aim here is to target the information for those who are self-employed. We don’t expect there to be anything contained here that is new – merely limiting the information to sole proprieter/independent contactor/self-employed (aka file a schedule C on their federal income tax returns). All of the strategies below are intended to help us limp along successfully enough to emerge from this pandemic. Hopefully you will be able to ramp up back to normal operation as smoothly as possible instead of having to start all over again from scratch. None of these benefits and aids are meant to be a method for a magic increase in income.

  • Stimulus check
  • Unemployment
  • PPP
  • EIDL

Stimulus Checks for Self-Employed Individuals

First the stimulus check – first off, there is a limit to income on if you will get the full check, a partial check or no check. However, it can be confusing for those with your specific type of income and how it is represented on your tax return. The stimulus checks are being issued and limited based on your AGI – which is a special number on the tax return. It will be your other sources of income (interest, retirement) in addition to your NET earnings from your Schedule C. For purposes of this article, all sole proprietor, independent contract worker, or general self-employed person or persons I am going to simply say, your SE income – because unless you have elected to be taxed like a corporation, you are all taxed literally the same on the federal tax return. Instead of listing all the different numbers here of what the limits are – I will instead simply link a very simple calculator so you can get an estimate of what your stimulus check might be:

The first question is about your filing status, single and married filing jointly are easy, but don’t be confused about head of household, while you are technically the head of your household, the head of household status on a tax return is more like ‘single parent’. It should be listed near your name on your form 1040. You AGI is on like 8b of the 2019 Form 1040, or line 7 of the 2018 Form 1040.

Unemployment for Self-Employed Individuals

Next is the unemployment aspect. There is a tricky bit with the base amount of unemployment that you can file for – which we will get to in a minute. The other interesting part is that the federal government will add $600.00 to whatever amount of unemployment check you will receive. It does appear that those in Texas are now able to file for unemployment that have SE income (they had a wait period while they updated their software to be able to handle and process the requests). Here is a link to the Texas Workforce Commission page that has some particularly useful information about how to fill out the request for unemployment with SE income. At the time of this writing, the 2nd to last bullet under the FAQ ‘How do I report Pay Rate for commission or self-employment?’ will bet the most helpful source of information. Please note, unemployment has always been considered taxable income, and you will get a tax form at the beginning of next year with the total amount earned via self-employment.

Paycheck Protection Program for Self-Employed Individuals

Now we come to the PPP – or payroll protection program. This is causing all lenders involved (backed by the SBA but filed through local lenders) a rather severe amount of angst. They are held to such incredibly high standards of compliance and the CARES act attempts to simply cut through all of it, but most are simply unwilling to put themselves at such risk – causing many lenders to only work with you if you are an existing customer in good standing. Assuming you are one such customer or are able to find a local lender willing to process the PPP application for you, here are some facts – and a little conjecture (the facts are STILL being hammered out).

What this is for, is to retain employees on payroll and not furlough/fire them. You are your own employee – you file your earnings and even pay payroll tax on them (self-employment tax on Form SE). Like the unemployment, the PPP was extended to those with SE income. How to calculate how much you can qualify for is the really tricky part, and is incredibly subjective to your particular business and it is generally recommended you first work with a tax advisor to help interpret what items qualify in your business for payroll. We cannot however act on your behalf and submit the loan for you – think of us like a consultant in every sense of the word in regard to your PPP application.

The big benefit to the PPP – is that while it is technically setup as a loan, if that used properly, the full amount can be forgiven – turning it into a grant for lack of better terms. A way to replace income you would have had otherwise due to the economic shift. Again, you are the employee of your SE income. SE stands for self-employed, but maybe ‘single employee’ might work just as well – every once in a while we have to trick our brains to see or think differently.

