PPP Loan Forgiveness Application Guidance For The Self-Employed, Freelancers And Contractors

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If you’ve been wondering how to get loan forgiveness through the Paycheck Protection Program Loan Forgiveness application, your wait is over. The sample application for loan forgiveness came out Friday May 15th, and while it’s not as clear as we’d all like it provides more guidance than before. Let’s walk through this application with the information that we have now and adjust as more guidance comes out. 

I’ve split this guidance to address business owners without employees (i.e., self-employed, freelancers and independent contractors) for a couple of reasons. First, the application gets much more complicated when employees are involved. And there’s no need to bog you down with information that doesn’t apply to you. Second, the calculations for businesses with employees are so convoluted that we will need additional guidance before they become effective. If you’re a business owner with employees who would like to take a deep dive. Check out this post from Forbes Contributor Tony Nitti. 

As always, this guidance is meant for informational purposes only and to help you navigate your way through the application. Make sure to check with your tax professional for specific information on your case. 

Before we begin 

It’s no surprise that this application is complicated. Just opening up the 11-page pdf gave me acute anxiety.  It includes the application, instructions, an additional schedule for the application, instructions for that schedule, a worksheet for the schedule that is for the application and instructions for that. 

Let’s break it down into bite-sized pieces. 

I’m not going to spend a lot of time on the top of the loan page. Most of it is self-explanatory. But I would like to point out a few important pieces of information:

  • PPP Loan Disbursement Date: This is the date you received the loan funds. That’s important because that’s the date that starts your eight-week countdown.
  • EIDL Advance Amount: If you got the advance, that amount will be deducted from your forgiveness amount.
  • Covered Period: This is the eight-week period for your loan. The start of this period is the day you received the loan fund and the end date is eight-weeks (or 56 days) later.
  • PPP Loans in excess of $2 Million Check box: Last week the Treasury updated its FAQs to let us know that borrowers with loans below $2 Million would be presumed to have taken the loan in good faith (see Question 46). That doesn’t mean you won’t get audited for other reasons, but at least you won’t have to verify your business experienced economic uncertainty. So if this doesn’t apply to you, make sure not to check this box. 

Start with the PPP Schedule A Worksheet 

As I mentioned there are three main documents: the application, the PPP Schedule A and the PPP Schedule A worksheet.  

A quick glance at the PPP Schedule A worksheet reveals that it only applies to business owners with employees.  In fact, the first line in the table instructions says “do not include any independent contractors, owner-employees, self-employed individuals or partners.”  So great….one task down. 

Then move to the PPP Schedule A 

Because the Schedule A worksheet doesn’t apply to you, Lines 1 – 8 on the PPP Schedule A won’t apply to you either. Your compensation comes in on Line 9. You calculate that number from your 2019 schedule C, line 31 divided by 52 multiplied by 8 (for the eight-week forgiveness period). The max amount you’ll have here is $15,385, that’s the $100,000 threshold, divided by 52 multiplied by 8. 

Line 10 is that same number. You’ll transfer that amount  to Line 1 of the application.  Lines 11 – 13 won’t apply to you, so you’re ready to move on to the application itself. 

Next the application 

As I mentioned, we get line 1 of the application from the PPP Schedule A.  Again, that’s your Schedule C, line 31, divided by 52 multiplied by 8. 

You can add to that any amounts you’ve paid for business mortgage interest (line 2), business rent or lease payments (line 3) and business utility payments (line 4). You may not have many of these expenses, especially if you don’t have an office or home office space.

If you do have these expenses, the good news is you can count costs that were either paid during the covered period or incurred during the Covered Period and paid before the next billing cycle. For example, you paid your electric bill for time before the eight-week period started but within the eight weeks after you received your loan funds. You can also count your lease payment for time within that eight week period, but that you don’t pay until after the timeframe is over. Just make sure not to double count expenses. And remember per the Interim Final Rule from April 14, 2020, you have to have claimed or been able to claim these expenses on your 2019 Schedule C. 

