Openforce Cares: Contracting Company Toolkit

By Openforce,

April 2, 2020

Openforce CARES:

Contracting Company Toolkit

Your guide to navigating financial relief during COVID-19

The coronavirus pandemic is hitting the U.S. economy hard. Your business may be faced with uncertainty and fluctuating demand. And the independent contractors (ICs) you work with may likewise be struggling with uncertainty and looking for help.

You may already be looking closely at the variety of relief programs available for businesses under the new emergency legislation. But, for the first time ever, ICs and other self-employed individuals—as small business owners in their own right—have access to significant benefits programs and financial assistance, some of which are unavailable to traditional employees.

While there are numerous general guides covering the details of the benefits available to businesses, there are also some gray areas, particularly in relation to those programs available to both businesses and the ICs they contract with.

We’ve designed this resource to help you navigate IC-related questions under the new COVID-19 legislation and to address concepts specific to companies utilizing ICs as a primary element of their workforces. This is meant to highlight the issues you may want to consider. However, we recommend that any final decisions on how to utilize the relief programs be made in consultation with counsel.

At this point, you are likely inundated with questions from ICs, so we have also created the Openforce CARES: IC Toolkit, which you can refer them to as they sort through their relief options.

What these laws do

The massive Coronavirus Aid, Relief and Economic Security (CARES) Act provides over $2 trillion in relief to American families and businesses. Under this act, businesses (including ICs) may qualify for a wide variety of relief options, such as loans (that may be forgiven in whole or in part), deferred taxes and more. In a notable departure from previous legislations, ICs also gain access to unemployment benefits. At the same time, the Families First Coronavirus Response Act (FFCRA) enables independent workers to access emergency paid leave in the form of tax credits.

Keep reading for a breakdown of these benefits and how they might affect your business.

Benefits guide

Tax refunds for business losses2020-08-07T02:38:56+00:00

How it helps
Under the CARES Act, small businesses and independent workers who pay themselves within a corporate structure (such as S-corporations and sole proprietorships) can now carryback up to five years of net operating losses (NOLs) for tax years 2018, 2019 and 2020. In short, this means some taxpayers will be able to receive additional refunds on taxes previously paid.

How to get it
Get in touch with your tax preparer to estimate your business losses for 2020 and file amended returns to potentially receive refunds for previous years.

Payroll tax deferments2020-08-03T17:57:03+00:00

How it helps
Self-employed individuals are required to pay self-employment taxes, usually quarterly. The CARES act, however, allows employers to delay these types of payroll taxes, and the self-employed are no exception: you can defer half of your self-employment taxes for over a year. These deferred taxes are required to be repaid over the next two calendar years—one half by December 31, 2021, and the other by December 31, 2022.
How to get it
Specific requirements for tax filings are still pending from the IRS. For more information, check the IRS Coronavirus page below and contact your accountant or tax preparer to discuss the options available.
Additional resources
IRS coronavirus tax guidance

Tax filing deadline extensions2020-08-03T17:56:23+00:00

How it helps
The IRS has moved the tax filing deadline for individuals and businesses from April 15 to July 15, 2020, which includes first-quarter tax payments (second-quarter payments are still due on June 15). Although anyone can take advantage of the extension, individuals who choose to file early will receive expedited tax refunds.

How to get it
You don’t need to take any specific actions, but you should check with your tax preparer to see if you’ll need to adjust quarterly payments based on your projected income.

Additional resources
IRS Filing and Payment FAQs
IRS Tax Resources (see the Tax Help section)
File Your Taxes Online for Free

Paid sick and family leave tax credits2020-08-03T17:55:30+00:00

How it helps
Although independent contractors are not usually included in paid sick leave benefits (though some states may have laws that include them), the FFCRA entitles eligible self-employed individuals to a paid sick or family leave tax credit. This is independent of any connection to a specific contracting company.

The paid sick leave credit is available to you as an IC if you are unable to work or telework while under quarantine or are experiencing symptoms of coronavirus and seeking medical attention. You may receive a credit of up to $511 per day (up to $5,110 for 10 days) or 100% of your average daily income for up to 10 days—whichever is less.

A paid family leave credit is available if the leave is taken to care for a sick individual or child at home due to a school closure. The credit amount is either $200 per day or 67% of your average daily income for up to 50 days.

Note: Under this act, your daily average self-employment income is calculated as your self-employment net earnings for the taxable year divided by 260.

How to get it
If you meet the criteria, you can claim the credit on your returns for the 2020 tax year. However, if you need it earlier, you may instead be able to deduct the amount of the credit you’re eligible for from your quarterly estimated tax payments.

Get in touch with your tax preparer to find out more about how this works, and remember to keep all medical records, notices of school closures and similar documentation.

