The Paycheck Protection Program (PPP) was established by the US Small Business Administration (SBA) to provide financial assistance to small businesses during the COVID-19 pandemic. The PPP loan was designed to help small businesses cover payroll and other operating expenses during the pandemic.
One question many small business owners may have is whether contract labor is included in PPP loans. The answer is yes, contract labor costs are eligible expenses under the PPP loan program.
Contract labor refers to workers who are not employees, but who are hired on a contract basis. This can include freelancers, consultants, and other independent contractors. These workers are not considered employees for tax purposes and are typically responsible for paying their own taxes and providing their own benefits.
Under the PPP loan program, eligible expenses include payroll costs, rent or mortgage interest, and utilities. Payroll costs include salaries, wages, tips, and benefits. Contract labor costs can be included in the payroll costs category.
To include contract labor costs in PPP loan calculations, businesses must provide documentation that shows these expenses were paid during the applicable time period. This documentation may include invoices, 1099s, or other proof of payment.
It is important to note that there are some restrictions on using PPP funds for contract labor. Businesses cannot use PPP funds to pay for independent contractors who are not US citizens or who do not have a US tax ID number. Additionally, businesses cannot use PPP funds to pay for contract labor expenses that exceed 25% of the total amount of the loan.
If you are a small business owner who has contract labor expenses, it is important to include these costs in your PPP loan application. This can help ensure that you receive the maximum amount of financial assistance available to you under the program.
In conclusion, contract labor costs are eligible expenses under the PPP loan program. By including these expenses in your loan application, you can help ensure that you receive the financial assistance you need to keep your business running during the COVID-19 pandemic.