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CARES Act Guidance for the Self-Employed

Posted by : on : April 8, 2020 | 8:00 am

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act has provided employers with opportunities to claim small business loans, as well as payroll tax incentives. The CARES Act also provided similar provisions for self-employed individuals. The following provides an overview of key opportunities that self-employed individuals should consider, especially with the Paycheck Protection Program opening to self-employed individuals and independent contractors on Friday, April 10, 2020.


CARES Act Guidance for the Self-Employed

1) Unemployment Relief Now Available Until December 31, 2020

  • The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act expanded unemployment income support for those who are typically shut-out of their states’ unemployment income systems, including self-employed workers, independent contractors, freelancers, part-time workers, and anyone with insufficient work histories.
  • Generally, benefits are extended to those who are affected by a COVID-19 diagnosis, quarantined, providing care for a child whose school has been closed, or has had to quit their job as a result of COVID-19.
  • At a minimum, self-employed individuals will receive roughly half of what a state offers through its unemployment insurance system. Benefits are being extended, as the states’ minimum of 26 weeks is increased by an additional 13 weeks for a total of 39 weeks (beginning January 27, 2020). However, an additional $600 of benefits, provided solely by the federal government, will be available only through July 31, 2020.

2) Self-Employed Individuals Are Eligible for the Paycheck Protection Plan (“PPP”) Loan

  • The PPP loan is also available to self-employed individuals.
    • Provides up to 2 ½ months average monthly income based on 2019 income.
    • If the self-employed individual has employees, their employees’ monthly wages and health insurance paid by the employer should be included in the calculation of the maximum loan amount.
    • If the full loan amount is used for net earnings from self-employment (“NESE”), mortgage interest, rent and utilities in the eight-week period following loan origination, the full amount of the loan (up to the premium) will be forgiven.
    • The amount not forgiven carries the balance of a 2-year term at 1% interest.
  • The PPP application process opens for self-employed individuals on April 10, 2020.
  • FGMK can assist those interested in the program work with their banker, as the PPP will be administered by the lending institutions.

3) Self-Employed Individuals May Defer A Portion of Their Self-Employment Taxes

  • The CARES Act allows self-employed individuals to defer one-half of their social security taxes (i.e. 6.2% of the total 12.4%) for 2020, with 50% of their 2020 liability due on December 31, 2021 and the remaining 50% due on December 31, 2022.
  • NOTE: The employee retention credit provided by the CARES Act is not available for a self-employed individual.

4) Self-employed Individuals Are Eligible for an Economic Injury Disaster Loan

  • In addition to, or in lieu of, a PPP Loan, self-employed individuals are also eligible to receive an economic injury disaster loan (“EIDL”), though an applicant MAY NOT use both loans for the same purposes. Effectively, if applying for both, an applicant would need to use EIDL proceeds for working capital other than net earnings from self-employment (“NESE”), mortgage interest, rent and wages.
  • EIDLs are capped at $2,000,000 and must be guaranteed beyond $200,000, though qualification is based solely on credit score.
  • These loans are NOT forgivable and carry a term of up to 5 years at 3.75% interest.
  • When applying for these loans, a self-employed individual is eligible for up to a $10,000 grant that is non-repayable. Thought should be given as to whether this grant, along with payroll tax deferral is more appealing than a forgivable $20,833 loan under the PPP described above.

5) Gather the requisite documentation

  • For a PPP loan, FGMK can assist you in working with your bank as you complete Form 2483 and gather documents to support net income, (e.g., Form SE, Form 1040, Schedule C, Form 1099-MISC, bank statements, etc.), as well as documentation to support qualified mortgage interest, rent payments, or utilities payments (e.g., bills and payment confirmations). Underwriting protocols vary by bank.
  • For EIDL, complete the online application. As little as a calculation of 2019 net income may be needed, as the SBA may approve based on credit score.


If you have questions or want more information about the CARES Act guidance, contact FGMK.


David H. Benz

Managing Director


Daniel F. Laughlin

Managing Director



The summary information in this document is being provided for education purposes only. Recipients may not rely  on this summary other than for the purpose intended, and the contents should not be construed as accounting, tax, investment, or legal advice. We encourage any recipients to contact the authors for any inquiries regarding the contents. FGMK (and its related entities and partners) shall not be responsible for any loss incurred by any person that relies on this publication.


About FGMK


FGMK is a leading professional services firm providing assurance, tax and advisory services to privately held businesses, global public companies, entrepreneurs, high-net-worth individuals and not-for-profit organizations. FGMK is among the largest accounting firms in Chicago and one of the top ranked accounting firms in the United States. For over 50 years, FGMK has recommended strategies that give our clients a competitive edge. Our value proposition is to offer clients a hands-on operating model, with our most senior professionals actively involved in client service delivery.