The PPP will be your main source of helping to replace income if possible – as it is forgiven and will not be considered income. On April 10th SE folks were able to start submitting applications (vs the 3rd when other small businesses could). The PPP is only as good as funding lasts, and it is going away quickly. However, there is a modest amount of talk coming from capital hill that if more money is needed in the PPP, then there will be more funded into PPP.  Any amounts (hopefully small) that are provided by the PPP and not able to be excluded is set as a loan for 2 years, with a 1% interest. Payments are deferred for 6 months.

There is truthfully a LOT of information going around regarding the PPP – the simple fact is that it is real, and it could benefit you. Please do look into it. It is worth the time to at least try – as there are no fees whatsoever.

Economic Injury Disaster Loan for Self Employed Individuals

Lastly is the EIDL – or economic injury disaster loan. This is not a new thing, for those in our local area, hurricane Harvey allowed many folks to seek an EIDL loan. This is done straight through the SBA – please be sure to be on the .gov website and not the .com as the SBA has no affiliation with the .com knockoff. If you navigate to there is a yellow banner at the top of the page to allow you to apply for the EIDL loan. This is purely a loan – but the interest is fairly low at 3.75% and the loan term can be as long as 30 years. The payments are not deferred for 6 months, it is better – the SBA will pay the loan on your behalf for 6 months. Not all are interested in simply obtaining funds that will have to be paid back – but for those that are looking for anything to help their business stay afloat, this is also an option. There is an amount, up to $10,000.00, that can be given very quickly and will not be required to be repaid. The application process for the EIDL will have a loan officer contact you to discuss the amounts of the loan and what amount you would qualify for – to which you can accept the full amount or a lesser amount, but it is not simply a fire the paperwork off and cross your fingers like the PPP. The PPP is a specific request for a specific dollar amount. The EIDL is more flexible. There is a special catch for those that already submitted for the EIDL – that if any EIDL funds are provided and ‘payroll’ was a number that helped gain access to more funding for loan and you subsequently file for an do obtain a PPP loan – then you need to refinance that part of the EIDL loan into the PPP loan.. that is the ‘no double dipping’ that is referenced between the two. Remember the EIDL can be repaid over 30 years, the PPP is set at 2. While the PPP is a lower interest and you might think GREAT I’ll happily refinance this into PPP and pay less interest, your base payment amount (though 6 months from now) will be a larger.

In Summary

I hope this information helps take some of the confusion out of the COVID-19 CARES Act resources for you as a self-employed individual. This is our specialty and we would be more than happy to help navigate these uncertain waters with you.




Follow Up: More Information

Get ready for this: “I’m from the government, and I’m here to help.”

Here’s the deal: “I’m going to give you $20,833 today. I want you to give me $5,448 no later than two years from now. You can keep the $15,385 difference, tax-free—no strings.”

It’s true. The lucky recipient could be you. To obtain the full $15,385 tax-free cash result in this deal (one of many COVID-19-related assistance programs), you must

  • be self-employed,
  • have no employees, and
  • have self-employment net profits of $100,000 or more.

If you are self-employed, you have no employees, and your net profits are

  • $75,000, you pocket $11,538, tax-free.
  • $50,000, you pocket $7,692, tax-free.
  • $25,000, you pocket $3,846, tax-free.

The results above come from the COVID-19 Payroll Protection Program (PPP). When you are a self-employed taxpayer with no employees, the PPP treats you as the one and only employee, and treats your net profits as your payroll.

Big Picture

Under the PPP, you go to your bank or another Small Business Association (SBA) bank or lender and obtain the PPP loan based on your 2019 net profits. It’s a no-doc loan—super easy. No credit report, no nothing.

Do This Now

Two steps:

  1. Read this letter.
  2. Get your bank (or another bank) to accept your application.

Don’t Procrastinate

The SBA runs out of PPP money in a hurry. The second round of funding started a few days ago.

If you snooze, you lose. And then you’ll have to wait until round 3 of funding, should it take place.

If you are self-employed, with no employees, you absolutely need to qualify for this loan and its forgiveness. Think free money. Think cash help during this crisis.

