All right, everybody. I’m going to get started. So welcome. Thank you for joining. This is about PPP Loan Forgiveness, thus the title WTF to do with PPP. As I said, this is unchartered territory. We have not had anything like this. There’s no precedent. There’s only the guidance that we’re getting from the SBA and treasury and it’s not fantastic, to be perfectly honest. So I’m going to just go ahead and hop right in. You should be able to see in the chat, there’s a link to download a PDF of the slides, if you want to follow along. I’m telling you I have 40 slides to go through in an hour. We are going to blow through this. Okay? Nobody’s going to be an expert by the end of this but you’ll have an understanding of what you need to do for this PPP Loan Forgiveness. So that being said… And I’m going to try to figure out how to share my screen.

I’m going to screen share and to keynote. All right. Hopefully you guys are seeing the actual… not the whole everything and just the slideshow itself but… Okay. So what to do with PPP? We’re going to go over today, the source, the use and the forgiveness. And our objectives are to figure out how much to borrow, although at this point you probably have already borrowed, presumably, that’s why you’re here. How much of it to use? How you’re going to maximize forgiveness? Which is really the ultimate goal here, is to get as much of it maximize as possible. How much to repay if you need to? Guidance, which is a timing time bomb and how we’re going to just play this game overall and some strategies.

So there are so many pitfalls here. It’s a little bit crazy. So one of the first things right off the bat is borrowing money incorrectly. They’re spending on non-allowed uses and spending on unforgivable uses, because usable and forgivable are not the same, just to make this extra complicated. Spending at the wrong time. There is a specified covered period and it is not the same for everybody. So, that makes it even more fun. Drop in payroll, drop in your employee head count, spending the wrong way on the wrong items and then failing to prove that you are forgiven. This is not automatic. You have to apply for the loan forgiveness.

So right off the bat. Borrowing incorrectly. I’m sure everybody heard in the news all about the… It was big public companies that were claiming the small business administration, PPP loans or Harvard or any of these ridiculously big companies that got this money. And what the Fed nailed them on was there’s a certification saying that you have no other resource for getting this money, which if you’re a public company, that’s obviously not true. If you’re Harvard is definitely not true, you don’t even need charged tuition. So they kind of forced their hand and said, “All right, give it all back. We won’t prosecute you.”

But that doesn’t mean that just because you’re a small business, you did everything correctly. You could have made mistakes and errors in your borrowing application. There could be problems. Yes, under a certain size, they’re not really going to look at you but over $2 million of PPP loan, that’s not the situation. So every step of this has these good faith certifications, right? Funds will be used to retain workers, finance payroll, make mortgage, right? Silly payments. That’s really all that you can do with this PPP loan, right? It’s not, “Well, I’m going to get it and figure it out later. I’m going to use it on what I need.” You have to certify that you’re only using it for the specified things.

Now, on top of that, there are other stipulations. So there’s a no double dipping, right? You can’t use the same dollars for your PPP and then for the EIDL. So if you’re thinking like, “Oh, well, I’ll pay for payroll but I’m going to say that my EIDL also went to payroll.” You’re double-dipping, you’re going to have a problem. You can’t make this good faith certification. If you’re misrepresenting either on your initial application… And we’ve already been hearing stories about fraud, people who made up fake payroll return, tax returns and submitted it.

Those people are being prosecuted. If you spend at the wrong time and I’ll get into that in detail, you don’t have this money forever to spend for the forgiveness. It’s within a certain allowable timeframe. And if you fail to trace the proceeds to the expenses, right? Yes, money is fungible but you need to document the crap out of this to get it forgiven. And then this is… If anybody’s looked at the form 3508 that they put out, this is just some screenshots of that form. It’s an 11 page document with schedules and instructions. And it is all over the place. It is not like a linear first calculate A then calculate B. It has you bouncing back and forth. I do have a tool, I can show you at the end for help with trying to calculate this, if you are trying to calculate it on your own.

There’s going to be a lot of different calculators out there. They are not all going to be correct. You just have to understand, if you pull something off the internet… For example, I was in a continuing education yesterday about this. They said, ADP, the big payroll processing company has a calculator that they put out and there’s already been chatter that it might not be right. So you have to be super, super careful. You can’t just download somebody’s calculator and assume that what they’re putting out is correct and just use it. You really have to think about this. You have to be super intentional. Very, very careful. All right. I got a question. When you say not to double dip, if the funds go into your deposit account, continue to pay payroll and rent utilities usual, how do we keep records of this properly?

Leslie, I’m going to answer that later on in this webinar. So that’s a great question. That’s the crux of the whole thing. And so, this is the beginning of the form. Now, it’s going to ask you all these questions. Like you have to know your payroll schedule. And if you’re not the person in charge of the payroll schedule but are running payroll but you are the owner of the company, you’re going to have to make sure this information is correct, because you are signing certifications. And then you see there’s this line. If borrower together with affiliates applicable receive PPP loans in excess of two million click here, you are subject to extra scrutiny, not extra documentation necessarily but two million was the threshold that the SBA has, where they are really going to look at you much more closely.

And then there’s this whole crazy calculation for full-time equivalent employees, FTEs. I’m going to go into more detail but there’s stipulations that you have to keep close to your same head count as you had before the corona apocalypse. And here’s the certifications that I mentioned. There are fines. You can go to jail, like there’s some serious consequences. You’re saying that what I’m turning in matches the IRS. I’m not making anything up, et cetera, et cetera. I’m going to that a little bit more. So filling out this form and it’s a beast of a form, the guidance is very unclear and we’ve had this issue from the onset with PPP when they first announced it. They were coming out every day and you can go back and watch my old webinars about the stimulus packages.

They would change every day, they were changing the interest rates, they were changing terms. It was just nonstop, literally on a daily basis. Sometimes more than once a day, they were changing things. This is a brand new program. Normally, with these kinds of things, they go through a legal system where it gets hashed out. And over time we have case law or we’ve got precedents that show us, this is the right way to do it. This is how they’re going to view things. We have no idea what the SBA is going to do with this. They’ve shown already that they don’t really care what the rules Congress lays out for them, what the rules are. They kind of make it up as they go. And we just don’t know what they’re going to do once people start needing to put in for this forgiveness.

And it’s probably going to start in the next couple of weeks because this program opened in April. So you get eight weeks. In June, people need to start putting in. So we probably will have more guidance for those that were either fortunate or unfortunate, depending on how you look at, it to get their money early on. We have so, so many questions. A lot of times we have no answers and we just don’t have time right now. So, this was a good takeaway. Don’t make irreversible decisions based on incomplete guidance, if you think, “Oh, Hey, well, you can pay for a mortgage and well, I’m just going to try and see if I can take it on my house because I’m working out of my house [inaudible 00:10:38] not fly.” So we’re going to be really careful about how we spend and how we document this money.

Okay. We got question and question about forgiveness stipulation. Employee account has to be the same. What are the dates account has to be compared? Also, does it have to be the same head count, literally, same list of employee? We’re going to cover basically all of those questions later on but they’re fantastic questions and that’s some of the most complicated parts of this. Let’s see. Will you cover how to use this forgiven for self employees that you schedule C? The answer is yes. That’s the short answer. The complicated answer is there is very, very, very little guidance and we don’t know a whole lot yet about the self-employed. So that’s still up in the air. I don’t have so many answers to it at this point.

Okay. So the purpose of PPP was designed to keep businesses with their employees, right? And we wanted to keep people off of payroll, keep them working and that was why the intention is that you have to primarily spend it on payroll costs. And if it goes primarily, which is really 75% or more to payroll costs, you can get a ton of forgiveness for this. And then we had some other issues with the self-employed independent contractors, where ultimately they had applied for their own and they’re going to have to qualify for themselves, which is going to be fun to figure out.

So there’s three aspects. There’s the source, whether and how to apply, which we’re probably a little bit beyond that at this point. The use, using this for allowable uses and then the forgiveness. And we have to jump through a lot of hoops for this forgiveness. Just wait and see. So this is… If you already got your PPP, there’s probably still money out there. I heard that there’s some companies that realized that they calculated incorrectly, they’re going back trying to get more. That is supposedly an option. I don’t know of anyone personally, who’s doing that or any banks that are looking for that but that’s an individual case-by-case talk to your lender. But you can qualify for the lesser of 10 million or average monthly payroll times 2.5.

So the payroll costs, what does that cover? Wages, state unemployment taxes, health insurance and employer on the employer side retirement contributions. Business mortgage interest payments, right? Not personal. You can’t use this on your house. No prepayments. So you can’t pay ahead and none of the principal qualifies for business rent payments, utilities and interest on other debts incurred before February 15, 2020. And you’re going to see this date over and over again, February 15, 2020.

