One, you’re running a business. Whether you planned to or not, you are. You’re legally classified as such, you pay taxes as such. So, treat it that way.
This is a business loan, they’re going to ask for business documents
The biggest reason comes down to documentation. As I write this, the specific rules and how-to’s haven’t been released yet. Like I said earlier, all that independent contractors needed for documentation the first time around was a Schedule C. I don’t know the exact details of what they’ll require this time.
Why would it be different? Last time everything was based on annual profits https://americashpaydayloan.com/title-loans-az/. This time, quarterly revenue is a qualifier. You need to demonstrate that.
In the recently released guidance from the SBA on the Paycheck Protection Program 2.0 Second Draw loans, they state that they’ll be looking for documentation of income reduction.
Such documentation may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, quarterly financial statements or bank statements.
As an independent contractor, your tax documents aren’t going to document your quarterly income. This indicates they’re likely to ask for business financial statements, in particular a profit and loss statement, as well as bank records.
Not sure what a profit and loss statement is or how to create one? That’s where a good bookkeeping program will come in handy. If you’ve entered all your transactions into a bookkeeping program, you can easily get the reports you need.
Some bookkeeping resources for independent contractors
Here are three apps you can check out that are particularly geared for independent contractors. They’re structured so you can get reports that line up with the Schedule C’s that we fill out for our taxes.
There are a number of good options. My preference is Hurdlr, which offers both bookkeeping and mileage tracking and has a free version that will handle the basics.
Quickbooks Self Employed is another popular one. Quickbooks is an established name and many tax preparers prefer it. You can read my review on Quickbooks Self Employed for delivery independent contractors here.
One other you can check out is GoDaddy Bookkeeping. That’s a bit less well known. I used it back in the day when I was flipping bikes and bike parts as it worked great with Paypal and eBay. You can read my review of Godaddy Bookkeeping and comparison to Quickbooks Self Employed
This tool will help you get an idea if you had a sufficient loss of income in 2020 compared to 2019.
- There’s nothing official about this. There’s nothing guaranteed about this. It is just a tool to give you a quick glimpse.
- This is the first time I’ve created a tool like this. I’ve tested it several times in as many scenarios as I can think of. There may still be glitches that I haven’t uncovered. If you run into glitches on it, please let me know in the comments so I can look into it.
- I am not a tax or financial professional. I’m not related to the SBA or any other government agency. I’m just a blogger who delivers in the gig economy and then uses my experience and research to assemble information that will be helpful to other gig economy contractors.
- Results of this tool do not guarantee approval for a second draw in the Paycheck Protection Program. Neither do negative results guarantee that you’ll be denied. There may be other factors that impact your eligibility. If the information you put in is inaccurate or incomplete, that can impact your results. Glitches in the form could create inaccurate results. I try to present the results in a way that you can check the math.