Getting both PUA Unemployment and a PPP loan
January 15, 2021 2:08 PM   Subscribe

I am self employed and in Spring 2020 I applied for PUA unemployment (in NJ) due to reduced work from Covid. I was approved, although only was paid for 2 weeks when my income dipped below the threshold to allow me to receive benefits that week. I kept the claim open and have been reporting hours should I fall below the threshold and qualify for more weeks.

I also received a PPP loan in the summer, and while I thought I could pay myself from the PPP loan over 8 weeks I had to do it over 24 weeks (June - December). I used 100% of the loan to pay myself, and it should be forgiven.

I was recently notified by email that unemployment reviewed my claim and I qualified for about $8000. I am assuming they raised the threshold of what I could earn per week so a bunch of weeks in the past now qualified for payment. Getting ahold of unemployment to clarify what changed and what weeks I was paid for has proven impossible.

Everything I have read online that I am supposed to report PPP weekly earnings as part of my income to unemployment so I'm not receiving both at once. My accountant says PPP isn't earned income so I don't need to report it to unemployment and it is okay to get both PPP and unemployment. Is this correct?

(I reported to unemployment my PPP income for the first 8 weeks of PPP only, not the full 24 that it turned out I had to. Reporting it over those next 16 weeks would likely put me over the threshold for how much I could earn before getting unemployment.)
posted by ridogi to Work & Money (4 answers total) 2 users marked this as a favorite
 
Best answer: This has been a frequent topic of discussion amongst my freelance colleagues. Your accountant is correct - PPP is a loan from a private bank. It's not earned income because that is what the IRS has officially declared in their guidelines. Even if/when it's forgiven it doesn't change the fact that it's a loan. And unemployment asks you to report wages or other earned income, not loans.

The CARES Act does not address this, the IRS, Treasury, SBA, and state UI offices (or at least my state) have not clarified this. As I'm sure you're aware having dealt with this stuff directly, the CARES Act is a giant mess with lots of unresolved problems and this is one of them. Congress clearly doesn't understand how the actual mechanics of self-employment works because the language of the law doesn't make any goddamn sense.

The more recent guidelines issued from the federal agencies say that for the self-employed, PPP has effectively been turned into a grant. I have already been through the forgiveness process already, and the attestation I signed and the approval I got back from the SBA pretty much say exactly that as well.

So the answer is.... no one really knows. Your accountant's not wrong but neither are your concerns. It's especially difficult, as in your case, the state UI agencies keep changing their minds about UI claims and re-evaluating everyone retrospectively according to different rules. I would contact your state unemployment office and see if they have guidance about how to handle this, since they are the ones who would decide one way or the other. But of course, it's impossible to get anyone to answer any questions about UI in any state, much less one as technical as this.

FWIW it does seem like a lot of my freelance colleagues took both. In most cases state UI is only paying benefits based on W-2 income (what they do in my state) or some type of average claim amount if you're 100% 1099 (what my friends in other states are getting). PPP is based on Schedule C profit which is not what the UI offices are looking at (again, in my state), and it's not income. The advice I have gotten from the people I rely on (accountant & business lawyer, family that works in banking) is that if you qualify for both you can take both.

TLDR - my opinion (and the opinion of all the professionals I've spoken with) is that PPP is a loan that MIGHT be converted to a grant for sole proprietors. Unless your state UI specifically asks you to itemize PPP loans, you're fine.
posted by bradbane at 6:21 PM on January 15, 2021 [1 favorite]


Also! In the newer CARES ACT II that passed a few weeks ago, it says state UI offices can use their discretion when seeking to clawback UI payments that were made because of honest mistakes, all these million rule changes, or mistakes the state made in evaluating your claim. So if your state can't give you a clear answer, you might not be liable anyways since it's their clusterfuck problem to begin with.
posted by bradbane at 6:30 PM on January 15, 2021


My accountant says PPP isn't earned income so I don't need to report it to unemployment and it is okay to get both PPP and unemployment.

Do you have an LLC or other not-you entity that actually received the PPP? And you are being paid by the LLC?

If that's the case, I would get a new accountant and see what they say.
posted by yohko at 7:06 PM on January 15, 2021


Response by poster: I do have an LLC. I don’t have a salary or payroll, and “paid” myself 100% of the PPP. I got PPP based on schedule C.
posted by ridogi at 8:05 PM on January 15, 2021


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