![]() ![]() Gross Income = Net Sales - Cost of Goods Sold (COGS) The formula for how to calculate gross income is: Gross income is calculated using two numbers: your net sales and your cost of goods sold. So when thinking how to calculate gross income, know that your result should be bigger than your net income. Once you pay rent worth $500 and the $200 for web hosting, you’re left with $800 net income ($1500 - $500 - $200).īecause gross income does not include any operational expenses or taxes paid, your gross income will always be greater than your net income. Let’s say your ceramic mugs business sold 100 mugs for a gross income of $1,500 (100 x 15). Net income is what you have after paying your operational expenses. For example, if you sell ceramic mugs for $20 and the clay you use to make them costs $5, you would make $15 gross income on each sale. Think of gross income as the money you make on just the sale of a product alone. These are expenses that don’t scale with production. Operational expenses include costs like rent, office supplies, and web hosting. Gross income is important because it shows how much profit you make before paying your operational expenses. Gross income-also called gross profit-is the revenue you make from your business minus any direct costs of making the product (called cost of goods sold or COGS). ![]() Multiply the number from step 5 by 2.5 to find your PPP loan amount.This is considered to be your average monthly payroll expense. ( Note: Some payroll providers have reports available that will provide all the information needed for steps 3 and 4). Add in employer contributions to employee group health, life, disability, vision, dental insurance, retirement contributions, and state and local taxes.Subtract any values in excess of $100,000 per employee. Add in any pre-tax employee contributions for health insurance.This can be calculated using line 5c, column 1 of IRS Form 941. Add in the gross wages and tips paid to employees based in the United States for 2019 or 2020.If this value is greater than $100,000 (the maximum allowed amount), use $100,000. Subtract any payroll costs as reported on lines 14, 19, and 26 of your 2019 or 2020 Schedule C.Take your gross income as reported on line 7 of your 2019 or 2020 Schedule C. Here are the steps to calculating your PPP loan amount as a sole proprietor with payroll: All of this information can still be found on your Schedule C. If you are running payroll for either yourself or employees, you will need to subtract payroll costs from your gross income. Multiply the number from step 2 by 2.5 to find your PPP loan amount.Divide this value by 12 to get your average monthly gross income (this is considered your average monthly payroll expense).Take your gross income as reported on line 7 of your 2019 or 2020 Schedule C.Here are the steps to calculating your PPP loan amount as a sole proprietor without payroll: Sole proprietors without payrollįor sole proprietors without payroll, you will use your gross income as reported on line 7 of your Schedule C. For now, only the self-employed who file a Schedule C will be eligible to use gross income for their PPP loan amount calculation. There are two calculations: one for sole proprietors with payroll and one for sole proprietors without payroll. With the latest guidance released on March 3, the SBA provided clarification on how to calculate gross income for the PPP. How to calculate your PPP loan amount using gross income
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