Why the PPP Loan is Good for Artists

Paddy Johnson of of VVrkshop and Hannah Cole of Sunlight Tax

This Q & A between Paddy Johnson of VVrkshop and ArtFCity and tax expert Hannah Cole on the Payroll Protection Program loan (PPP loan) explains how it can help artists. You don’t have to run an incorporated business to qualify. This money is a stimulus for you. ⁠⁠

Paddy and Hannah talk about loan terms, and our take home message: this is a forgivable loan that could help you. For many people, that could mean more time in the studio, a new body of work, or simply some extra peace of mind. Read the Q & A. Look into the loan if you haven't already. It's an easier application than almost any grant you'll apply for and might be more money too. ⁠⁠

PJ: What types of professions in the arts qualify for a PPP loan? 

HC: Absolutely everyone. There is no restriction.

If you are in a food or hospitality profession (look at the 6-digit code, called a NAICS code, in box B on the upper right corner of your Schedule C) with a NAICS code beginning with the digits “72” then you get special access to a bigger PPP loan (3.5 times your monthly income versus 2.5 times your monthly income for everyone else. This was meant to help the ailing restaurant and hospitality industries). But the PPP loan is meant for all professions.

PJ: Do I need to be running payroll?

HC: No. You don’t. This issue is confusing people. You are eligible for a PPP forgivable loan as long as you have “gross income” on line 7 of your Schedule C. As of the changes made in President Biden’s recent stimulus bill, you don’t even need to have a profit. 

PJ: Is the PPP loan forgivable? 

HC: Yes! In fact, it is designed to be 100% forgivable in most circumstances. This means that the loans are designed to turn into grants for almost everyone, so long as you spend the money on eligible expenses. Good news: this is really easy to do as a sole proprietor.

PJ: How much money are artists eligible for?

HC: You can receive up to 20.83% of your annual Gross Income. Loans are capped at $20,833 for sole proprietors without employees.

PJ: Can artists qualify for a PPP loan if they are receiving unemployment checks? 

HC: They can qualify. But receiving PPP money will likely reduce or eliminate their unemployment payments. You can re-apply for unemployment once your PPP money has run out, though. If you are depending on unemployment, you might not be a good fit for a PPP loan. Individual cases may vary, but if you made less than $25,000 on your Schedule C (“gross income” on line 7), then you are probably better off sticking to unemployment.

PJ: What is the difference between gross income and net income? In January loans were given out only for net. 

HC: The rules on this have changed. The current rule is that you may apply with “gross income” (line 7 of your Schedule C), instead of “net income.” Gross income is your income before taking out expenses. Net income is your profit after you subtract expenses. This change is great news because it gets you a bigger loan amount. 

PJ: Where can artists get a PPP loan? Are there better places to get PPP loans? (I had a poor experience with Chase and ultimately went through Newtek, which is an SBA lender.)

HC: You apply for a PPP loan through your bank. The big banks have demonstrably favored larger businesses and white men in this process. For this reason, Congress gave special access to funding to community-based lenders such as local credit unions. That’s because these institutions have a better history of supporting women-owned and BIPOC-owned businesses. There are also so-called “Fintech” companies that have been pretty helpful and streamlined getting PPP loan applications processed for Schedule C-filers, such as PayPal, QuickBooks, and Square. 

PJ: Where can artists find their Schedule C? Relatedly, there are five million places on a tax return that note gross and net income. How do artists know where to find the right one? 

HC: If you have freelance income, you have a Schedule C. Schedule C is part of your personal income tax return. It says Schedule C “Profit or Loss from Business Activities” at the top. Gross income is on line 7 of your Schedule C.

PJ: Do artists who have made more money in 2020 than 2019 qualify for a PPP loan? 

HC: Yes, they qualify if this is their first PPP loan. So long as you had gross income (line 7 on your Schedule C) in either 2019 or 2020, you are eligible. You don’t even need to have had a profit. If you are applying for a second round of PPP funding (i.e., you already got a first PPP loan), then you need to show that your income dropped by at least 25% in 2020 vs 2019. So the scenario in this question would then disqualify you from a second loan.

PJ: Is the loan taxable? 

HC: Nope! Loans aren't taxable as income (because they aren't income - you have to pay them back). And the bills have made it clear that the forgiven PPP loans, aka grants, are not to be included in taxable income. Normally a forgiven loan would be taxable income, but the PPP is special.

PJ: When can artists apply for loan forgiveness? 

HC: You apply once your funds are used up. You can apply for forgiveness any time between using up your funds and the maturity date of the loan. If you don’t apply for forgiveness by 10 months after the last day of your covered period, then you will need to begin paying it back.

PJ: How do artists track their spending so they don’t owe money they can’t pay back to the government? 

HC: I recommend that you open a separate bank account and deposit your PPP loan into that. That way, you transfer funds to your personal account as “owner compensation” at the approved amounts, and it easily documents these transfers for forgiveness.

PJ: How do artists calculate the approved payment amounts? 

HC: Presuming your loan was for the right amount, to begin with, making 10 equal transfers of 1/10th the loan amount from your specially-opened new PPP bank account into your personal account should do it. But please check with your bank for their latest guidance. 

PJ: Can the terms of loan forgiveness change? 

HC: I suppose it is possible. There have been a few rule changes so far, but generally, they have trended towards simplifying the process for freelancers, giving them better access to funding, and created more generous loans. 

