Sba Loan Forgiveness Independent Contractor

As small businesses struggle to stay afloat during the COVID-19 pandemic, the Small Business Administration (SBA) has offered various loan programs to help ease the burden. One of these programs is the Paycheck Protection Program (PPP), which provides forgivable loans to businesses to cover payroll and other expenses.

However, many small businesses also rely on independent contractors for services such as graphic design, marketing, and consulting. The question then arises, can independent contractors be included in PPP loan forgiveness?

The short answer is yes, independent contractors can be included in PPP loan forgiveness. The SBA has provided guidance on how to calculate the forgivable amount for loans that include independent contractors.

To include independent contractors in PPP loan forgiveness, businesses must use Form 3508EZ or 3508S. Form 3508EZ is for businesses that didn’t reduce salaries/wages of employees by more than 25% and didn’t reduce the number of hours worked by employees. Form 3508S is for businesses with loans of $50,000 or less.

On these forms, businesses must list the payments made to independent contractors during the covered period (the period in which the loan was used). These payments are then added to eligible payroll costs, such as salaries, wages, and benefits, to calculate the forgivable amount.

It’s important to note that businesses can only include payments made to independent contractors for services that are included in the business’ regular course of operations. Payments for non-business-related services, such as personal services, cannot be included.

Additionally, businesses must have documentation to support the payments made to independent contractors, such as invoices, canceled checks, and bank statements.

Overall, including independent contractors in PPP loan forgiveness is possible and can provide much-needed relief for small businesses. As always, it’s important to consult with a financial advisor or accountant to ensure proper documentation and eligibility.