Line 5, which corresponds to line 3 of the PPP Schedule A, won’t apply to you. So, you’ll add all of the amounts from lines 1-4 on line 6. Line 7 doesn’t apply and as such will be 1, per the PPP Schedule A instructions. 

Line 8 should be the same as line 6. The amount of your loan goes on line 9. And line 10 will be your line 1 divided by .75. 

The forgiveness amount line 11, will be the smallest of lines 8, 9 and 10. 

Some Examples

Here’s an example for a freelancer who got $20,832 in a loan based on hitting the $100,000 threshold. She just pays herself and has a separate phone bill.  Her application had the following numbers: 

  • Line 1 (Payroll Costs): $15,385
  • Line 2 (Business Mortgage Interest): $0
  • Line 3 (Business Rent or Lease payments): $0
  • Line 4 (Business Utility Payments): $116
  • Line 5 (Total Salary/Hourly Wage reduction: $0 (not applicable)
  • Line 6 (Totaling lines 1-5): $15,501
  • Line 7 (FTE Reduction Quotient): 1 
  • Line 8 (Total Applicable Expenses): $15,501
  • Line 9 (PPP Loan Amount): $20,832
  • Line 10 (Payroll Costs 75% Requirement): 20,513
  • Line 11 (Forgiveness amount): $15,501

A couple of things of note. Despite her having a maximum loan amount of $20,832, the highest forgivable amount is going to be $20,513. At the very least, she’ll have to pay back $319.  In this instance, $15,501 will be forgiven, and she will have to pay back $5,331 of the loan. 

Here’s another example from a client with lower payroll ($68,000 in total on Schedule C, line 31), rental and lease expenses ($3,600) and some utilities ($200). He got a loan for $14,167:

  • Line 1 (Payroll Costs): $10,462
  • Line 2 (Business Mortgage Interest): $0
  • Line 3 (Business Rent or Lease payments): $3,600
  • Line 4 (Business Utility Payments): $200
  • Line 5 (Salary/Hourly Wage Reduction: $0 (not applicable)
  • Line 6 (Totaling lines 1-5): $14,262
  • Line 7 (FTE Reduction Quotient)t: 1 
  • Line 8 (Total Applicable Expenses): $14,262
  • Line 9 (PPP Loan Amount): $14,167
  • Line 10 (Payroll Costs 75% Requirement): $13,949
  • Line 11 (Forgiveness amount): $13,949

Despite having more qualified expenses, his amount of forgiveness will be limited to 75% of his payroll costs. Meaning, he will have $13,949 forgiven and have to pay back $218. Not a bad deal overall. 

Documentation needed

In addition to the application itself, you will need to submit some documentation. You must also keep these documents for “for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.”

Here’s what you need: 

For Payroll 

  • Nothing! The SBA didn’t list any documentation needed for people without employees. You had to submit your schedule C with your application, so they have the document that they need to confirm what you pay yourself. 

For Non-Payroll

  • Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.


As with the application, you have to agree to certain certifications. Read them carefully. Here are a few that catch my eye: 

  • The dollar amount for which forgiveness is requested is for eligible costs (payroll, business mortgage, interest payments, business rent or lease payments, or business utility payments).
  • If funds are used for unauthorized purposes, the federal government may pursue recovery of the loan amounts with penalties and/or civil or criminal fraud charges. 
  • Making a false statement to obtain forgiveness is punishable by imprisonment and a fine.

Don’t forget the demographics information 

The very last page of the application asks for demographic information. And while you’ll likely be exhausted and not want to fill out this information, I urge you to do so. You can read more about why that information is important here.

But in short, there are some 30 million small businesses in the US, 8 million of which are minority-owned. There’s substantial risk that these businesses are being left out of the PPP program, and this demographic information can give the SBA more insight on whether that’s so. Since we are all in this together, I urge you to help out by supplying the demographic information. 

I hope that helps relieve some of the anxiety and burden with the application. I’ll make sure to update this with any additional information that comes along.

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