Now, you notice actually in this slide here for use, we’re looking at interest on other debts. It has… I’m sorry. The interest on other debts is number five. We got five uses here. For forgiveness, there’s only four because we lose that interest on other debts. You can use the funds for that. It is not forgivable if you use that. So for forgiveness, they really still primarily want you working with the payroll costs. The business mortgage interest, now the part that is forgivable has to be incurred before February 15, 2020. The rent payments, your lease agreement has to be enforced before February 15th, 2020. Utilities have to be in service before February 15th, 2020.

And we are getting a little bit more guidance about what is utility, electric, gas, water, transportation, not quite sure what the hell transportation is. We don’t think it’s your car, FYI. If you’re like, “Well, I use my car for my business.” We don’t really think it’s for that but we don’t know. So that’s when it those up in the air things. Telephone, internet but again, it had to be already in place. So if you went and at the end of March, when the lockdown started said, “Oh, hey, I need a higher speed internet connection.” You might get pushback on the forgiveness because it wasn’t in service in February.

So again, use and forgiveness are not the same. I can’t stress this enough, not the same thing. Oh no, it’s going to flash at you. So you can imprint on your brain. The hardest part of it, I think to understand is that what you can use it on and what you can get forgiven aren’t the same things. So this little chart, I kind of copied it largely from the continuing education I said in on yesterday. This is a great way to see what you can use but what can you get forgiven. So payroll, use it, yes. Forgiveness, yes. Mortgage interest, remember business mortgage interest. So if you own your office space, things like that. Yes, it’s usable. It’s not forgiven unless it was incurred, meaning you already had the mortgage set up before February 15. Rent, yes, it’s usable. Forgiven, no. Unless your lease agreement was enforced before February 15th.

Utilities, yes. It’s usable. Forgiveness, no, unless it was in service before two, 15. Interest on other debts incurred before two, 15. So if you have other loans ahead of time, yes, you can use it. No, you will not get forgiveness. Okay. And the no is red, it’s bold. And then other expenses, while you probably have a lot of other things that you run your business, besides payroll rent or mortgage, utilities or interest, none of that is allowable under PPP. If you have an EIDL you can use it but not for the PPP. Okay? This is just the PPP use and forgiveness.

Payroll. Now, not all payroll costs are the same for the PPP, right? Ee is shorthand for employee. So employees that live inside the U.S., a hundred percent, yeah. You can use that and you can get forgiveness for it. But if you have employees that live outside the U.S., no, they don’t qualify. Right? And salaries, wages, commissions, tips, their vacation, sick leave, a lot of these things are covered. There are some stipulations of people who go on leave under the Family First Act. This goes back to double-dipping. So if you’re getting covered under Family First, no, you can’t get forgiveness under a PPP. All right. And then the payment of employer side employer or the business side of your retirement contribution plans, you can also use it and get forgiveness.

Payroll taxes. Well, this is super confusing. Blows my mind a little bit. So forgiveness for the employee federally withheld payroll taxes, the employee, not the employer, the employee. Yes. Use it and you can get forgiveness. State and local unemployment taxes withheld from employee. Florida, where I am, we don’t have these… I think New York, New Jersey have those kinds of taxes. Yes, they can be used. And yes, they can be forgiven. Federal payroll taxes paid by employer. No, do not put your FICA on there. Do not say my social security coming out on the employer side. It is an expense to you. It is not usable and it’s not forgivable for PPP. FUTA, form 940. That is a federal unemployment that the employer pays. No, not covered, not forgiven. But the state employer unemployment. So in Florida, that’s our RT-6, Florida reemployment, which is its own disaster that we’re not talking about today.

That is usable and forgivable. And worker’s comp, no, does not qualify for that. Workers’ comp is really an insurance, it’s really not… It’s related to payroll but it’s really not a payroll tax. So spending on non-allowed uses. Borrowing application and certifications are violated, right? So if you said, when you made the application, “I’m going to use this for my payroll.” And then you’re like, “Oh, I need to go buy a new truck.” You violated the certifications that you signed. Now, depending on how much money you got, will determine if they’re really going to come after you. If you’ve got a small, like five, $10,000 loan, you’re probably not going to jail. If you got a $2 million loan and there was a news article about someone… I don’t know, the guy’s name. It’s someone out of Atlanta who was a reality star, lied on his application, made up stuff and then went and bought like jewelry and cars.

He’s probably in jail now. Now another effect of this is the loan becomes recourse, right? And what does that mean? You as the borrower become personally liable, because the whole aspect of this that we haven’t really discussed much is that with PPP, you’re not on the hook for it, personally. So if you got the PPP and your business ends up tanking and you shut your doors in July and you go through and not everything’s forgiven, you actually have no personal recourse. They can’t come after you individually, which is super unusual for the SBA. Usually everything is personal guarantee on the SBA. And then also if you’re violating the certifications, you don’t get forgiveness and it becomes a regular loan. You have to pay it back.

Suggestions on how to use PPP money. All right. This is what I did. I would highly recommend for everyone to do this. Set up a separate bank account, deposit those loan proceeds into that separate bank account. Don’t mix it in with your regular operating funds or anything else like that because it’s going to become super complex to trace how this money is used. Okay. What if it’s already deposited and first disbursement was made? You’re still okay. You can track it. You’re just going to have to be very, very careful with how you track it. Putting it in a separate bank account makes it much easier because you just have a lot more clarity where you can see like, “Okay, this 10,000 went into his bank account and I started paying my rent out of it.”

It’s not a problem if it’s some of it’s already happened. If you could still open another account, it’ll make the rest of the documenting super easy for you. All right. Only pay allowable expenses and costs from that bank account. If you can set that up, track them on a spreadsheet, make a digital folder like Google drive is your friend or Dropbox. PPP loan forgiveness, title it that and start throwing copies of receipts, canceled checks, payroll reports, all that stuff. The name of the game here is CYA, cover your ass. That’s what you want to do. You will need to make sure you can cover all of this stuff. You can document everything.

So things to watch out for. We are all stressed out right now, right? When you’re stressed and you’re in fight or flight, you don’t make the greatest decisions. You’re definitely not thinking terribly logically but here you have to be very specific and you have to be very logical about how you use their funds. It’s not, “Well, I just needed to get cash in and I’ll figure it out later.” And the reason is you only get eight weeks to do this right. So there might not be time to figure it out later. You’ve got to figure it out now. You’ve got to figure it out from the very beginning, right? Don’t make goofy, broad, rounded up transfers. And my example here, I think my electric bill’s around 400. Well, if it was really only $365 and you transferred 400 into your operating account to pay it, well, now the difference is not forgivable because you didn’t pay 400, you paid 365.

So you have to be really, really exact. And then if you don’t prove what you spent the loan proceeds on, you’re in trouble. You’re not really in trouble at the small dollars but you won’t have it forgiven. Especially for the folks on here who are my tax clients, this is very different than filing taxes. Taxes I largely take your word for it. The onus is on you. Nobody’s looking at your documentation unless you get audited. And this is quite frankly the opposite. This is you have no forgiveness until you show the documentation and prove it.

So it’s put it all together. It’s like a reverse audit. I’m going to put all my documentation together and then show it to the SBA and my lender. And they’re going to say, “Yeah, your day.” So it’s really the opposite. They’re not taking your word for it. You have to have this papered. So for a lot of small business owners, this is probably very different way of operating than what their normal business practices are.

All right. What costs can you include? So this is where we’re having a lot of difficulty because it’s costs incurred and payments made, right? And the keyword there is and. This is a little bit of logic and this is not going to be a common sense argument. This is very specific, costs incurred and paid. So paid and incurred versus paid or incurred, right? Those are not the same thing, if you really think about it. Cost would need to happen during the covered period, right? This is this eight weeks. So it’ll get into more detail. As well as paid for during those eight weeks. So question, if you meant to put in your retirement contributions for 2019, the employer side and you didn’t get to it, could you pay them now? Maybe, they’re not incurred now but they’re being paid now.

And again, this is where your size of your loan and the amount of forgiveness you’re trying to get, is probably not guaranteed but probably going to play a big part of whether or not it is deemed forgivable. The covered period, which I keep mentioning. It’s the eight week period following the date of the loan. This is going to be different for every single borrower. It is not as of a certain date. It is from when you get the money, count eight weeks out, okay? This is where we need those incurred and paid costs to happen. Payroll, you get a little wiggle room because payroll cycles aren’t necessarily going to coincide with when you randomly got your PPP money.