Additional resources
IRS paid sick leave FAQs for the self-employed

Unemployment benefits2020-08-07T02:38:56+00:00

How it helps
Self-employed individuals, independent contractors, and gig workers do not usually qualify for unemployment benefits, but the CARES Act for the first time broadens the eligibility guidelines to include independent workers, meaning qualifying independent contractors have a direct claim for unemployment benefits under their own tax ID. The expanded program runs through December 31, 2020, and provides retroactive benefits from January 27, 2020.

The revised benefits add 13 weeks of unemployment payments to most states’ usual 26, increasing availability from six to nine months. States are required to use the Disaster Unemployment Assistance Program formula to determine the amount you will get. An additional flat weekly sum will be added on top of that for the first 4 months someone collects unemployment.

How to get it
If you want to apply for these benefits, you’ll need to prove you are either partially or fully unemployed, or unable and unavailable to work because of the circumstances related to COVID-19. Because as an independent contractor, you are self-employed, you’ll want to use your own EIN or SSN when asked for your employer’s tax ID number. As noted above, doing so allows you to aggregate revenues from all independent contractor sources in eligibility calculations. For more information, head to your state’s Department of Labor website or use the link below.

Note: The current unprecedented demand may cause delays in application processing and receiving funds.

Additional resources
How to apply for unemployment benefits (resources for every state)
Pandemic Unemployment Assistance information for ICs

Paycheck Protection Program (PPP) loans2020-08-03T17:53:17+00:00

How it helps
The new PPP loans are designed specifically to provide small businesses, including independent contractors, gig workers and sole proprietors, with cash support. The loan amount you are eligible for is 2.5 times your average monthly “payroll” expenses—which can include your own “salary” and health insurance premiums. What can be treated as “salary” is dependent on how you operate your business (e.g., are you incorporated, are you a sole proprietor, are you an independent contractor reporting on Schedule C). For example, for unincorporated independent contractors, your salary may be most easily determined by looking at the net profit listed on Schedule C of your tax return. If you contract with and provide services to multiple contracting companies, this is aggregated in the analysis.

If you have already filed your 2019 taxes, or prepared a 2019 return, this number is reported on line 31 of the Schedule C. If you have not filed your 2019 taxes but have accurate bookkeeping completed for all of 2019, this will be the Net Profit line on your Income Statement. Your Openforce account can help supply documentation to support these numbers. Please contact your tax advisor or business consultant for assistance in this regard.

You may also want to check applicable time limits —i.e., have you been operating your business (or rendering independent contractor services) prior to February 15, 2020?

Importantly, almost the entire amount of the PPP loan may be forgiven (no payback requirement) when applied toward qualifying expenses. These qualified expenses include items such as “payroll” costs (see above) and other designated business expenses listed in the Act.

Because these loans will be available through a list of approved lenders, some terms may vary but the interest rate will be 1% on the portion of the loan that is not forgiven.

How to get it
The PPP loans will be available through approved banks and credit unions, so consult with yours directly to see if they are participating in the program. No personal guarantee or collateral is required.

Additional resources
Treasury Department’s borrower fact sheet
Chamber of Commerce’s complete guide to the PPP
Chamber of Commerce’s PPP checklist
Sample application (learn what information to provide to your bank or credit union)

Economic Injury Disaster Loans (EIDLs) and advances2020-08-03T17:54:04+00:00

How it helps
EIDLs are one of two loan options available to self-employed individuals through the CARES Act. These low-interest, flat-rate loans can be used to cover expenses like paid leave, payroll (even if that means simply paying yourself), or lost revenue due to the pandemic.

When you apply, you may be able to obtain an advance of up to $10,000 and receive it in as little as three days. When used on covered expenses, this advance does not have to be paid back, even if you end up being denied for the loan itself.

How to get it
You can fill out a simple application online through the SBA website. Because, as an independent contractor, you are your own small business, you would enter your own information in the business section of the application. Qualification is based solely on your credit score. But again, you may be eligible for the $10,000 advance even if you don’t qualify for the loan. These are available on a first-come, first-served basis.

Additional resources
Chamber of Commerce step-by-step application guide
EIDL terms and conditions

We want to help, so keep checking back

As difficult as things are right now, the current crisis has made the vital role you play in the economy more visible. That means more relief for your business and independent contractors alike, but this relief does raise questions worth discussing with your legal counsel.

Over the next few weeks, we will continue to update this page as the government releases new guidelines about each of these programs, so keep checking back. We’re committed to making sure you have the information you need.

Legal Disclaimer

Openforce provides general information and industry guidance related to solutions and services for independent contractor workforces. Openforce does not provide legal advice and is not a law firm. While we may have former lawyers and other legal specialists on staff, none of our representatives are licensed lawyers and no one at Openforce provides legal services. Although we go to great lengths to make sure our information is accurate and useful, we always recommend you consult a lawyer for legal advice or a business/tax advisor for applicable business assistance.

About Openforce

Openforce is the leader in technology-driven services that reduce operating costs and mitigate risk for companies using independent contractors. Our cloud-based applications help companies and contractors alike achieve more sustainable, profitable growth by removing financial, operational, and compliance barriers to getting business done.

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