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How would an independent contractor find out their quarterly gross receipts?

5th May 2022

How would an independent contractor find out their quarterly gross receipts?

Let's say you made $10,000 in the fourth quarter of 2019. If your gross revenues were $7,500 or less, that would qualify you. $7,501 would not. If any one quarter qualifies, you meet the reduction of income qualification.

The paycheck protection program reduction of income tool at the end of this article will help you see if you qualify.

Understanding “Gross Receipts.”

The language in the act and in the SBA guidance for the Paycheck Protection Program (PPP) 2.0 second draw uses the term “gross receipts.”

For those of us that are independent contractors, that means it's the money we've received. If you contract with gig companies like Doordash, Uber Eats, Lyft, Instacart, Grubhub, Postmates or any of the others, your gross receipts are whatever you received for your contract work including tips, delivery and trip fees, money received for referrals, bonuses.

If you ran a business that sold items, gross revenue means your sales minus cost of goods sold, returns and allowances.

For example, I used to buy and flip bicycles. If I bought a bike for $100, spent $25 on parts to fix it up, and sold it for $500, my cost of goods sold would be $125, my gross receipts would be $375 ($500 $125).

Differences for those who started their business in 2019 or later.

It's easy enough to compare one quarter of 2020 to the same quarter in 2019 if you were in business all four quarters of 2019. But what if you weren't?

Any business that started before to the same quarter of 2019. In other words, if you started in , you can compare 4th quarter to 4th quarter, 3rd to 3rd, and 2nd to 2nd to see if you meet the income reduction qualification.

There's more flexibility for people who started later. If you started in the second half of 2019, you can compare any quarter of 2020 to either the third or fourth quarter of 2019.

You could pick the lowest earning quarter of 2020 and compare that to the highest of the 3rd or 4th quarters of 2019. If the reduction of income is 25% or more, you would meet the income qualification.

You will need to find some way to add up your quarterly earnings for 2019 and 2020. The best way to do so is to use a bookkeeping program of some sort. But you can use a spreadsheet or just make lists.

This is a bit of a different thing for a lot of independent contractors. Many of us are used to just pulling all the numbers together for our taxes at the end of the year.

But now we have to get quarterly revenue numbers. It's going to force us to up our games in treating this like a business.

Understand what quarterly means.

  • The first quarter is January, February, and March
  • The second quarter is April, May, and June
  • The third quarter is July, August, and September
  • The fourth quarter is October, November, December

I know you know that. I put that there for the benefit of someone who might wonder if they could say something like September, October and November. Or just pull any three months out whether they are consecutive. You can't do that for this program.

How do you determine what date the earnings came in on? It's based on when you were actually paid. When did the gig company send you the money?

Don't try to fudge on that. If the SBA wants to get documentation, as independent contractors they may look for bank records. If your numbers don't match your documentation, you can have some real problems.