So paid means the day the paychecks are distributed or ACH transfers initiate, incurred is the day employee pay is earned, right? So you might have a lagging payroll. So maybe you pay twice a month but it’s lagged. So if I work May 1st through May 15, maybe I don’t get paid for it until May 30th, right? That would be a lag. So my pay and my incurring is a little off kilter. Payroll costs incurred but not paid during the last pay period of the covered period are considered paid if paid on or before the next regular payroll date. Ooh. All right? So here they’re giving you a little bit of leeway as to when you can run your payroll.

A question that I asked the tax attorney yesterday in the webinar I was in, that I have not heard back yet. Can you change your pay schedule to accommodate this now? I don’t know. That’s an interesting question. Maybe you can, maybe you can’t. We don’t have any guidance on it. And don’t know if that’s something that we would even get guidance on before it’s too late. Non-payroll costs. They also must be paid during the covered period, paid on or before the next regular bill date. Even if the bill date is after the covered period. So again, you’re getting a little bit of leeway here. Now, the interesting thing is they’re letting you pay late rent interest in utility if you pay it during the covered period, right?

And if you’re incurring those but you don’t pay them until after, that’s also going to qualify. So you’re really got a lot of moving targets here. It’s a little bit insane, I would say. You’re going to be looking at calendars and watching date payments. It’s going to be a little bit confusing. All right. We’re going to move on to independent contractors. Can amounts paid to independent contractors be included in payroll costs? The very, very first round of PPP information that had come out for just calculating the loan, initially said yes, later was changed to no, because they wanted the independent contractors to get their own PPP.

Does that make any sense? I don’t know. I guess it does to somebody in the government. So this was the treasury interim rule, page 11, no independent contractors have the ability to apply for PPP loan on their own. They do not count for purposes of borrowing PPP calculations. And then from the treasury FAQ on this, no, any amounts paid by businesses to independent contractors are excluded from businesses payroll costs. Okay. I know there are people out there. I have many inquiries about, “Well, I got funding to cover my independent contractors.” By the read of the treasury rules in FAQ’s, they don’t qualify. But this might be an area where your lender is able to get this forgiven for you. And right now we just don’t know how that process is going to work because nobody’s done it yet.

Sole proprietors. Okay. Here’s this self-employed that Robin had asked about. All right. So must have been business on February 15th. So if you just became an Instacart delivery person in April, you’re not qualifying for this. You had to have self-employed income without a loss and schedule C because then you don’t have self-employment income. You only have a loss. Principal place of residence in the U.S. filed a 2019 form 1040 schedule C. And if you didn’t, because you could have started your business between January 1st and February 15th of this year, there’s going to be special rules that we don’t have yet. Isn’t that fun? So we don’t know what to do with those people.

This is another chart. It’s going to be similar with what is the item? What can you use it for and how do you get forgiveness? So if you filed your 2019 schedule C and this is only up to a hundred thousand, there’s the same cap on wages for regular payroll. You’re going to divide 2019 schedule C by 12 and multiply by 2.5. That’s going to give you your loan amount and how much you can use, right? And those uses are the same. It’s the… I’m going to call it payroll costs, it’s really not payroll though, for you. It’s kind of your general income, utilities, business, mortgage interests, business lease, et cetera.

How is it going to be forgiven? No idea yet. We need guidance. We’re still waiting for it. It’s not out yet. If you were not in business in 2019, you can wait for guidance. But as I keep saying, you don’t really have time here. You’ve got to figure this stuff out kind of quickly or you can make a reasonable projection, which I’m guessing is what’s going to end up happening because the longer it takes for the SBA and treasury to come out with these rules, the harder it’s going to be for anybody to figure out what’s happening.

All right. Tax consequences. Any amount forgiven does not have to be paid back. All right. So it’s kind of like free money. Any amount forgiven is excluded from gross income. Now, this is different because in normal tax world, if you’ve got forgiven loans, they’re taxable to you but here it’s not. It’s really quite amazing. This is a point of contention. Are the related expenses deductible? The IRS right now says, no. And it seems unfair at the surface but if you think about it, you’re getting the income for free, right? You’re not paying any taxes on the income. If you took the expenses and deducted those, you’re kind of double-dipping. But the AICPA, who is the American Institute of Certified Public Accountants and Congress are fighting it. So we still don’t know. It’s up in the air but it’s possible that these are not going to be regular deductions on your tax return.

No idea what that’s going to look like. Hopefully, it’s not too big of a pain in the butt. But again, you’re going to make your tax preparer, especially if it’s me, very happy if you’ve kept great records of all this PPP stuff. Allowable but not forgivable. Ooh, what happens? Well, that… And remember, there’s at least one use that it’s a permitted use but it’s not qualifying for forgiveness. So basically, it becomes a regular loan, right? Those PPP funds have to be repaid. The loan remains non-recourse because of their allowable uses not the other allowed uses. Remember, like, don’t go buy jewelry and cars unallowable and fraudulent. But if you use it for other interest on other debt that you have, that’s okay. Borrowing applications certifications are not violated. So it’s not fraud. Basically, what I just said.

Spending outside the covered period. So this is the… If you spend it at the wrong time, you can lose some forgiveness. Covered period is the eight weeks starting the day the proceeds are received or the alternative payroll covered period, which is eight weeks starting the first day of the first pay period following receipt of the proceeds. They’re giving you a little bit of leeway to choose what works better for you, which should hopefully also make some of what you need to calculate, might be a little easier. I’m coming back up by a question. Say sole proprietors that cover all self-employed even if LLC, yes. If you’re a single member, LLC, you’re treated the same way as a sole proprietor for this purpose, also for your taxes, it’s the same. If you’re an LLC of partners, that’s like a whole different situation. There’s a little bit different partnership rules, which I didn’t really go into because there were super, super technical and really specific.

All right. This alternative payroll is only if you’re bi-weekly or more frequent. So if you’re bi-weekly or weekly, I don’t know how you could be even more frequent than that but it’s not for everybody. All right. This is where we start getting into the hairy parts, right? Salary reduction. So forgiveness is reduced. If any employee had wages reduced by more than 25% during your eight week covered period versus the beginning of the year. Okay. And then there’s a safe harbor on here though. June 30th, each employee forgiveness, not reduced if annual salary, as of June 30th, exceeds average annual salary between February to March. Ooh. That is a little bit of a crazy safe harbor. But I think what they’re trying to get at is, it’s the middle of… I guess, towards the end of May, right? A lot of places are still not open yet or not very open.

Are they expecting you to bring in all your employees, if your business is only at 25% capacity and pay all of them? And can you stay in business past June at that point? That’s why they’ve got these safe harbors in case you’re not quite there yet and not quite ready to bring employees back on right away but you’re going to have to get them back in by June 30th. Headcount reduction. I actually had somebody email me about this. Like a day after they got their PPP loan, they had a time employee that left. It wasn’t like, they were fired or anything like, they just like, “I’m done. I’m not doing this anymore.” So this is pretty complex. This makes you do a little bit of math. You’re going to jump through some hoops to figure some of this out.

The drop in number of employees or average paid hours. So maybe you bring all your employees back but maybe they’re only half time now. So you’re not paying them for as many hours, right? Or maybe you can only really bring back a couple employees. Not everybody. Forgiveness is reduced if the borrower’s average weekly FTE employees covered during period is less than the reference period. Right? But again, there’s safe harbors. So if you’ve reduced your FTE levels between February through April and then you restored them but not later than June 30th. So again, they’re kind of being a little bit understanding that everyone not might be back up and running. You might not be able to actually bring everybody back in a reasonable way until June. But the deadline for this is June.

Hopefully, we don’t have a lot of state counties, cities that are still super locked down by June. I don’t know what those people are going to do otherwise, because they’re going to be screwed if they got PPP loans. All right. What if employees won’t come back? We’re hearing a lot about this. Employment is so appealing right now because there is that extra federal $600 per week. You’re hearing a lot of stories, especially people who don’t make a whole lot, not wanting to come back because they’re making more being unemployed.

Well, obviously, there’s a lot of problems with that but for the PPP, as far as we’re concerned, if you can document that you made as the employer, a good faith written offer to rehire the employee but the employee rejected or the employee during the covered period had to be fired for cause, where they voluntarily resigned or requested a reduction of hours, that’s not going to negatively affect you for the PPP calculation. Again, you need to document, document, document, get it in writing. Even if you’re not in an industry where you normally have things in writing, you’re still going to want to have that. Like for example, restaurants, I don’t know how many restaurants have written offer letters for servers, things like that but you’re going to have to get stuff written offer.