Here are three questions and answers that will help you understand this program during these COVID-19 times. Read on.

Q&A 1

Question 1. I have income from self-employment, have no W-2 employees, and file a Form 1040, Schedule C. Am I eligible for a PPP loan?

Answer 1. You are eligible for a PPP loan if

  • you were in operation on February 15, 2020;
  • you are an individual with self-employment income (such as an independent contractor or a sole proprietor);
  • your principal place of residence is in the United States; and
  • you have filed or will file a Form 1040 Schedule C for 2019.

Q&A 2

Question 2. Since I have no employees, how do I calculate the maximum amount I can borrow, and what documentation is required?

Answer 2. Follow the three steps listed below:

  1. Find your 2019 IRS Form 1040 Schedule C line 31 net profit. (If you have not yet filed your 2019 tax return, don’t fret. Fill out the Schedule C now. You need it for the loan.) If the net profit amount is over $100,000, reduce it to $100,000.
  2. Calculate the average monthly net profit amount (divide the net profit by 12).
  3. Multiply the average monthly net profit amount by 2.5.

Q&A 3

Question 3. What amount of the loan qualifies for forgiveness (remember, I don’t have any employees)?

Answer 3. You are going to like this. With no employees, your loan forgiveness is

  • eight weeks’ worth (8/52) of your 2019 net profit (yes, last year, from that Schedule C you used for the loan amount—you don’t have to consider your 2020 profits);
  • mortgage interest paid during the covered period (eight weeks from loan receipt) on real or personal business property (the interest you will deduct on Schedule C);
  • rent payments during the covered period on lease agreements in force before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C (business rent payments); and
  • utility payments under service agreements dated before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C (business utility payments).

The SBA will reduce your loan forgiveness by any COVID-19 qualified sick or family leave tax credit you claimed. Your loan is for two years, but you don’t have to wait much longer than the eight weeks to apply for forgiveness. There are no prepayment penalties.


Loan amount. Say your Schedule C shows $120,000 of net profit. Your limit is $100,000. Divide that by 12, and your monthly amount is $8,333. Multiply that by 2.5, and your loan amount is $20,833.

Loan forgiveness. Your loan forgiveness is $15,385 (8/52 of $100,000) plus qualifying interest, rent, and utilities, not to exceed total loan forgiveness of more than $20,513.

In the SBA loan application, the amounts from this example show as follows:

  • Average monthly payroll: $8,333
  • x 2.5 = $20,833
  • Number of employees: self


The paperwork is easy:

  • Your 2019 1040 Schedule C (if you have not filed yet, complete Schedule C now)
  • Proof that you were self-employed during 2019, such as a 2019 Form 1099-MISC, invoice, bank statement, or other book of record
  • Proof that you were operating as a Schedule C business on or around February 15, 2020 (a 2020 invoice, bank statement, or book of record)
  • Completed application with an SBA lender

Other Facts to Know

How can I request loan forgiveness?

You submit your forgiveness request to the lender that is servicing the loan. The lender must make a decision on the forgiveness within 60 days.

What is my interest rate?

1.00 percent fixed rate.

When do I need to start paying interest on my loan?

All payments are deferred for six months; however, interest will continue to accrue over this period.

When is my loan due?

In two years.

Can I pay my loan earlier than two years?

Yes. There are no prepayment penalties or fees.

Do I need to pledge any collateral for these loans?

No. No collateral is required.

Do I need to personally guarantee this loan?

No. There is no personal guarantee requirement.


It’s true: the government is here to help your self-employed business during these difficult times, even when the only worker is you. The funds you receive and the minimum amount forgiven are automatic—based solely on your 2019 Schedule C net profit.

You need to move quickly. The government’s newest (round 2) PPP funding will be used up in a matter of weeks.

Get in the game now. Even if you miss out on this round 2 of funding, having your application on file for a possible round 3 of funding would give you a head start.

If you need our help, please don’t hesitate to reach us at 281-440-6279.

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

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