TIPS FOR STATE PANDEMIC UNEMPLOYMENT ASSISTANCE (PUA) APPLICATION - FOR SELF-EMPLOYED INDIVIDUALS
The Pandemic Unemployment Assistance (PUA) is a taxable benefit for self-employed individuals similar to unemployment insurance (UI) that is taxed at your state/federal income tax rates. For every weekly reporting period, you have to file a weekly certification that you were available to work and did not earn income. In that filing, you also have to report any and all additional income. So if you actually did make money, it has to be reported as income. This article focuses on travel agents, but applies in the same way to gig-economy workers.
What makes the PUA more complicated than UI is that you need to report income in the week you "sell" the product - not when you get paid by the customer (or received a cash commission from a supplier). So for example, if you sell a cruise today and earn $200 commission - you have to report it on this week's certification as income, even if the cruise line only pays you at the end of the cruise. And nobody currently has an answer about how to re-file if you don't get paid.
Things to consider while filing the application:
1. MAX OUT THE BENEFIT PERIOD: The benefit is available retroactively from February 2, 2020 until December 26, 2020. Make sure to take advantage of the full payment time period.
2. MAX OUT YOUR DOLLAR AMOUNT: The benefit is not $600 per week for everyone, it is based on your quarterly income for 2019. So make sure you know all your commission amounts by quarter. You can use the Nexion 1099's, bank statements, or checks to support your claim - but be prepared to upload them in pdf version. The minimum amount with no data is $172 per week or $8,256 dollars for the full period - assuming no other income.
3. OPT-OUT OF TAX WITHHOLDING: You can choose to have 10% withheld, but most of us have other expenses that we can apply against our commission income, so get the maximum cash upfront. Just make sure that you don't owe anything at the end of the year. Keep receipts like a hawk.
4. SELECT THE RIGHT CATEGORY: Be sure to select Travel Advisor as your occupation type. For gig-economy workers, select a job description that most closely reflects your gig. If you have multiple gigs you can add them later, but for right now focus on the one that earns you the most income.
5. BE PREPARED TO SHOW A BUSINESS LICENSE NUMBER: My state (Nevada) asked for my business license number, or my EIN (Employer Identification Number) if you have a company.
6. IF YOU HAVE SPECIAL LICENSES ADD THEM: For example if you have a Division of Insurance license to sell Limited Travel Baggage (travel insurance), be sure to add it. You will need your license number, issuance, and expiration date.
7. USE THE ADDITIONAL COMMENTS SECTION: There is usually an additional comments section to add items to support your claim in which I wrote (and I was subsequently immediately approved!!):
"Unable to work due to U.S. State Department issuing a level 4 - do not travel advisory; government-enforced closures of all international borders to nonessential travel including but not limited to Canada, Mexico, European Union, South America, South Africa, Australia, China, Japan, and South East Asia; and cessation of 98% of all commercial flights by major air carriers; and issuance of No Sail Order thru September 2020 by CDC to all Cruise Lines departing from the United States. Lockdown, shelter-in-place orders issued by Governors of 46 consecutive U.S. States."
As a gig-economy worker, you can probably piece something together from the above and add whatever else may have impacted you.
8. FILE THE WEEKLY PUA REPORT RELIGIOUSLY: Like with other unemployment insurance you have to file a weekly report to get your benefit. This usually has to be filed by every Sunday - or else you don't get paid. Any income you make must be declared and will be deducted from your benefit.
9. ECONOMIC IMPACT DISASTER LOAN (EIDL) AND PUA: This amount does NOT need to be reported as income on the PUA weekly report, as the EIDL and EIDL Advance is a "loan" and therefore not deemed income at this point in time, so do not report it on your weekly PUA certification. The IRS will figure out how to classify it down the road - if we are lucky it will be categorized as a tax-free grant.
10. PAYROLL PROTECTION PROGRAM (PPP) AND PUA: The PPP is a loan that can be forgiven if you can show proof that you used it to pay payroll or pay rent/utilities (max 25%). The PUA and PPP technically offset each other, but HOW depends on which legal status you have i.e. the way you set up your agency or business. The two most common situations for us agents are:
(A) you are a sole proprietor getting a 1099-MISC from your host agency in your own name; or
(B) you are an employee of your own C-corporation or limited liability company (excluding S-corporations and partnerships) that gets a 1099-MISC from Nexion in the companies name, and in turn, pays you either a salary or commissions on a 1099-MISC issued by your own corporation.
Since you are one and the same person getting both PPP and PUA, you have to report the PPP funds as "additional income" on your PUA weekly certification. Normally, the PUA system will then automatically deduct it from your total benefit credit balance. Similarly to ensure your loan is forgiven you have to report the PPP funds as earned income on your tax return.
If you have a corporation and you are its sole employee those are legally two people. The corporation can get the PPP loan and you as an individual can get the PUA benefit. If the corporation pays you with PPP funds, you need to report that as personal income on the weekly PUA certification, and of course file it as personal income on your tax return. The PUA system will automatically deduct it from your benefit credit balance. At the same time, the corporation needs to file payroll taxes or a 1099-MISC in order for the loan to be forgiven.
For example, if your corporation gets $1000 from PPP and you personally qualify for PUA. And your corporations pays you $250 every week for four (4) weeks. Then the PUA reports for additional income should look like this:
Week 1 (additional income): $250
Week 2 (additional income): $250
Week 3 (additional income): $250
Week 4 (additional income): $250
Week 5 (additional income): $0
Week 6 (additional income): $0
Week 6 (additional income): $0
And that is how it should all get netted out and avoids double-dipping, subject to PUA rule changes, local state tax laws or any re-interpretation by the Small Business Administration.
I hope that makes sense of it all. As always your results may vary. But I was approved in less than 24 hours by the state of Nevada.
THIS IS MY PERSONAL OPINION AND DOES NOT CONSTITUTE LEGAL, TAX, FINANCIAL OR PROFESSIONAL ADVICE. PLEASE CONSULT A TAX ATTORNEY AND PROFESSIONAL CPA IN YOUR JURISDICTION. I AM PROVIDING THIS FOR INFORMATION PURPOSES ONLY AND MAKE NO CLAIMS OR WARRANTIES IMPLIED OR OTHER AS TO ITS ACCURACY.