PJ: Should artists apply for a PPP loan? 

HC: Yes. Except for people with small amounts of freelance income who are depending on unemployment. For most others, it's a great idea and will help you.

ArtWitch Podcast: Permission to Thrive + Money Mindsets

In this episode artist and tax expert Hannah Cole joins ArtWitch host Zaneta to talk all about money.

Art Witch Podcast with Zaneta

Tax expert and artist Hannah Cole discusses all things money with Art Witch Podcast host Zaneta of Brooklyn, New York. They also talk about mindfulness in this nearly hour-long podcast interview. How did Hannah go from being an artist to also being a tax expert and running a membership program?

Hannah speaks about empowerment for creative people (especially for BIPOC people and women) and they talk about smashing the patriarchy. They discuss issues people have with earning and having money and how to change your attitude. What can you accomplish when you are not trying to run from money issues and fear of the IRS? Taking control of your money and finances will give you the time and space you need to thrive in your creative career. We can shift what we think we're allowed to access, and we can find permission to thrive in our art practices.

What action steps can we take to get control of our money and our taxes? Hear about how to take advantage of the new tax credits from the recent American Rescue Plan stimulus bill that freelancers need to know about. “Involuntary” home schooler parents need to take advantage of the family leave credits. What can you do as a freelancer to prepare for tax season? What is the brand new retroactive change to unemployment tax laws from the stimulus? What advice does Hannah have for people who haven’t filed their taxes yet?

Listen to the interview below! Check out all of Art Witch’s podcast episodes here. Sign up for the free March 30 Masterclass that Hannah mentions in the broadcast here.

Artist/Mother Podcast with Hannah Cole of Sunlight Tax

Interview with Kaylan Buteyn about Hannah’s art journey and financial tips for creative people

Hannah talks with Kaylan about when she started out as an artist, her life as an artist, and how her career progressed to a tax expert specializing in helping artists and other creative freelancers. She talks about her career in accounting and what experiences led to her decision to start her own company.

Other topics covered in this hour-long podcast are the factors involved in choosing a type of business and how getting your finances organized gives you more room for creative work.

Understanding where your money is going and getting your finances organized give you more head space, more time to spend on other things, a clearer vision for your practice. They discuss how women are taught differently about money than men and money shame and breaking down stereotypes. Hannah shares some empowering advice for anyone feeling down. Her mission is to help artists feel more organized and in control of their own money.

Hannah also covers the basics in bookkeeping and profitability to get your business moving forward and how to get into the habit of tracking your finances.

Hannah will be available via zoom on the Artist/Mother network for a live Q&A to answer any lingering questions you have on March 16th, 3:00pm ET.

Click here to listen to the podcast.

The Artist/Mother podcast is created and hosted by Kaylan Buteyn. You can see more of Kaylan’s work on her website or connect with her on Instagram @kaylanbuteyn

The Insidious Role of Gender Bias in How Artists Grapple with Personal Finances

Our culture is quick to put down a woman who seeks money or power at the same time that it valorizes the men who do so.

When I met Dr. Katherine de Vos Devine at a business retreat we bonded immediately. Both I (an artist and tax expert) and de Vos Devine, an intellectual property expert, art historian, and lawyer who works with artists, counsel clients struggling with the same money issues. Though neither of us is a personal finance expert, we address personal finance issues as professionals who help artists manage their businesses. I see artists repeatedly making the same expensive mistakes that could be avoided with some basic knowledge of personal finance. Furthermore, de Vos Devine and I both encounter women artists who lack confidence due to the pressure of harmful art and gender myths about money.

To open up a conversation about these issues, de Vos Devine and I did some research on a new generation of personal finance books. We discussed the myth of an objective set of rules that a previous generation of (mostly male) writers perpetuated, the emotional power of money, and how personal finance education in the US has shifted to address the self-limiting beliefs of women. We also considered the parallels between the disempowering messages that artists receive about money and those that specifically women receive. The conversation has been edited for length and clarity.

Hannah Cole: What made you dive into this type of personal finance research?

Katherine de Vos Devine: I had a very chaotic childhood, even though there was a lot of privilege. As an adult, I realized I knew nothing about personal finance. I was terrified of it, and I did not want my daughter to grow up feeling as disempowered as I did.

…read more…

This article first appeared on Hyperallergic on September 30, 2019.

Money and Happiness: Artists' Superpower

Chicory, acrylic on canvas, 2016 by Hannah Cole. Courtesy of Slag Gallery, New York.

Artists Have a Superpower

I see all kinds of incomes in my tax practice, and the one thing it confirms for me is that, once past the basic human needs, money and happiness aren't related. I've been doing a lot of reading on the science of happiness lately, and also on the financial independence movement, (favorites: Mr. Money Moustache, Frugalwoods, and the Mad Fientist) and I've suddenly been noticing the strong thread of happiness science within the extreme-frugality movement. 

And I had a thunderstrike: artists have a superpower. We already know this. No one goes into art because their top priority is getting rich. And most artists do go into it because they feel a need, and they get things out of art that are more important than money. Things like connections, community, curiosity, continuous learning, challenges and projects, and engagement with the unknown. 

So this post is just a word of appreciation. 

But here are a few things you can DO with your money to help it grow and give you lifelong security. Because that is my particular passion project:

• Open a SEP IRA.

• A super basic (and funny) intro to low-cost investing, from Mr. Money Moustache