I mean, even if you end up with a text message conversation, if you can screenshot and print, at least you have something to document and somebody won’t come back. All right. Here’s another problem. If you spend too much on non-payroll, wait, the rule is you need to spend at least 75% on payroll costs. So you’re going to take all of your payroll costs divided by point 75. All right. So your forgiveness then is not going to exceed this amount. So 75% of the costs have to go to payroll. If not, now we’re going to take our payroll costs divide by 75% and that’s going to be the max forgiveness. I don’t know why they use the same exact percentage. I don’t know how they came up with it. It makes it a little bit confusing but here’s my example for you. If you’ve got 5,000 payroll costs, you divide that by 0.75, you get 6,667. All right. So, that would be the cap of your forgiveness, if your payroll wasn’t or if your costs weren’t at least 75% payroll.

Let’s see. What if all funds are used for payroll, is it a hundred percent forgiven? The short answer is yes. You can use at least 75% to payroll, right? So the problem is if your non-payroll goes above 25%, if you use it all for payroll, you’re probably fine. Forgiveness process. Okay. So time check here. This is the general process. It is going to be highly specific to your lender. Okay. That can be frustrating. I know for me, I got Bank of America. They basically said, “Don’t call us about this. We won’t talk to you.” If you’re with maybe a nicer bank, you’ll get a little bit more feedback than what I’ve been getting. So here’s the general process, right? You’re going to have that SBA form that you’re going to have to fill out.

It’s got the PPP schedule A, you need that payroll documentation, payroll reports, copies of the tax returns that you are sending to the IRS and to the state. So your 941s, your state unemployment tax, then you want to see receipts or canceled checks, especially if you’re handing out old cash and payroll, if it’s direct deposit, it’s a little easier to show because there’s not so much of keeping canceled checks that you have to deal with. You’re going to have to go through that FTE calculation and all that documentation. For the non-payroll costs, if it’s a mortgage, you’re going to have to include a copy of the mortgage, right? And remember it’s business mortgage only.

An amortization schedule to show that what you’re paying for is only the interest portion and amortization schedule basically breaks down your interest and your payment. For those who don’t know. Receipts or canceled checks, something to show that yes, the mortgage company got your payment and yeah, they deposited it, cleared the bank, et cetera. If you’re going for rent, you need a copy of your lease agreement, receipts, canceled checks, utility payments, receipts, canceled checks. All of these things, keep copies. You’re going to have to make these borrower certifications.

So you had to make certifications to get the loan. Now you’re making certifications that you used it, how you needed to. A dollar amount for which forgiveness is requested, was used to pay costs or eligible, includes applicable reductions due to decreases. Like we kind of went through before, does not include non payroll costs, blah, blah, blah. Funds not knowingly used for unauthorized purposes. Calculations are accurate. And you’re saying I did good math, right? That’s part of this is that I didn’t screw up my calculations.

The required documentation’s provided, everything is true. Everything’s consistent with what I’m giving to the IRS. So if you find there was a mistake in your payroll and you have to go amend returns for some portion of this, you might have an issue later on. So hopefully everything is correct when you’re filing. Yeah, keep this documentation for six years, six years, keeping this documentation. What do you have to keep, that PPP scheduling worksheet, documentation supporting each line on schedule A, documentation with job offers and refusals, firings, resignations. Documentation that you submitted with your loan application, right? So if you don’t have whatever you put in for that loan, go find it because you’re going to need it. It’s just more and more… Basically anything that had to do with PPP, you’re going to have more and more paperwork and you’re going to just have to hold onto it.

All right. So that is a blow through, like I said, it’s a lot to cover. This is so new. It is so different. This is not a service that is included with anything else that I do. So for example, if you are a tax client, do not assume that I am doing this for you or that my firm is going to do this for you. This is completely new. It is completely different. Yes, we are offering a service to do this, if you don’t want to go it alone. And quite frankly, I would be nervous to go this alone as a small business owner, just because there is so much and it’s changing constantly. So we are putting some packages together to help do those calculations, put together the documentation, help you track it properly in your books. This is a really very different from anything else that any of us have seen before, right?

It’s brand new. There’s no guidance except as it comes out, there’s nothing to say, “Well, what did we do before?” There is no before. So we are available. I don’t know if I’m going to do any more webinars, even on this matter because it’s just going to get more and more nuanced and detailed at this point. But in other things, I do have a business book club that we moved it to being virtual and set up a group on Facebook. If you want to learn some more about how to make your business better, come join it. It’s on Facebook. We’re [inaudible 00:46:11] start with why in about a month. I’m putting a lot of general information about stimulus out on my Facebook page. It’s also on my bettehochberger.com/covid-19. And who’s got questions?

Also, I just wanted to throw this up there for the Game of Thrones fans, A Lannister always pays his debts. It’s a little humor about loans if there’s such a thing. Okay. Another question. Do you know if nonprofits have different kinds of requirements, rules regarding PPP? I do not believe so. I think they are roughly the same because you still have to mostly spend it on the payroll. You’re looking payroll for the most part that 75%. You’re still dealing with those limits. Hold on. Okay. I’m going to hop in the chat because it’s [inaudible 00:47:08]. I couldn’t see it while I was doing the thing.

If you pay yourself via draws, should you write yourself a check weekly, true payroll? I would like to send you [inaudible 00:47:18] not super clear. Okay. 1099 subs. Everything coming out is saying that it is not going to be forgivable. Again, your lender might have something else to say but according to everything that I have read and every time I ask the question, they’re saying no, on 1099 subs. Pay yourself via draws. Draws are not covered for S-corporation owners. It is just payroll, right? Can you get away with it? Maybe, there’s no guidance right now. So far, they’re just saying that it’s payroll, payroll, payroll, payroll. I am paying for house hard money. Paying interest only as construction company considered investment property [inaudible 00:48:01] in the name of the one biz paid by my biz. That might qualify if it’s in the name of the business but just the interest, right? Only the interest portion. And you’re going to have to follow their amortization schedule. If you only get forgiveness in 75%, 25… Oh, sorry. Telephone.

Could you only get forgiveness in 75%, 25% for the portion of money that you use, if you don’t need the balance? I don’t totally know what that means. If you don’t need the money, you’re actually supposed to give it back to them. There is a deadline for that. I don’t know what it was. It might’ve passed. Paperwork for a hard money private lender. I don’t think it matters if it’s not conventional. I think there’s still going to want to see it. And you’re probably still going to need an amortization table. Start date. Does it go by the date we received EIDL or PPP? So for this, the covered period starts, when you got the date, you got the PPP. How do you pay yourself? You have to go through payroll, unless you’re self-employed. If you’re self-employed, LLC single member of file, schedule C, then it’s different. But if you’re on payroll, you got to run on payroll. Let me see, let me show you guys a couple of things. I’m going to share a screen again here.

So this is… Let me pull it up. This was released by the AICPA. So it’s the American Institute of Certified Public Accountants, who put out a lot of about the PPP, the whole process. They’ve had a ton of information. It might be very technical because it is really for CPAs but it’s open to the public. So they created this workbook to go through. Now, notice it says here, draft as of May 21st, 2020, I don’t know if it’s ever going to stop being a draft because they’re just going to keep changing things, right? And this is another fun thing that they have in here. It’s this yellow box, your judgment and interpretations of the act maybe necessary, right? So even the biggest CPA organization in the country, doesn’t have all the answers. That’s what we’re dealing with. But this will walk you through a lot of what you need to do.

I haven’t used this yet. I’m going to start playing with it for myself to make sure that I get all my forgiveness as much as possible. Here’s that schedule A, that they were talking about, where you’re going to have to keep this compensation and there’s different compensation for different types. Like here, we’ve got an amount paid to owner employee self-employed general partners. Like there’s just… everybody’s different. Not all of it is the same thing. So worksheet A, non-payroll cost tracker, payroll accumulator. Well, that’s going to be fun. And if you’re in a really employee-heavy business, like if you’re in a restaurant or a hairstyle salon, something like that, where you’re really needing to track hours, you’re going to have a field day with this because there’s just so much information that you need to keep and you need to have immaculate records.

You should have good records anyway but you know not all industries deal with things the same way. And then this is the FTE input to try to deal with some of those calculations, right? And again, your judgment interpretations of the act may be necessary. And this is going to be a moving target. All right. Let me stop sharing so I’ll answer some more questions. If you got a hundred thousand, I only use 80k per the rules and can pay the extra back, I get forgiveness 75, 25% [inaudible 00:52:37] that doc and Excel. I don’t think I can share it over here. I can find it… I will share that link out. AICPA. Let me see what else I got on questions here. Okay. What are terms of repayment if you don’t qualify for the forgiveness?

