Update from January 12th, 2021
APPLICATIONS FOR FIRST AND SECOND PPP LOANS ARE NOW OPENED.
On December 21st 2020, Congress passed a new stimulus package to (finally) send Americans the help they need to overcome the lasting economic fallout from the COVID pandemic. Most of what’s in this new bill is an extension of the previous CARES ACT that was enacted in March, with some new additions and clarifications. Here’s a recap of what it could mean for freelancers like you.
We will update this post as new information becomes available. Last updated: 01/04 – 2:00p EST
New Stimulus Payments of $600 are on their way.
If you received a stimulus payment at the beginning of the year, you will receive another one. This time the payment will be $600 per adult who made less than $75,000 in 2019 (the IRS will still use your 2019 tax return to determine eligibility.) You will also receive up to $600 per eligible dependent under the age of 17. So a family of 4, with 2 children under 17, that declared less than $150,000 on their tax return in 2019, should receive $2,400.
If you made a lot more money in 2019 than in 2020, making you ineligible for this payment based on your 2019 tax return, there will be a way for you to claim this new stimulus payment in the form of a tax credit when you file your 2020 taxes.
If you received your previous stimulus payment in your Lili account, this next round will be deposited there as well and there’s nothing for you to do. If the IRS doesn’t have your bank account information, you will likely receive a check or a prepaid debit card. If you changed bank account since the last stimulus, the IRS will send the payment to your old account since it’s the one they have on file. If the account is still opened, this is where you’ll receive the money (you can transfer it to your Lili account by opening the Lili app, go to the menu, Add Money / Withdraw from Another Account). If the account is closed, the payment will bounce and the IRS will then send you an alternative method of payment – check or prepaid debit card. Unfortunately, in this scenario, the payment will likely take longer to arrive. If you receive a check, you can deposit it in your Lili account as soon as you receive it.
For more information, you can refer to the press release from the IRS.
Extension of the Pandemic Unemployment Program + $300 per week
The PUA covered freelancers, part-timers and other professionals who are usually not eligible for state-funded unemployment assistance. This program has been extended for another 11 weeks, so until March 14th. If on March 14th you haven’t reached your maximum benefit, the extension will then go until April 5th. During that period the federal government will add an extra $300 every week to the amount you’re currently eligible for.
An extra $100 for freelancers who don’t qualify for the PUA.
Some freelancers who also worked part time (say a graphic designer who also worked as a bartender at night) have not been able to enroll in the PUA because they were already eligible for regular state unemployment through their lower-paying job. This has created a lot of frustration for many, since the PUA would have been financially more beneficial to them. According to a Senate aide, the new law adds an extra $100 for freelancers in this situation, as long as they made more than $5,000 from their freelance work last year. This $100 weekly payment will be in addition to the $300 weekly federal benefit (so $400 extra per week). According to the New York Times, this benefit will begin only after your state reaches an agreement with the Labor Department.
The EIDL Advance Program (aka the $1,000 Grant) could reopen
The popular Economy Injury Disaster Loan Advance program from the Small Business Administration, which offered a $1,000 grant for freelancers, ran out of money last summer. This new bill is providing more funds to the EIDL program ($20 billion) meaning applications for the grant could reopen soon. We’ll keep you posted.
New PPP loans available for freelancers
This new bill also unlocks a second round of Paycheck Protection Program loans (PPP Second Draw) and freelancers are still eligible to request one. Overall, the terms are quite similar to the first one, but there are new eligibility requirements: the applicant must have spent the entire amount of their first PPP loan and must be able to demonstrate a loss of at least 25% of gross business revenue between Q1, Q2 or Q3 of this year compared to the same quarter in 2019.
A few updates on your previous loans.
- If you received the $1,000 EIDL advance, you will no longer need to deduct it from your PPP forgiveness amount. In other words, that money is yours.
- Initially, business expenses that were paid with the forgiven portion of your PPP loan were no longer eligible to be deducted from your taxes. For example, if you paid your $100 internet bill with money from the PPP loan, and were expecting your loan to be forgiven, you were no longer allowed to deduct those $100 when calculating your taxable income for 2020. The new law changed course on that. All eligible business expenses this year can now be deducted from your taxes, no matter which money you used to pay for them. A big sigh of relief for small business owners in general and freelancers in particular.