There’s been plenty of media coverage about the widespread benefits provided by the American Rescue Plan (ARP). But many self-employed professionals and other small business owners don’t realize how many new sources of relief they may be eligible for. Plus, there are numerous other active programs offering financial relief to small businesses, freelancers, and the self-employed. In a recent session of my Pandemic Office Hours, we conversed about these benefits extensively. Here’s a summary of what help you can expect and pursue if you’re suffering financially from the COVID-19 pandemic. (Unlike most of my posts, this one is for U.S. residents only. Apologies to my international readers!)

Collecting money

Federal Benefits Available to Most Americans (see below for benefits specific to the self-employed)

  • $1,400 per person 2021 stimulus payment: Almost every adult earning less than $75,000 per year — based on Adjusted Gross Income (AGI) — will receive $1,400 by direct deposit, check, or debit card. For more details, see this summary of who is eligible. If you still haven’t received your payment, check on its status with the Get My Payment tool.
  • $600 stimulus payment authorized in December 2020: If you never received this, you can request it when you file your 2020 income taxes. Claim the Recovery Rebate Credit on your federal tax return. If you already filed your 2020 return, you’ll need to file an amended return to claim it.
  • Earned-Income Tax Credit: This credit for working adults whose 2020 income was below certain limits is now higher than before and more people are eligible. If you haven’t been eligible in the past because you are over 65 or have no children, you may now be eligible anyway. Use the Internal Revenue Service EITC Assistant to find out. If you’re eligible, but you already filed your 2020 return and didn’t claim the credit, you’ll need to file an amended return to get it. If you filed and did claim the credit, but now the amount should be higher due to ARP-related changes, the IRS will calculate this for you and send you a refund.
  • Increased Child Tax Credit and Child/Dependent Care Tax Credit: Effective in 2021, the amounts of both these credits have been increased, and more people will now be eligible for the Child and Dependent Care Tax Credit. In addition to claiming these credits next year on your tax return for 2021, you can now also start receiving advance payments for these credits throughout this year. The details for receiving advance payments are still being worked out. To be notified by the White House when updates are available, sign up here.
  • First $10,200 of unemployment benefits tax-free: If you collected unemployment last year, you will not need to pay federal income tax on the first $10,200 of benefits you received in 2020. If you already filed your 2020 return, you don’t need to file an amended return to receive a refund. The IRS will start issuing these refunds in May 2021.
  • Lower health insurance premiums: If you get your health insurance from a state or federal Affordable Care Act program, your premiums are about to become more affordable. The ARP expands who is eligible for ACA premium tax credits and increases the subsidy amount for many people already eligible. If you’re already enrolled in an ACA plan, you should start to see lower premiums in May 2021. If you’re currently without health insurance, or paying a sky-high premium for a non-ACA plan, now is the time to check what you can get from the ACA. Open enrollment is open at least until Aug 15, 2021 in most states. In California, ACA enrollment is open until Dec 31, 2021.
  • No need to repay excess APTC: If you’re already on a subsidized ACA plan, your monthly subsidy is officially called the Advance Premium Tax Credit (APTC). It’s possible that your income ended up being more than expected last year, for example, if you collected unemployment with a federal boost. If so, you don’t have to repay any excess APTC you received as you normally would on your 2020 tax return. Already filed your 2020 return? The IRS will recalculate this payment automatically and send you a refund.