So it’s a 1% loan, they give you, I think, two years to repay and it’s pushed off for six months. Now, what’s the other interesting thing is nobody’s sure, because what I heard was they’re accruing interest from the second they sent it to you, is the loan itself forgiven is the loan and the interest forgiven? We’re not totally sure. So that’s an interesting point. That’s one of those we’ll get more guidance eventually. And in LLC is the employer’s salary forgivable? I would need a little bit more information because it depends. Are you an LLC filing a 1040 schedule C? If so, that’s where we’re waiting on guidance. We don’t really know what they’re going to do. The start date, so that it starts the day you get the PPP loan, not the EIDL, right? And the EIDL if you got that grant is supposed to reduce your forgiveness.

And I don’t totally know what that looks like yet. Does forgivable wellness depend on existing cash in the business bank account, whether the company makes profit or loss in the financial year? Sorry, guys. It does not depend on cash in the business bank account on existing cash. So the forgiveness is the PPP proceeds that you’ve got, right? So whatever you received. So if you got a thousand dollar PPP loan, you have the ability to forgive that thousand dollars. But only if you spend it at least 75% on payroll and up to 25% on those other allowable costs with all of the stipulations on how they let you spend. Now whether the company makes profit or loss in the financial year, if it’s the schedule C, that might matter, we don’t know yet. If it’s a regular business, it should not matter because it’s… [inaudible 00:55:12] I say regular business I don’t really mean that schedule C is not a regular business.

If you’re an entity, that’s not a schedule C, not a sole proprietor. So if you’re an S corporation, a corporation, it should not matter how profitable your business is. It should only matter what you spent it on. If that makes sense, right? So I could still have such a crappy year but I managed to bring back employees and pay them and get that… I can get that forgiven, even if I ran into the red for the whole year, because maybe this goes on for so long, maybe my business was really badly affected. Forgiveness will include both amounts requested EIDL and PPP. Okay. So the EIDL, if you’ve got the EIDL loan and it wasn’t really going to cover it too much in this, is a completely separate loan. But the EIDL advance, which was what turned into a thousand dollars per employee, that is supposed to reduce your forgiveness.

I don’t know exactly how that works. I don’t know if it’s even in these spreadsheets, worksheets or not yet. Hold on one second. I lost my mouse. I’m trying to… I want to share out the Excel spreadsheet here. Okay. So if you go to this website, this AICPA website and I’m going to throw that up on my personal website also. In the center… Here, let me share the screen. It’s easier than describing it. SBA paycheck. So you go here, you’re going to scroll down to this gray box featured resource, right? PPP loan forgiveness calculator, right. And it downloads a file, you might need to repeatedly download this file and make sure that you’ve got whatever their latest version is because it’s still a draft.

If we have PPP money intermingle in the operating account, do you recommend new transfer money to a new account? Should we transfer the operating account money to new account demonstrate amount? I would say it does not really matter which money you move. It might be just easier to say, “Okay, I got $10,000 PPP, I’m going to go open a new account and transfer it.” I took it and I transferred it all to my payroll account because I’m anticipating using it all for payroll. But either way, you could either move one or move the other. It might just be more practical to move just the PPP, because if you have other things that hit that operating account, it might be a challenge to get like auto pays and things like that out of that account.

Can I pay an existing employee substantially more during the eight week period? That’s a great question. We’re not really sure. It seems like maybe no but possibly a bonus. And that’s one of those waiting for more guidance, because why wouldn’t everyone just do that? I’d be like, “I’m just going to pay everybody more.” Because if you think about it, you got a loan based on 2.5 times an eight week average of 2019. But now you’re only going to pay them across eight weeks. You’re not paying… You got the loan on more than what you’re going to pay out, is basically what I’m saying. So that is a good question that we don’t totally know the answer to.

Would monthly storage costs be considered forgivable? Possibly, if you have a rental agreement or lease agreement, you probably could get away with it. That’s one of those things to contact your lender about. I would think that that would probably be on the reasonable to assume, yes. What is your advice on my initial question? Hold on. Let me go scroll back up to Leslie’s… When you say not to double dip, if the funds go into your deposit account, continue to pay payroll and pay rent utilities as usual. How do we keep records of this properly? Okay. So if you’re not going to move it into a separate bank account, you need to probably keep at least a spreadsheet, right?

You’re going to have a spreadsheet that says, I use this money here, put the total PPP loan at the top. Okay. I paid this money out of it and just have it subtracts, subtract, subtract. You’re going to keep all those documentations. So if you’re covering your rent, you need the lease agreement, you need the canceled checks. If you’ve got the mortgage, you need that mortgage agreement, you need interest, you need all this stuff. Let me find back where I was. Is there any way to amend EIDL application, which we submitted online? Whew. I have no idea. I know that… I actually did get an EIDL loan. They did not really ask me for any documentation at all, which I thought was really crazy. They let me pick how much I wanted. EIDL is a whole separate situation.

Let me see. Oh, hold on. If you keep records very well organized, just keeping a spreadsheet with PPP related expenses will be good instead of opening a new bank account. Yeah. If you keep it very, very clean, yes. You can. You could just do a spreadsheet and you don’t have to open a separate bank account. If we did a small mistake. Abdul, I don’t know what that’s in reference to. I’m sorry, if you want to give me a little more clarification. I’m not sure if you mean on the EIDL or what? I don’t know that you can’t really do much of anything with EIDL except say, no, I don’t want it. PPP, if you have an error on your calculation for the initial borrowing, there was something that you could do. I think it was due like May 14th or something like that. So it might be too late.

Let me see if I can scroll back down here. Okay. I think we got everyone. Oh, wait. No, there’s more. Small mistake on the EIDL. Yeah. I don’t know. EIDL, I will tell you the process for me was I got an email from a contractor from someone working for the SBA for the EIDL. He said, “We need to see proof that your business is real.” So they said a license, a schedule C tax form, there was something else. So I just sent him a copy of my CPA firm license from the state, my printout from sun biz, with Florida that shows that I’m up to date. And that was it. That was all they asked me for. So what you could do is maybe redo the calculation. And I don’t know how they came up with the amount of the loans either. They didn’t say like, it’s 2.5 times, whatever. It roughly looked like it was income less subcontractors.

And then half of that, roughly. Not even an exact amount, it was about… You can always take less than what they offer you if you’re concerned. I don’t know anything about how to deal with that EIDL process. It’s a little bit more of a like traditional loan with the EIDL. Yeah, sorry. Oh, are there any other good information about that one? Okay guys. So, like I said, we are offering this as a service to help people with PPP loan, documentation, calculations. This is not for the faint of heart. It is overwhelming even for us tax folk, because it is so different and we’re going to end up with a mess comp next texts in any way, trying to figure this all out. So feel free, reach out to me. I will see if I can help you.

And if you’re trying to go it alone, best of luck to you. Keep an eye out. I think Forbes also has some good information out there. That’s another area. You’ve got to really pick and choose who you’re looking at for your information because not all information is created equal. Don’t read it in life. The regular news, they’re kind of morons. They don’t really know what they’re talking about and they’re going to get it wrong. You need a reliable source. All right. And with that, thank you, everybody. Enjoy your Memorial Day weekend.

PPP Loan Forgiveness Application and Calculators

The Treasury department released the PPP Loan forgiveness application. It’s 11 pages long – wow!  You can find that here.

If you are trying to see what the loan forgiveness calculation entails, you can see the calculator developed by the American Institute of Certified Public Accountants (AICPA):

Go to this website- https://www.aicpa.org/interestareas/privatecompaniespracticesection/qualityservicesdelivery/sba-paycheck-protection-program-resources-for-cpas.html

In the center of the page under Featured Resource, click the link PPP loan forgiveness calculator. It will down load an excel file.

There will be many calculators that you will find on the internet. Not all of them will be correct. You, the borrower, will still need to certify that the calculations are accurate. Beware of what “tool” you use!

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Florida Reemployment – Changing Your Claim Date

Anyone trying to claim unemployment in Florida has probably encountered some problems. The state is trying to process as quickly as possible. They know there are problems, including issues with claim dates being wrong. This is the date as of when you want reemployment to start. If you need to modify your claim date you need to go fill out this webform:
https://claimdate.myflorida.com/recertification

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Florida Reemployment Updates

Florida has released a new website for applicants, including self-employed people. The new site is http://floridajobs.org/

If you are still having trouble accessing the reemployment system (like I am!), I highly suggest reaching out to your local State Representative. I called mine and the aid I spoke with was very helpful. She sent me a release form to go advocate to the reemployment office on my behalf.  Find your representatives here: www.myfloridahouse.gov

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Update Webinar Replay

On April 22, 2020 I did an webinar updating information for the COVID-19 stimulus options. You can watch the replay here. Updates on the PPP, EIDL, unemployment, and how self-employed people can get assistance from these programs. The Senate approved additional funding so hopefully these programs open up soon to get financial help to small businesses!

