Stimulus payments are cheques that the government is issuing directly to tax payers. You don’t need to do anything. The stimulus cheque amounts will be deposited directly into your bank accounts on file with the IRS.

For more information, check the IRS’ FAQs page.

The CARES Act expands the unemployment insurance currently provided by states by providing an additional $600/week for up to four weeks, by including independent contractors and freelancers, and by restarting benefits that have lapsed. The enhanced unemployment benefits will be administered by each individual state. You can pull up your state’s unemployment offices by visiting CareerOneStop’s Unemployment Benefits Finder and selecting your state from their drop-down.

* Note that 1099 workers may not be able to qualify for unemployment benefits for COVID-19- related reasons. The CARES Act creates two categories for workers eligible for Pandemic Unemployment Assistance: 1099 workers, and those experiencing work stoppage for COVID-19-related reasons. States have broad authority to interpret the provisions of the bill. See the Authors Guild’s excellent analysis of the bill for more information.

Paycheck Protection Flexibility Act, passed June 6, has relaxed some terms of PPP loans. The information revised below has been edited to reflect that (edits in bold). The  PPP program still has funds to disperse. Graphic artists who have not applied are encouraged strongly to see if they qualify and do so.

Small businesses, sole proprietorships, and independent contractors can apply for loans of approximately 2.5x the average monthly payroll through the Small Business Payment Protection Program. The purpose of the loan is to prevent employees from being laid off by subsidizing eight weeks of payroll. The loans must be applied to payroll, rent, and utilities. If applied appropriately, the entire amount of the load may be forgiven.

Read the Treasury Department’s Information Sheet on the PPP program.

To apply for the PPP loan, you’ll need to find a lender active through the SBA’s 7a lender program. If your own small business bank is part of this program, work through them. You’ll also need to fill out the lender’s PPP loan application. Many banks will require you to have some sort of relationship with them – for example, a business account or credit card – or will want assurance that you don’t have a business borrowing or credit relationship with another bank. The lender will require documentation showing that the loan is required to weather economic uncertainty and maintain payroll, including tax documents, mortgage payments, etc. In order to apply for debt forgiveness, you’ll also need to prove that you used the funds as required, so accurate record-keeping is a must.

If you’re an independent contractor, you’ll need to include your 1099-MISC forms. If you’re a sole proprietor, you’ll need to submit the appropriate schedules from your tax filing.

There is some confusion as to when sole proprietors and independent contractors should apply. Small businesses and sole proprietorships can apply starting April 3, and independent contractors and gig workers on April 10. However, there isn’t clear guidance on who is considered a sole proprietor versus an independent contractor. According to The Balance SMB, the distinction is made in how you are considered for tax purposes. A “sole proprietor” is a one-person business who is not registered with their state as a business entity, such as an LLC, corporation, or partnership. Sole proprietors file Schedule C forms with their personal taxes. Independent contractors work for someone else and receive a 1099-MISC to show their earnings. The difficulty, as any freelancer knows, is that you can be both a sole proprietor and an independent contractor. Many freelancers receive both 1099 income as a contracted worker, as well as income from services they provide to clients. Both the 1099 income and the other income streams are reported on their Schedule C.

So how to choose when to apply for the PPP?

Because there are serious concerns that the PPP loan program is underfunded, it’s crucial that individuals apply early, before the funding runs out. The opening date for applying as a sole proprietor is April 3, one week earlier than the opening date for applying as an independent contractor. A good rule of thumb to follow will be to look at your Schedule C. If you’ve only reported revenue streams from 1099 forms, you should apply as an independent contractor. But if you’ve reported multiple income streams (which may include 1099 income), you should be able to apply as a sole proprietor. Regardless of which route you’re going, search for a lender, and apply as soon as you can.

Forbes has a comprehensive article, How To Calculate Payroll Costs For Your Paycheck Protection Program Loan.

In summary:

Learn more:

The US Chambers of Congress has an excellent recap of the PPP. The Small Business Administration also has information on their website. PPA has also posted a video of how to apply for the Paycheck Protection Program; register with PPA to view the webinar.

Because of the high volume of applications, the EIDL program currently is only accepting applications from agricultural businesses. EIDL applications which were already made will be processed. Check with the SBA website for updates on when application eligibility requirements open up again to non-agricultural businesses.

The EIDL program predates the COVID-19 crisis, but the CARES Act relaxed requirements for the program and increased its funding. It also expanded the program to cover sole proprietorships and independent contractors. The program extends loans to these and other small businesses which experience temporary losses incurred from COVID-19-related public emergencies. Any business under 500 employees (including sole proprietorships and independent contractors) in existence before January 31, 2020, is eligible.

PPA has an excellent guide on how to apply for an EIDL loan for download. You can apply for an EIDL loan directly on the SBA website.

If the COVID-19 emergency means that you are unable to get to your job, you may be able to receive a credit on your income taxes, to be claimed on your income tax return and reduce your estimated tax payments. The COVID-19-related causes include:

If you’ve been subjected to a quarantine or self-quarantine, the credit equals 100% of your sick leave equivalent amount. The sick leave equivalent amount is the lesser of either your average daily self employment income, or $511/day for up to 10 days ($5,110 total).

If you’re caring for someone under quarantine or self-quarantine, or for a child whose school or daycare has closed, the credit equals 67% of your sick leave equivalent amount. The sick leave equivalent amount then is $200/day for up to 10 days ($2,000).

You can also claim a coronavirus emergency family leave credit for up to 50 days. In this instance, the credit amount would equal the number of qualified family leave days multiplied by the lesser of either $200, or your average daily self employed income. The maximum total family leave credit would be $10,000.

Employers whose operations were fully or partially suspended due to COVID-19-related public emergency orders, or who experience a loss of over 50% in gross receipts as compared to the same quarter in 2019 are eligible to apply for the employee retention tax credit. The credit would be for 50% refundable payroll tax of up to $10,000 for each eligible employee.

For more information, visit the IRS’ FAQs page.