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An Independent Owner’s Coronavirus Financial Survival Guide

Updated: Jul 15


By Steven Davidson

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As we all continue to battle the economic impact of Coronavirus, many business owners continue to look for any option they can use to stay in business. Independent contractors may have gotten the short end of the stick with low funding abilities from the Paycheck Protection Program and having to wait longer than other businesses to apply for CARES Act programs. In addition, many other business loan and grant programs require a minimum of two employees, placing funding even further out of reach. Even with these setbacks, there are a few things independent workers can do. Here is a checklist of all the things independent contractors should do to help themselves and their businesses.

Apply for the Paycheck Protection Program

Though independent business owners were forced to wait longer than other businesses, new funding has opened this program back up. There are a lot of current applicants, but the funds have already been refilled by over $300 billion and it is unlikely that the government will allow it to be completely drained. The program is designed to incentivize businesses to keep their employees but provides help to single owners as well. Independent contractors, who have not applied for this program already, can still find it to be a good option. The loan program allows for sole owners to use their average monthly profits and get a loan for up to 2.5x that amount. The loan has a maximum of $100,000 and is eligible for complete forgiveness if 60% is used on lost income, as opposed to payroll for other businesses. The application period closes on June 30, 2020. For more information, click here.


Recent Update: As of June 4, 2020, the federal government has signed in the PPP Flexibility Act to amend some of the requirements of the programs. Investopedia has provided an outline of the changes including:

● Amount needed to be spent on payroll (lost income for independent owners) reduced from 75% to 60% to qualify for forgiveness

● Deadline to fully restore workforce to pre-Covid 19 levels is now on December 31st (previously, it was June 30th) to obtain full forgiveness

● Repayment period is now 5 years instead of 2

● Payment deferment period of 6 months now begins

● Owners now have 2 new exceptions for not fully restoring workforce and still receive forgiveness.

○ 1. If employee is unable to find qualified employees to fill vacancies

○ 2. Unable to restore operations to pre Covid-19 levels

Independent owners can use some of these changes to their advantage to prepare for repayment options and loans.

Apply for Unemployment

Normally, independent contractors and independent business owners cannot apply for unemployment benefits because they usually do not pay into the system, but the government has made an exception for the current situation. The Pandemic Unemployment Assistance Program, through the CARES Act, has opened the door for these owners and workers to apply for unemployment benefits if their income has been affected by Covid-19. It is a federally funded program which is administered through the states.


Those who qualify for this program are ones who cannot receive normal unemployment. This includes self-employed individuals, independent contractors, and anyone who files Form 1099. It requires certification of partial or full unemployment based on a pandemic problem, like being diagnosed with Covid-19 or having your business closed for quarantine. Those, who apply for the program can receive $600 per week until July 31, 2020, are subject to an amount calculated by their state based on their 2019 income. Other requirements for the program depend on the state, so look to your state government website for their criteria. The benefits are capped at 39 weeks under this program, but some states allow for an extension under certain circumstances.


Some independent contractors go through phases of workload, so they may be wondering what it means to be unemployed for the use of this program. To qualify for this program, those who work sporadically can qualify if they show a significant decline in work due to the Coronavirus. For more information on the program, look at Forbes’ PUA article.

Use the Families First Coronavirus Relief Bill

This Act has provided workers with one month’s worth of sick and family leave at about their usual wages. This does not help the self-employed, but the Act provides them some relief too. Individual workers can claim a refundable credit against their federal income tax and will issue a payment if this ends up being in excess of the tax.


To calculate the amount, self-employees need to calculate their equivalent sick leave and equivalent family leave. Sick leave is calculated by taking the lesser of daily self-employment income or $511 for 10 days. The family leave is calculated by the lesser of daily income and $200 per day. They are entitled to take the full amount of equivalent sick leave and add it to 67% of their family leave equivalent.


Along with this, the program offers an emergency credit worth up to $10,000. It takes up to 50 days of qualified family leave days and is equivalent to this number multiplied by $200 or daily income, whichever is less. Both of these programs are only available for the period after the March 18th release until December 31, 2020.


For more information about eligibility requirements and application process, click HERE.

Delay Filing 2020 Taxes and Social Security Payments

To help Americans relieve some of the current stress, the government has pushed back the date of filing 2020 federal taxes to July 15, 2020. It applies to every individual filer, and in most states businesses too, and is not determined by how much money is owed. The date has been moved automatically, so there is no need to apply unless you need more time than that. However, the government is still asking for anyone who is still able to pay before the date to do so, likely to ensure funding for other programs.