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Where’s my IRS stimulus check??

Still haven’t received your IRS stimulus check? You can check on it’s status with the IRS Get My Payment application here. You can also use this application to update your direct deposit information with the IRS.

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Contact Your Senator!

Over a week ago I put in my loan advance request for the EIDL. As of Tuesday April 7 I’ve received $0 of that advance! The SBA has changed the rules on all of us, repeatedly. I called Senator Marco Rubio’s office and left a message with constituent services. They actually called me back, and emailed me a consent form so they can go ahead and speak with the SBA on my behalf. If you live in Florida please feel free to call Sen. Rubio’s office as well and also fill in this form. If enough tax payers complain, they can put pressure on the SBA to do what they are supposed to do. Find the form here:

Privacy Consent Form – Standard 2020 (fillable)

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Webinar Replay

On Friday April 3, 2020 I did a webinar on the various options available from the government. Did you miss it? Catch the replay below. Please note that the information presented is valid as of April 3, 2020, unless disclaimed in the video. This is a highly fluid area, with changes being made daily. Please check back often.

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COVID-19 Loans and Grants

The new stimulus package has many new and confusing options, and we’re here to help. We will help you figure out which programs are right for you and your business.

If your company’s whose books are up-to-date, we can move really fast. If your company’s books aren’t up to date, we’ll review what is needed and help you chart a course to get your records together and application out the door.

You can file on your own, but engaging a CPA can help you verify that there aren’t errors that will slow your application; additionally we can help you review the tax implications.

The initial one hour consultation includes the following:

• Review the SBA programs
• Review the status of your business
• Evaluate your tax situation (based on your most recent tax return)
• Cash Management Advisory Session to help you make the best decision for you, your business, and your family.
• Help you decide which program should to move forward

Once we have a plan, we can move forward quickly to get your records in order and application into the SBA.

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This information was current as of 4/22/2020

On this webinar we review updates on the various government stimulus programs. We will go over:
– PPP/Payroll Protection
– Payroll Tax Credit
– Unemployment
– Information for self-employed/independent contractors/gig workers

Okay. Hopefully everyone can see the slides. Might see a little bit of my head, it’s okay. All right. And I’ll try to keep an eye on the chat if anybody’s got questions. So, I’m going to get started. So, thank you for joining. This is The update. I know not a lot of time has passed since the original but here we are. a lot has changed in two weeks. It’s been a long two weeks. So, here’s what we’re going to talk about. We’re going to do a little recap, changing tax deadlines again, updates on individual rebates, unemployment, PPP with the loan forgiveness and EIDL. And the new thing I really want to talk about is the employee retention credit. So, you’ve heard of news, This is OLDS. The OLDS on the tax deadline, nothing is new about this. They moved everything that was due April 15th to July 15. There were some weird hiccups in that including the second quarter estimated payment for 2020 which was still due in June. But other things like IRA contributions, HSA contributions, retirement plans, all that got pushed off into the future.

So here’s what’s new, actually somebody realized either in treasury, I guess, maybe Congress, I’m assuming this was a treasury decision that it made no sense to have the second quarter estimated payment due in June when the first was due in July so they went ahead and move that forward also. So now on July 15th are due your tax filings, if you don’t file an extension, and your first and your second quarter estimated payments. But for a lot of people they might not be making those payments because if your income has been dramatically affected you might not have anything estimated to pay in. So that’s the big change. Practically everything got pushed forward.

There are a few weird deadlines here and there. Some states were not very cooperative. I know I have a bunch of technology startup clients in Massachusetts and Massachusetts moved their corporate filing deadline but if you didn’t pay their corporate excise tax by April 15 they were going to charge you interest. So, there is a screw you from Massachusetts. I guess that’s not so surprising. But most states did eventually conform just because it’s insanity but you’ve got to keep an eye on it if you’re in a taxable state. And if you are, you might want to consider moving to Florida where we don’t pay income tax.

The individual rebates, this is the $1,200 per person for taxpayers and their spouses. These have actually been going out. I have had a lot of people tell me that they received it direct deposited into their bank. There are phase outs, you maybe don’t qualify depending on what your income is. And then if you haven’t gotten it yet but you think you should there’s a big where’s my money. So, I have heard of some problems. For example, some people have told me they got their $1,200 and I said, “Well, what about the $500 per kid?” They did not get that. No clear information but the bet conjecture on what I think is going to happen is that after they get some of these out or some portion of these $1,200 direct deposits out they’re going to go back and try to figure out dependents because it’s actually a little bit tricky. There’s an age restriction on the dependent. I have seen confirmation in fact that if you have a child age dependent who is 18 to 24 and they’re full-time you are not going to get money for them. And if they didn’t file on their own, which many college age dependents don’t, they’re not going to get $1,200 either. So, that’s a little bit of a screw job there.

Might it make sense to file a quick 2019 return? Maybe. It really depends on your individual tax situation. It’s not that easy to just say, “Oh yeah, have them file it.” Because if you’re the parents and you’re supplying their support and they really don’t have income you might be losing out on more than $1,200 if you would otherwise claim their tax credits and other things. So, it’s not that straightforward. It’s definitely a case by case individual decision. Just be aware that if you’ve got college aged kids this might happen to you.

There is a website that you can go to and check out your status. It is not the most easy to use form not because of the information you have to put in but the results that you get often are telling people that they can’t find you, it doesn’t know anything. I don’t know of anybody who’s used it who already got the stimulus if it tells you like, “Oh, you did get your stimulus.” I’m not sure.Yeah, it’s not perfect, not a perfect system. And the important part for me to explain is that it is not taxable and if you end up making a lot more money in 2020 because some people even when there’s a catastrophe going on still are in business and are still doing well it does not need to be paid back in 2021 when you file your 2020 taxes. So if your 2020 income is high it doesn’t matter. You’re not being taxed on this.So they say right now. I feel like we have to caveat everything like this is what we know right now. It’s not supposed to be taxed.

All right, before I go into unemployment I’m going to hop in and see if there’s a couple of questions. “Which banks are still taking applications.” Helen, I will try to get to you on that when we get into that section. “What is the threshold income for stimulus checks?” Hold on. I will back that up. It is married filing joint. The phase out starts after $150 and after $198 you don’t qualify anymore. Single at $75 when you’re over $99,000 and you don’t qualify anymore. And in between it goes through a little math calculation to figure out how much they’re going to send you. “I heard if dependents didn’t get paid out properly it would include 2020 income tax return.” Yes. That is correct as far as I know. Whatever they’re not catching by, I think they have a deadline of they have to have these payments sent out by December 31st and if it didn’t happen then you can pick it up in 2020. I don’t know if that will include those college aged dependents so that is the real question.

I’m going to move on to unemployment. By the way, in case anyone doesn’t know this in Florida we call it reemployment for whatever reason. I guess it sounds better. This is the recap portion. You can apply for unemployment. Every state is different with their calculations. The thing that was really special is that the federal government is adding an additional $600 per week on to of whatever you qualify for from the state. And that is retroactive back to when you became unemployed. And it is tacking on a 13 week extension past what states cover. We would all like to think at 13 weeks we’re not in this situation but who knows.

So, some of the specific things that I’ve been getting a lot of questions on, I’ve had so many people come to me and say, “But I’m self-employed,” or, “I’m an independent contractor,” or, “I’m an Uber driver,” “I’m this, I’m that.” “I don’t qualify.” All those normal rules for unemployment are out the window. It is an unemployment free for all. So even if normally you have your own business, you’re on your own payroll, or you just file a schedule C or you’re a gig worker, or you just get a 1099, all of these things that normally you wouldn’t qualify you can go and file for unemployment. Even if you don’t qualify for the state portion you still are supposed to get the federal portion of it. So $600 a week is $600 a week especially if you’re not working. That’s fantastic.

Go try to get it. If you can’t get through the website, I know Florida’s website is a dinosaur. I mean, that thing has been a nightmare for years and years. It has not gotten better. They claim that they’re trying to update on the backend and make it work. I was actually able to log into it for the first time yesterday So that was exciting. But if you are not able to log into your state’s unemployment website most of them have paper forms. So, I know I filled in the paper form the day they released it in Florida, it was four pages long.

Then they went and revised that same form to being like 10 or 12 pages long. Filled it in again, sent it in. Yes, it’s a duplicate. Yes, it’s probably going to cause a delay but so would having the wrong form. Nothing is moving very quickly as we can all see. but they are working through it So if there’s progress it’s just not as fast as we would hope it would be. And yeah, the unemployment system has never seen anything like this before in terms of volume So it’s causing delays in every state.

