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CARES Act & the Self-Employed

CARES Act & the Self-Employed

March 30, 2020

by Martin Pringle attorney Karlee Canaday

The $2 trillion federal stimulus package signed into law on Friday, March 27, known as the Coronovirus Aid, Relief and Economic Security (CARES) Act, will be a lifeline to many self-employed individuals, freelancers, “1099 workers,” independent contractors and gig workers.

Unemployment Benefits

  • The law takes unprecedented steps to include the self-employed in the social safety net by offering them unemployment benefits, for which they generally don’t qualify, on a large scale for the first time. Under the Act, self-employed and gig workers whose work has been negatively impacted by the COVID-19 public health crisis are now eligible for emergency unemployment payments. These workers can apply for state unemployment benefits based upon previous incomoe, which will be supplemented by the federal government by an additional $600 a week for up to four months. In addition, the state’s standard benefit period will be extended by 13 weeks (for a maximum length of benefit of 39 weeks) through the end of 2020.

Stimulus Payment

  • Self-employed individuals may also be eligible to receive a direct cash payment of up to $1,200. The $1,200 payment is available for individuals earning $75,000 or less and decreases incrementally as the individual’s income reaches $99,000 (based on 2018 or 2019 income tax returns). Additional funds may be available for married couples and those with children. Stimulus payments will be considered taxable income.

Small Business Loans

  • The stimulus package also includes the self-employed in certain small business loan and grant programs. Small business owners, including sole proprietors, the self-employed, and independent contractors, are eligible for a $10,000 advance on an Emergency Economic Injury Disaster Loan (EIDL) that does not have to be paid back, even if the borrower does not qualify for an SBA loan. The program provides loans up to $200,000.
  • There is no personal guarantee required for the loans.  The SBA is waiving the requirement that businesses have one year of operations prior to the disaster, but businesses are not eligible if they were not in operation on January 1, 2020.  Applicants will not have to submit a tax return and will be evaluated based on their credit score.  The SBA will provide the funding within three days of a successfully completed application as an advance payment.
  • The self-employed may also be eligible for the Paycheck Protection Program which offers forgivable loans to cover payroll, rent, mortgage interest, or utilities. More about these small business loan programs can be reviewed in our overview of the CARES Act.

Other Relief Relevant to Self-Employed Individuals

  • The CARES Act delays federal income tax filing and payment deadlines, including quarterly tax payments.
  • The Act also suspends repayment of student loans held by the federal government until September 30, 2020 without penalty.
  • Self-employed individuals may also delay deposit of payroll taxes until 2021 and 2022, though individuals should consult their accountant to determine if they should do so, as they risk the financial impact of doubling up on payroll tax obligations by deferring the current obligations.

Have questions about how the CARES Act may impact or assist your freelance or solo business? Martin Pringle's business attorneys are happy to help.

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