During the continuing health crisis due to COVID-19, some freelancers may experience reductions in their workloads. In dealing with their reduced workload, freelancers should consider some of the provisions of the recently enacted CARES Act, four of which seem particularly relevant. First, under the Act, coverage for unemployment benefits was expanded to include self-employed individuals. Second, the Small Business Administration is offering an Economic Injury Disaster Advance Loan (EIDL). Third, and probably the most publicized provision, is the Paycheck Protection Program. Fourth, for those people carrying federal student loans, there is financial assistance to get them through these difficult times. Each freelancer will have to evaluate which of these programs provides the best benefits to them during this difficult economic time. If they haven’t already, they should reach out to their respective accountants/attorneys for more specific guidance.
Unemployment Benefits – Pandemic Unemployment Assistance
This is a federally funded and state-administered program. Accordingly, each freelancer will have to check their particular state’s guidelines for how to apply and the amount of their benefits. In addition to expanding coverage to include self-employed individuals, the Act provides for an additional $600 per week increase for up to four months (ending July 31, 2020). In order to qualify, the claimant must be otherwise able and available to work but cannot due to one of the enumerated reasons associated with the COVID-19. See the links below for more details.
Currently, it seems that some of the states are not in a position to process claims for unemployment compensation from self-employed persons. For those self-employed individuals considering filing unemployment compensation benefits, they should continue to check with their state’s labor/unemployment department. California’s department of labor summarizes the program well (see the links below).
https://www.dol.gov/coronavirus/unemployment-insurance
https://edd.ca.gov/about_edd/coronavirus-2019/pandemic-unemployment-assistance.htm
SBA Assistance for Small Businesses
Economic Injury Disaster Advance Loan
This program targets small businesses with temporary losses of revenue. You can take a loan advance of up to $10,000. Funds are made available within three days of a successful application. The loan advance will generally not have to be repaid.
Overview: https://www.sba.gov/disaster-assistance/coronavirus-covid-19
Link to Application: https://covid19relief.sba.gov/#/
Paycheck Protection Program
This program is designed to provide a direct incentive for small businesses to keep workers on their payroll. A portion of the loan will be forgiven provided the money is used for payroll, rent, mortgage interest (business) or utilities during the eight-week period following the loan origination. This program is also available to the self-employed and sole proprietors. On Friday, April 10, 2020, banks will start taking applications from self-employed and sole proprietors.
One of the more confusing areas of this program deals with calculating the amount of “payroll” and the amount of the loan. As written, the program will allow for a loan of 2.5 times eligible payroll costs. In the case of a self-employed individual or a sole proprietor who operates without employees, the amount of payroll is equal to their average monthly net income from self-employment for the twelve-month period ending January 31, 2020. For those who do not regularly update/maintain their business financial records, it may make sense to use the profit and loss from their 2018 income tax return. In general, a self-employed person will prepare and file a form called Schedule C with their income tax return. The profit figure will be found on line 31 of Schedule C. Included is a copy of a Schedule C for reference.
Overview: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp#section-header-2
Link to Current Sample Application: https://www.sba.gov/document/sba-form–paycheck-protection-program-ppp-sample-application-form
Link to Schedule C form: https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Student Loans
Finally, for those who may still be carrying student loans, the Act provides relief for those with federal student loans. Payments will be put into forbearance from March 13, 2020 through September 30, 2020. See the link below for details on this aspect of the Act.
https://studentaid.gov/announcements-events/coronavirus
For more tips, check out the latest episode of N2’s coronavirus podcast miniseries, where we talk to some of the folks behind the COVID-19 Freelance Artist Resources. Listen below, on Apple Podcasts, Spotify, & more.