The extension only applies to federal taxes, but most states have provided a similar deadline as well. Other than the ones provided below, the extension is essentially the same. Here is a list of the states with different extension dates and guidelines:

● Iowa (Extension to July 31, 2020)

● Hawaii (Extension to July 20, 2020)

● Idaho (Extension to June 15, 2020)

● New Hampshire (Extension to June 15, 2020)

● Mississippi (Extension to May 15, 2020)

● Virginia (Extension to June 1, 2020)

● Puerto Rico (Extension to July 31, 2020)

● Washington (Extension to June 15, 2020)

● Minnesota (Extension only for individuals)

● Connecticut (Extension only for individuals)


To learn more about the program in your state, click HERE.

Look Into Withdrawing from a Retirement Account

The CARES Act has waived the 10% fee for withdrawing before account owners turn 59 and a half. Traditional IRA’s, 401(k)s, 403(b)s, and other defined retirement contribution plans are covered by this new rule. It is important to note that this does not apply to retirement loans. As many independent business owners either have worked for a company before or have their own personal retirement accounts, it could be useful to use some of that money now to finance business and personal operations.


To qualify for the exemption, either you, your spouse or dependent must have been diagnosed with Covid-19 or have suffered a financial loss because of coronavirus related problems, like quarantine or reduced hours. Account holders may withdraw up to $100,000 per person. Even if the holder has multiple accounts, this is the maximum total they can pull from all of them. If the plan is provided by a previous employer, only the amount is necessary to reduce some approved hardships. Approved hardships include foreclosure, immediately necessary home repairs, and medical expenses.


For those who really need the money, this is a good option, but there are some things to consider before deciding if this is the right thing to do. Along with the cost of pulling out money from a portfolio in a down market, it is still a risk to do this. Here are a few reasons this might not be for you.

  1. If you have a plan from a previous employer, you may not have access to the full amount of the account, so it might not even be enough for what you need to do. The employer can limit how much you can pull out to only what is necessary for basic living function.

  2. Another problem is that the money is not readily accessible. It can take weeks before you have the money and by then it may not be necessary. Even without the complications of Covid-19, it can take up to 2 weeks and it is very likely to take even longer now.

  3. Though you will avoid the 10% early penalty, the amount pulled will still be subject to taxation. It will be added to your annual income taxes as if it were part of your income. You can apply to have some of this set aside and the CARES Act allows for a three year distribution of the burden.

This is a big decision for those with structured retirement plans so be careful when choosing this option. The Consumer Financial Protection Bureau has more information for those considering this.

Apply for a 1099 Loan

For independent contractors who file a 1099, Stilt is offering loans depending on your needs and standing. Stilt is a fintech company whose main goal is providing immigrants and underserved people with access to credit and loans. The company is offering loans for independent contractors in need of more funds. It is perfect for those who are new to their business or have a poor credit history because this is only one aspect they look at for granting loans. Current employment and employability, education, financial behavior, defaults and collections, and credit score are all weighed to find the best available funds and interest rates. Applications are evaluated and an offer is sent to the applicant within a few days. If it is accepted, the funds are transferred within 2-3 business days and payments are scheduled. The loan amount is determinative of the individual applier, so to find out how much you qualify for, visit Stilt’s Loan Application Page.

Stay Updated with Your States Reopening Phase

Many states are beginning the process of returning to normal, meaning it will soon be time to return to business as usual. Cities are even starting programs to allow for businesses to inch back. For example, San Francisco has begun a program allowing businesses to use public spaces and streets to conduct sales and other operations, even if they are not essential. Governor Murphy of New Jersey is allowing curbside pickup only and social distancing measures on construction. We may soon be making even bigger leaps in the right direction, so being ready is important. Getting started as soon as possible allows for independent contractors and other solo ventures to deal with an inevitable slowness of business flow. Thinking that everything will return to the way it was before the pandemic does not seem reasonable right now, so it is better to be prepared for a low profit year than rely on a big turnaround.

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Are you interested in launching or sustaining a pandemic proof small business? Spot issues, take action, stay safe, and thrive in a post Covid-19 world with Legalucy. Learn more at thelucyreport.com

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