Table of Contents

• Unemployment Before Applying for PPP
• Unemployment After Receiving PPP Funds
• “Weekly Salary” Overview
• Calculate Your Weekly “Salary”
• PPP Application Tips

This article is for self-employed and 1099 workers who are wondering how they can access both Unemployment and PPP funds. For everything you need to know about PPP, visit our PPP Resource Center.

Unemployment Before Applying for PPP

Not considered earned income

Unemployment payments are not considered earned income. Although you pay taxes on Unemployment payments, it does not show on your Schedule C (line 7 or line 31), because your Schedule C is only for self-employment income while Unemployment is Unemployment 🙂 So, you can’t count Unemployment payments as income in order to get a higher PPP amount.

Does not affect 25% reduction for Second Draw

One condition for Second Draw PPP is a 25% reduction in gross income in at least one quarter of 2020 compared to the same quarter in 2019. When calculating if you had a 25% reduction in income during any quarter in 2020, you don’t include Unemployment payments.

So, even if you had more income in 2020 because of Unemployment, you are still eligible for Second Draw PPP, as long you had a 25% reduction in your self-employed/1099 work.

Unemployment After Receiving PPP Funds

Question: Can I collect Unemployment after receiving PPP funds?

Answer: The only guidance from the SBA that we have seen is this line “…you should be aware that participation in the PPP may affect your eligibility for state-administered unemployment compensation or unemployment assistance programs…”. This doesn’t tell us all that much.

As Unemployment is administered by individual states, the best idea is to check for specific guidance from your state, and go with whatever guidance you get from your state.

If your state doesn’t provide PPP-specific guidance, here is an attempt to clarify how PPP “may affect” your unemployment. This is not definitive by any stretch. Just a way to try to make some sense of it all.

• Your PPP is considered income, which in turn affects your Unemployment.
  Note: Some people have asked why we consider PPP as income if, after all, it starts off as loan and should not be considered income. Even though PPP is initially considered a loan, one way to think about why it may be considered income is that in a sense there are two entities: “your business” and “you the person”. So the loan is a loan to “your business” but when you decide that you are using the loan as owner compensation (and as such plan on getting the loan forgiven) then “you the person” is receiving income.
• While you get the full PPP funds in one shot, it is meant to be your weekly ‘salary’ for some time after receiving the PPP.
• Depending on your state’s rules for earning income while on Unemployment, PPP will affect your Unemployment differently.

NY Guidance

In NY, for example, you can earn up to $504 a week and still receive full Unemployment payments. 

So, provided you are otherwise eligible for Unemployment, as long as your “weekly salary” from PPP is less than $504, you should be able to collect full Unemployment. If you are on regular unemployment (UI) you can likely stay on Unemployment even if your PPP “weekly salary” is over $504 a week, as PPP is most likely considered self employment income, which is not included in the maximum $504 for those on regular unemployment.

“Weekly Salary”

What is your “weekly salary” once you receive PPP and for how many weeks is it meant to be your “salary”?

Let’s work our way through the math:

The default is that your PPP is meant to cover 2.5 months (10.8 weeks) of salary. This would mean that you weekly salary is your PPP amount divided by 10.8

For example, if your Schedule C line 31 (net income) is $52,000, and you received $10,833.33 in PPP, your weekly “salary” of $1,000 (for 10.8 weeks) is too high for Unemployment.

However, you have some options to change your weekly salary. Have a look and see if any of them can help you. Use our exclusive calculator at the bottom of the post to help you with your calculations.

Remember: You don’t actually have to do anything to change your “salary” – it’s just how you decide to consider it, though do keep a record of what you decided.

1. Stretch from 10.8 weeks to 24 weeks to lower your weekly salary
   • This effectively cuts your “weekly salary” from 1/10.8 of your PPP to 1/24 of your PPP. You can choose any amount of weeks in between as well.
2. Use 40% of PPP for expenses to lower your weekly salary
   • If you use 40% on expenses, your “salary” can be 40% less.
3. Use 40% of PPP for expenses to help spend PPP quicker
   • Instead of using expenses to lower your “salary” by 40%, you can use 40% on expenses and keep your salary the same amount. This will help you finish your spending quicker.
4. Delay your PPP salary
   • Start your PPP weekly salary with just enough time to finish your monoey before the 24 weeks are finished. This will leave you the first x weeks without a PPP salary. So if you want to collect unemployment for the first number of weeks, then stop, this option can work for you.
5. Return some of your PPP funds
   •  Doing so lowers your PPP weekly salary.

Note: Keep in mind that PPP funds are not taxable, whereas Unemployment is taxed.

Calculate Your “Salary“

Use this tool to see how you can change your weekly PPP “salary” depending on your PPP amount, expenses, and length of the covered period.

First Draw Funding Date

Schedule C Line 31 $

PPP Amount Received

What percentage will be used on expenses?

How quick can you finish spending your PPP?

Maximum weekly "salary"

Quickest you can use your PPP without expenses (2.5 months - 10.8 weeks)

40% Expenses

Quickest you can use your PPP funds with your expenses

Weekly "salary" if covered period is stretched to the maximum 24 weeks

Without expenses

With your expenses

First Draw PPP

Second Draw PPP

Which Schedule C Should I Use?

Estimated PPP Amount

If you are eligible for both First and Second Draw, you would end up getting twice the amount!

If your NAICS code starts with 72 check this box

PPP Application Tips

1. Calculate your PPP eligibility
2. See our recommended partner PPP banks, along with tips and tricks for each partner bank.

<Originally published 02/17/2021. Last updated: 4/18/2021>