Federal Benefits Available to the Self-Employed

  • Extended PUA unemployment insurance: As a self-employed individual, you are eligible for extended unemployment insurance with a $300 per week supplement, via the Pandemic Unemployment Assistance (PUA) program. As long as your 2019 earnings from self-employment were more than zero, you may qualify for this program. Many self-employed folks don’t realize that if you are still earning, but your current income is below what you earned in 2019 due to the pandemic-caused recession, you may be eligible for partial benefits. You can file for these benefits through your state unemployment department.
  • First draw PPP loans: I’ve been surprised to learn how many self-employed people don’t realize that Paycheck Protection Program (PPP) loans convert to grants as long as you use them to pay yourself and cover certain business expenses. These loans will be completely forgiven if you use at least 60% to pay yourself and no more than 40% on approved expenses. You can use 100% of the loan just to pay yourself. Most self-employed people, even if you have no employees, are eligible for these loans: don’t be misled by the word “paycheck.” If you didn’t receive a PPP loan in 2020, you can apply now through May 31, 2021. Don’t wait to apply, as some lenders may stop accepting applications earlier than this date. PPP loans are no longer available as of May 31, 2021.
  • Second draw PPP loans: If you received a PPP loan in 2020, you may be eligible for a second draw loan. To qualify, your 2020 gross revenue needs to be at least 25% lower than your 2019 revenue — either for the whole year or for just one quarter. Right now, you can apply through May 31, 2021, but don’t delay, in case this date is moved up.
  • Larger maximums for PPP loans: After the ARP was passed, a subsequent ruling increased the PPP loan amount that most self-employed folks can apply for. If you are a sole proprietor or single owner pass-through entity — basically anyone who files their taxes on a Schedule C — you can now apply for a loan based on your gross revenue rather than your net profit. If you couldn’t get a PPP loan before because your business wasn’t profitable in 2019, you can now apply for one based on the amount of revenue you took in, minus only your direct cost of sales. (It’s the amount shown on Line 7 of your Schedule C).
  • Finding PPP lenders: Many small business owners have asked me what their options are for finding a PPP lender. The best place to start is with the bank where you have your business checking account. But you may not have a checking account just for your business, or the bank you use is being slow to respond, or perhaps isn’t even offering PPP loans. You can search the SBA map of available lenders to find others. Many self-employed folks have found that local credit unions and small banks are easier to deal with. I received my own PPP loan from Patelco Credit Union in San Francisco. Another local business owner I spoke with recommended San Francisco’s Bank of Guam. There are also some national lenders you can work with. I’ve heard from a couple of people getting PPP loans from SmartBizLoans, which is nationwide.
  • New expenses PPP loans can be used for: Second draw PPP loans can be used to pay a wider range of expenses than were allowed for first draw loans. You may use PPP funds to pay “mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.” Expenses for operations include many of the monthly subscriptions we self-employed people pay for web hosting, mailing list management, accounting systems, etc. Payments you make toward the home office portion of your rent or mortgage interest, plus utilities, are also allowable PPP expenses.
  • EIDL payments deferred and loan amounts increased: Most self-employed people didn’t receive Economic Injury Disaster Loans (EIDL) in 2020, as PPP loans were a better deal since they convert to grants. However, if your business is incorporated, you may have gotten an EIDL instead of, or in addition to, a PPP loan. If so, the good news for you is that all EIDL payments have been deferred until 2022, so you have a reprieve before you must begin repaying. Also, the maximum loan amount has been increased, so you can potentially increase the amount of your existing loan. You should expect to hear from the Small Business Administration about how to request an increase.
  • Targeted EIDL Advances: Despite these being labeled “loan advances,” they are actually grants which do not have to be repaid. There are some limited circumstances where you might be eligible to receive up to $10,000. If you applied for or received an EIDL in 2020, your business is located in a low-income area, and you can demonstrate more than a 30% reduction in revenue during any eight-week period since Mar 2, 2020, you should be hearing from the SBA how to request an increased advance.

State, Local, and Industry Benefits

  • State stimulus payments: Some states are making their own stimulus payments. California is offering the Golden State Stimulus, and Maryland included stimulus payments in its RELIEF Act. Check with your state governor’s office or income tax department to see if you qualify and how to follow up on any missing payments.
  • State Earned Income Tax Credits: Twenty-nine states plus the District of Columbia and Puerto Rico have enacted their own version of the federal EITC. If you earned less than usual in 2020, you may not realize you’re eligible for one of these. Check with your state income tax department to see if you qualify and how to claim the credit. If you’ve already filed your 2020 state tax return, you may need to file an amended return. Note that in some states, claiming a state EITC may make you eligible for other relief. In California, for example, if you claim an EITC on your tax return, you will automatically receive a Golden State Stimulus payment.
  • State unemployment tax relief: Many states already don’t levy income tax on unemployment benefits. Some that do levy tax on these benefits have lowered or waived the tax for 2020 and/or 2021. Check this state-by-state guide to see what your state is doing.
  • Help with housing costs: If you’re having trouble paying your rent, almost every area in the U.S. has some type of pandemic renter’s assistance available. Visit your state’s page at the Department of Housing and Urban Development site to explore what your state is offering. If you’re a homeowner and need help with your mortgage, visit the Consumer Financial Protection Bureau to find out what you might qualify for.
  • State and local relief grants and loans: Many states, counties, and cities are offering relief grants and loans to small businesses. Duke University has a searchable database of more than 1,300 of these opportunities. Also check with your state governor’s office, county government office, and mayor’s office to see what else may be available locally. In my city and state, there is both a California Relief Grant and multiple types of grants and loans available to San Francisco businesses.
  • Industry and professional grants and loans: Hundreds of organizations are offering relief grants and loans for their members, or for people in specific professions. An an example, for artists and musicians in California, the Center for Cultural Innovation has a list of available grants, as does the San Francisco Jazz Center. Check with all the professional organizations you belong to, and every industry group that your profession relates to. Some of these industry-specific programs are also included in the Duke University database.

Investigating all these benefits may take you a considerable amount of time. But if the pandemic has left you and your business short on funds, taking a few hours to pursue some financial relief will be time well spent.

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