Posted: Jan 19, 2021
Category: The Musician Business
Related Blog Posts:
"Hey Working Musician,
Did you know that the Paycheck Protection Program loan is also for independent contractors and sole proprietorships?
Well it is. So if you’re a working musician and you filed your 2019 tax returns as such (i.e. a contractor or sole proprietor), then you’re eligible.
Here are my Top 5 reasons why you should apply for the PPP loan right now.
It opens up on Monday, January 11th 2021. The deadline is March 31st, 2021. But don’t wait til the last minute. We heard the story of unscrupulous businesses scooping up these loans last year. Like Tom Brady’s TB 12 wellness business that got $900,000. That just takes money away from small business owners, like you and I. So apply for one immediately.
If you’ve been getting Pandemic Unemployment Assistance through the CARES act, then you know you have to go through the initial application then continue to file weekly certifications to get paid. With the PPP application, it’s one and done. No weekly certs. Once you’re approved, the money is directed deposited into your account within days.
With PUA, you need to report any income each week, which then gets deducted from your benefits. So even if you made tips on a live stream performance, that’s income PUA wants to report. PPP is a better solution because It’s purpose is to help small businesses stay afloat and continue working during this pandemic.
Yes, technically it’s a loan, but as long as you spend it according to the SBA’s guidelines, the loan is less than 150K, and you apply for forgiveness, it will be 100% forgivable. Current guidelines say that you need to spend at least 60% on payroll. So if you're an Independent Contractor or Sole Proprietor, you can actually pay yourself a weekly salary with those funds.
What are you waiting for?!?
How do you get the PPP loan? Just like round 1 in 2020, you need to apply through a bank. Having an established relationship with your existing bank helps you get priority. So start there. I applied through 2 banks and got funded by the bank that I’ve been with the longest.
How much funding can you get? It might sound complicated, but it’s really not. Take your 2019 IRS Form 1040, look at schedule C line 31. That’s your net profit.
Net profit divided by 12 then multiply by 2.5
Schedule C Line 31 = $48,000 net profit
$48,000/12 = $4,000
$4,000 x 2.5 = $10,000 PPP funding amount
If I got a PPP loan in 2020, can I get another in 2021? YES! It’s called Second Draw PPP Loans and I’ll be applying for one as soon as it opens on January 11th. You just need to show at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
Can you receive PUA and a PPP loan? Yes, but not at the same time! Let’s say you’re getting money for PUA now and then you receive funding for a PPP loan. The week the PPP money hits your bank account is the week you will stop being eligible for PUA. So you can get both, but you can’t double dip.
I’m not a CPA. I’m just trying to create awareness for working musicians. So as always, talk to your accountant!
Visit www.sba.gov or www.treasury.gov for more information and details, including the comprehensive program rules."