All right. Now for the fun PPP, this is our recap here. Oh, hold on I got a question. “Self-employed, does reduction in hours, income qualify for unemployment?” It can. I don’t know the specifics. I know that because you can work part-time even and still be on unemployment. I don’t know what proof they need but I’m pretty sure at this point if you just go fill out the forms you’ll probably get something. So you might as well throw it in. All right PPP. This has been in the news. If you haven’t heard about it you’re maybe living under a rock. I’m not sure. But we’re going to say it’s for small businesses and that gets quoted because we’ve all heard the stories of Harvard and Shake Shack and Ruth Chris Steakhouse that are these enormous companies with way over 500 employees managing to get millions of dollars of this money. The loan is capped at 250% of your payroll and you have to go through SBA approved lenders so that’s banks, there’s some other lenders. I think even QuickBooks is able to do these now. Some payroll companies became SBA lenders. It’s a crazy world.

So, what makes PPP super special is that it’s forgivable which we have a concept of forgivable loans normally when we had the 2008 financial crisis people were getting foreclosed on left and right. If you had a mortgage and they forgave your mortgage normally it’s taxable income in the year that the bank files that form, that 1099 C or A and sometimes it would happen years later. What’s completely different about this loan forgiveness is that it’s not taxable ever. It basically turns into a grant more or less.

But there are some teeth on it. You have to use at least 75% for payroll costs. And not only that, within your payroll you have to maintain the level of payroll you are at. So, if you have a decrease in your head count that can reduce the amount that’s forgiven. If you reduce your salaries maybe you say, “Okay I can bring people back with this loan but I can’t bring everyone back and I can’t bring them all back at the same rate.” Well, that can also reduce the amount that’s forgiven. And you have to have people back in place by June 30th So if you were like, “Well, let me see when we’re fully functional again,” And that’s not until July. You’re going to still have a problem where this loan won’t be forgiven.

Here is the new fun part, PPP for self-employed and independent contractors. So originally they were not accepting these PPP loans for anyone who is self-employed or an independent contractor. How do we know if we’re self-employed? In the terms of the PPP they’re using a very tax focused description. So like working for yourself, if your self files a schedule C on your 1040 then you’re self-employed. If you’ve got your own S corporation you are not self-employed for this. You are a regular employer. You should be on payroll. I said this last time, I have said this a million times, if you run an S-corporation, if you are the owner you must run pay roll, you have to. And if you haven’t been then you’re just getting screwed for one more thing with the PPP loans.

But the self-employed independent contractor is very specific, it’s for schedule C filers. How do you know if you’re a schedule C filer? You would have to look at your tax return. All right. If you normally file your business files a whole separate return you’re not a schedule C filer. It goes on your personal return. And again, there’s a bunch of rules as to who’s actually eligible. So you had to be in operation on February 15th of this year. You have to have 1099 income or if you don’t receive 1099s, I know that’s not a perfect system. If you generate your own clients and they pay you directly that’s fine. It’s just self-employed income or 1099 miscellaneous income. You have to be a principal place of residence in the U.S. and you have to file a schedule C for 2019. So that means if you started your business on January 1st of 2020 you don’t qualify for this because you’re not going to have a schedule C filed for last year.So you had to be in business last year still operating February 15th of this year and be self-employed.

Now the other question before they came out with a clarification is what were they actually going to base these loans on and this is nuanced, detailed accounting jargon. Was it going to be net profit? Which would be when you look at schedule C it’s the income less the expenses is your net profit. Or was it going to include equity draws which is money that you take out of the business? A lot of time for small businesses those numbers are more or less the same thing. There are some things that can make that different. For example, if you tend to leave money in your business and not take draws, your cash draws and your profit won’t be the same. But they put out the guidance very specifically we are looking at self-employed profits for the PPP loan calculations.

So, there’s actually two ways of calculating and it depends on whether or not you have other employees. So if it’s just you and nobody is on payroll this is how you would calculate your PPP loan amount. So you’re going to start with whatever your net income is on your schedule C for 2019. It’s the total income less all of your allowable expenses that reaches the what we call bottom line number or your profit. If you’ve made more than $100,000 on your schedule C it’s capped at $100,000. Why do they do that? Well, for the other piece of PPP for the other businesses they’re excluding payroll over $100,000 so this is falling in line with that.

And a sidebar, if you have a schedule C company that’s making over $100,000 you need someone to talk to you about tax planning because you are not optimized for your taxes. And then if you’re running at a loss or if you’ve totally broken even you’re not eligible. Because if you’re losing money in your business and you’re out of money right now you might lose more but I guess they figure it doesn’t harm you that much more. So you’re going to take the amount of your net profit or $100,000 and you divide it by 12. That gives you the average for last year. And then you’re going to take that average and multiply it by 2.5 or a 250%. So, that’s how they’re equating the schedule C method to the business method. It’s as close as they could do to make it to be roughly the same thing.

Now, if you have employees you’re in a slightly different situation, you’ve gotta do a couple more steps here. You’re going to start again with that net profit or loss from schedule C. That can’t be more than $100,000 and if it’s zero you’re not eligible. Now you’re going to add in your Medicare wages. So this is really the payroll. You’re gonna add in the wages of your employees that you’re paying that show up on your quarterly payroll tax form 941. You can also add in health insurance, profit contributions. You take that total, divide it by 12 and multiply it by two and a half and that’s how they’re coming up with your loan calculation. So, it’s an extra step in there if you’ve got employees on payroll because you need to include them along with yourself.

So that’s that part for the self-employed. That didn’t come out right away at the beginning. My update on what’s going on with PPP, They ran out of funding in 13 days which is crazy. Yesterday the Senate approved phase 3.5 for relief with $300 billion going to PPP funding, which is fantastic.The SBA should resume handing out loans. Now this is supposed to be first come first serve, there is all a lot of questions, I think there’s even some lawsuits now about did the big banks like your Wells Fargo, Chase, did they actually hand these out first come first serve or did they go to their enormous clients and say, “Hey, we think you qualify. Come give us your application and we’ll get you $10 million.” I don’t know. I don’t know when we’ll know, if we’ll ever know.

What I can tell you is that while there’s lots of outrage on social media towards those businesses like Ruth Chris and Shake Shack the thing you have to understand is they actually qualified under the rules as they were written. Now you might say, “Well, if you think about it, logically the SBA, the Small Business Administration, you shouldn’t be able to apply if you’re a publicly traded company.”That seems like it should just be common sense but that’s not anywhere in any of the rules. They put specific waivers in for restaurants that have multiple locations and that’s how these big, big companies managed to swoop in and grab all that money. Fair no, but that is the price of unintended consequences sadly.

Let me see a question, “All my subs are 1099, I applied, received SBA loan. What’s the process? What docs need to be kept for the loan to be forgiven?” Everything. You’re going to have to document the crap out of that. My suggestion on the loan forgiveness documentation is to put the money, the funding into a separate bank account, and only use that funding for the forgiveness. So, if you’re running payroll do a transfer from that to your payroll account, document the hell out of it, put memos notes, whatever you can so that when you need to justify it you’ll have that in there. Also, the 1099s are not going to qualify for loan forgiveness. Initially they said that they were going to count them and in the end they said, “Nope, only payroll.” So yeah 1099 people you are going to have no forgiveness. In fact, the bank should not have granted you even the loan based on 1099s because that’s not the qualified wages for PPP. So, I’m impressed that they did that or terrified not sure which. And once you get to the actual forgiveness it seems like it’s going to be the up to the lenders. So, maybe that particular lender will be okay with it and then it’s their problem, who knows, but document, document, document.

Okay, EIDL. I’m going to move onto the next part. EIDL is the free $10,000 that hardly anybody actually got. It was supposed to be an advance on the EIDL emergency disaster loan.It was written in the bill to say that it was an advance of $10,000. The SBA went on their own and said, “Well, we are not going to give you that. We’re going to give you $1,000 per employee up to $10,000.” So that sucks. I don’t know if there’s anything to be done. You can try and contact your Senator. If you’re in Florida contact Senator Rubio who is on the committee that oversees that program and maybe they can help. I’m not sure.

“Has anyone received it yet?” Yes. EIDL, I actually got my EIDL, I got a whopping $1,000 for me who is the only person on payroll. A small nonprofit that I applied for also got $1,000 and I have one client that got $10,000 but he’s got a bunch of employees. So, that’s how he got it. They are giving it out, it’s again supposed to be first come first serve so if you put it in right away you got it eventually. It wasn’t within the three days that they said but it happened eventually. So this is supposed to be a loan with an interest rate of 3.75 up to two million with principal interest deferment up to four years. The grants have gone out. I have not seen anything about the actual loan. I personally have not heard a thing about the loan itself. So, I’m not even convinced that there is loan money available. I think they might’ve used it all with the grants. And this was to be able to to be used towards any operating expenses. You could use it to payroll but it could be for anything.

