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Paycheck Protection Program Forgiveness Sole Proprietor Compensation

 
 

Please note, this guidance is subject to change based on further guidance published by the Treasury and SBA. We will endeavor to update this page to reflect additional guidance, however make no commitment to do so, and recommend visiting the SBA website to learn of any changes that occur.

Since each individual’s facts and circumstances will vary, the answers to these questions may not be accurate for you. Therefore, you should consult with your legal, tax, and/or accounting advisors for advice for your specific situation.

 

Sole Proprietor Compensation included in Forgiveness

Forgiveness calculated for sole proprietors includes payroll costs and non-payroll costs similar to other businesses. The primary difference is that owner compensation is determined based on the 2019 IRS Form 1040 Schedule C line 31 net profits pro-rated for the number of weeks in the Covered Period or Alternative Payroll Covered Period provided that the owner compensation included in the forgiveness amount cannot exceed an annualized rate of $100,000. In addition, for nonpayroll costs, borrowers must have claimed or be entitled to claim a deduction for such expenses on your 2019 Form 1040 Schedule C for them to be a permissible use during the Covered Period or Alternative Payroll Covered Period.

Additional guidance was provided regarding compensation for sole proprietors and owners which can be included as part of payroll costs in the forgiveness calculation.  Compensation for sole proprietors and owners is based on 2019 Schedule C net profit prorated for the Covered Period.  It should be noted that forgiveness amounts for sole proprietors and owner’s compensation are limited to no more than $15,385 for an 8-week Covered Period, or for a 24-week Covered Period no more than 2.5 months of 2019 Schedule C net profit subject to a cap of $20,833.