What Are You Waiting For?

Mar 15

This is your last chance to get tax-free money from the Paycheck Protection Program (PPP)!

The deadline to apply is March 31st, so apply now! Update: The new deadline is May 31st!

All family child care providers who were in business before February 15, 2020 are eligible to apply. In addition, to be eligible:

You don’t need to have employees.
You don’t have to show a profit in either 2019 or 2020.
You don’t need to have a business checking account.

The amount you can receive from the PPP is based on your gross income, not profit, from either your 2019 or 2020 tax return. For example, if your profit was $50,000, you would receive $10,416!

You are eligible for the First Draw PPP if you have not previously received money from the PPP.

You are eligible for the Second Draw PPP only if you have previously received money from the PPP before February 3, 2021.

Apply for the PPP through your local bank or an online lender such as PayPal, OnDeck, Kabbage, Biz2Credit, Intuit.

Money from the PPP is tax-free. You do not report it as income on your tax return. It’s a forgivable loan you will not have to pay back once you fill out a simple forgiveness application form. Some providers are worried that the money they receive will not be forgiven. Don’t worry about this! 98% of those who have applied for forgiveness, have received it. The forgiveness application form is very simple.

You need to apply before the March 31st deadline. Update: May 31st!

What if I don’t have a separate business checking account?

Some banks require that you have a separate business checking account. If this is the case, apply using an online lender who will not require it. All lenders are likely to ask you to send in proof that you were in business before February 15, 2020. To show this, send in your Schedule C and several monthly bank statements before this date to show you earned money.

What if my lender only asks for my net income?

If a lender asks for your net income, rather than your gross income, apply through another lender. You will get a lot less money if you use your net income.

What if I haven’t filed my 2020 tax return yet?

If you haven’t completed your 2020 tax return, you can either use your 2019 gross income or fill out your 2020 Schedule C. Since lenders only want to know your gross income, you may need to just send in Schedule C with lines 1-7 filled out.

Can I change my application if I’ve already submitted it?

If you haven’t yet received money from the PPP, contact your lender to see if you can make a change and use your gross income. It’s not clear if this is possible.

Do I need to show a loss in 2020 to be eligible for the PPP?

You do not need to show a loss when applying for the First Draw PPP. You do need to show at least a 25% reduction in your gross income from 2019 to 2020 to be eligible for the Second Draw PPP.

Can I apply for the PPP if I am an LLC or a corporation or partnership?

Yes! The articles I’ve written on my website describe how to apply if you are self-employed (sole proprietor). But, you can apply no matter what your business structure. Your application will be based on your payroll.

How can I spend the PPP money?

My advice is to spend all of the PPP money on payroll for yourself. You can spend the money from 8 to 24 weeks before you ask for forgiveness. Divide the money you receive by 11 and write yourself a check for that amount each week. Enter “payroll” in the memo line of the check and redeposit it into the same bank account or another account. Or, you can transfer money from one bank account to another.

Once I pay myself, is this considered taxable income to me?

No! When you write a check to yourself and call it "payroll" it is not subject to any payroll taxes and you do not report it as income. The PPP money is tax-free.

Do it!

This PPP program can provide a significant financial benefit to you and your family. Tell your fellow family child care providers to apply! There is no reason not to apply.