So the update here is that the Senate approved another $60 billion in loans and $10 billion of that would come in the form of the direct grant. So that’s that magical $10,000 or $1,000 per employee as it’s been re defined. But who is going to get it? When I looked yesterday on the website the SBA took down the application website and they actually said that they’re not taking any loans because they’re out of funding. And they again are supposed to be processed first come first serve. Who knows? I don’t know if once the funding gets fully approved by the house, president, everyone, if they will put that back up. I don’t know. I’ll try to keep an eye on it and see because it’s a free grant so that if you do get that grant it does not need to be repaid which is what is so nice about it.

I see question, “Can you still apply for EIDL only and not PPP?” As of right now no. That is what I’m saying. The SBA is no longer taking applications for it. That might change with this additional funding. I will try to keep an eye on it and see. Hopefully we find out the answer will be yes, it would be great.

Into the new stuff, employee retention credit. So this is supposed to be to keep businesses with their employees on their payroll even if you have to reduce. Anyone who can stay open this would be I guess a huge benefit if you are able to stay open and keep employees on. So, the refundable credit is up to, it’s 50% up to $10,000 in wages. But you had to have a financial impact by COVID-19. I would think probably just about every business has been financially impacted by COVID-19. Even those that are still open are not open to the full capacity that they used to be.

Now, this is available for any size employer so you’re not going to hear those screaming and yelling about big public companies taking it when small businesses couldn’t because it’s a tax credit. This is not a loan, it’s not money that’s being doled out by any government agency. However, if you take an SBA PPP loan you do not qualify for the retention credit, it’s one or the other. So you have to think about that before you go and take a PPP loan. And it’s not even taking it and using the money. Once it’s granted to you, you no longer qualify for the employee retention credit. So it’s one or the other, it’s not a both, you cannot combine them. That has to be totally clear. It’s a decision you have to make.

Now you’re a qualifying employer if your business is fully partially suspended due to government in relation to COVID-19.So, a local grocery store could be someone like that like everybody’s partially at least suspended. I don’t think anything’s fully operational at this point. And your gross receipts have to be down 50% of the comparable quarter from the previous year. And if you go above 80%, so if you’re in an industry that’s booming right now you might not qualify. The other important thing, self-employed independent contractor, schedule C people, you do not qualify because you don’t file payroll taxes and this is a payroll tax credit.

So hang with me here. It’s a little dense but it’s worth it if it’s worth it to you. So how do we calculate it? Half of your qualifying wages up to $10,000. So for example, if I pay somebody $10,000 a month or I guess it’s really, I think it’s in a quarter, I don’t think it’s a month, I think it’s a quarter, $10,000, half of that $5,000 would come as a credit. Which is a huge amount for a payroll tax credit. And this is good on wages that are paid after March 12th, before the end of the year basically which is pretty cool. So, it can go on for the rest of the year and you can also include healthcare on that. And then I’m only including employers with less than 100 employees because that’s mostly who’s going to be seeing this. If you had 100 or fewer on average in 2019 the credit is based on all the wages that are paid on the period, the March through the end of the year period.

So, how do you actually claim this credit? Well, it’s going to be claimed on your form 941 starting with the second quarter. So second quarter ends in June and that would be the first time that you can claim it. And it specifically is offsetting the social security portion of your payroll taxes. Even though you can start counting wages for this on March 13th you cannot go backwards and amend your first quarter 941. You can only take that credit and apply it to your second quarter. And as of yesterday when I went to go look at it they have not updated the forms yet. So, hopefully by the time June comes around they’ll update the 941 forms. Those 941s you only file quarterly. They’re not so fast on updating this stuff, it’s a bit of an ordeal, but there is a note.If you go Google that the form 941 there’s a note on it that says basically all the information I just said. You can’t claim it all the first quarter, it’s only starting the second quarter, et cetera.

So, what are the problems here? As I said before you cannot combine this with the PPP loan or the EIDL loan if you get it. Now, what do we not know? What if you got the EIDL credit, does that count? No idea. I would venture to guess no because that’s not a loan, it was just an advance or a grant. Hopefully that doesn’t preclude you from being able to get this. The other thing is that the earliest you can claim is for the second quarter which usually you’re dealing with the taxes as you go but you might not be able to claim it until July.

So, something you have to take your crystal ball out and see is do you have the cashflow to keep running payroll all the way through June if we stay in this locked down situation? Which we might not be. You’re starting to see the economy open up in various places, but even with things opening up I don’t know how long it’ll take for businesses to really return. Because I think even if things open up you’re going to have a lot of people staying home and they might not open everything. They might not open the restaurants, the bars, all that kind of stuff, maybe not all retail. So, this is really a, I like to think of this as a bright light if you’re managing to stay open and stay with people on payroll. I would not count on this to keep you going. I think that’s the bottom line.

More pitfalls. Well, so they put out a great form, form 7200 advanced payment of employer credits due to COVID-19. Holy moly this sounds great. However, can you calculate what your anticipated tax credit on payroll is going to be in June? I don’t know. And I think even if you thought, “Okay, I have enough money I can keep everything going until then,” there are so many unknowns in the world right now that this is maybe not the most advisable way to get cash. if you asked me I would say, “Don’t even look at this form, ignore it.” I put it up there with the ability to push off paying your payroll taxes to later in the year that the government passed. I wouldn’t do that either because at some point you’re going to owe it. What happens if your calculation is wrong?

These payroll taxes are serious business. If you don’t pay your payroll taxes there is no faster way to get an IRS agent on your door than to not pay your payroll taxes. So what if you screw up your calculation? Are they going to charge you interest, penalties? Is there going to be extra fines? Is it fraud? Who the hell knows? And if you file this what is the government going to do? Is the IRS going to send you a check for this request? No idea. I would avoid using this form. I think it’s just more headaches and trouble than it’s worth and payroll tax trouble is the worst tax trouble. All right. So that is that. Let me hop over and take a look at some of the questions.

“How can you trace EIDL loan confirmation number?” As far as I know, you cannot. You can’t trace it. You can contact your senator and they can try to on your behalf if you give them permission, you fill out a form, you give them permission, they can supposedly talk to the SBA for you. But as far as I know there’s no way to track with a confirmation number. You just have it.

All right other question, this is about the unemployment, “Did you mail in the new form or do it on the website?” I mailed in the new form. After I mailed it in I was able to log into the website and I have been contemplating filing it on the website and haven’t really decided if I want to really screw up my account and try and do that also.

“If I already applied and got zero do I reapply?” That I don’t know. I have heard this from a few people that they applied, they were told they didn’t qualify. I think that’s a system error. I don’t know what you’re supposed to do. You might have to get ahold of a human. Because even if you don’t qualify you’re supposed to get the $600 federal portion of it. So, I don’t know. Sorry, I don’t have that information at this point. Let me back up here and hop back over. Okay so the options you have available, go apply for unemployment if you haven’t. That’s probably the easiest one to actually get. PPP loans, the banks and lenders are still taking those applications. They should be opening up money.

“Do self-employed file on the Florida unemployment website?” I don’t know that it will let you know. I would mail in the paper form if I was self-employed because they’ll probably just tell you you don’t qualify in the computer system and you’re going to answer the questions wrong, wrong for getting it not wrong for what your situation. The paper form is on their website. If you go to the unemployment website there’s a link that’s like print the paper form or something like that.

Okay so back to what we can do. Unemployment, PPP loan. You can go put in the application, still the sooner the better. The EIDL grants, if the open that website back up with the funding being approved there you go, you can get that. There’s paid family leave employer credits available. This again is if you have the cash to keep employees on you can eventually get these credits. And get cash wherever possible and hold onto it. Just about every credit card company that I have heard of is doing some kind of COVID-19 forbearance of some sort. Call your mortgage company. Call anyone you can that you normally pay and see what you can do. I have heard that some of the credit card companies are even doing rate negotiations. You’ve just got to sit on hold for a long time but it’s probably worthwhile.

And what else? Cut and reduce expenses. I talked about this last time, definitely cut expenses but think about it. Be a little bit forward looking. Like I had a service that I didn’t use very often, $25 a month. It’s not a lot of money but I’m not using it. I got rid of it. I went through subscriptions, things that I didn’t need anymore, got rid of those. But think about if you’re going to cut things that in the future you will need you might not want to, for example marketing costs, effective marketing. If you have ineffective marketing you can cut that. But effective marketing, SEO, things like that you probably don’t want to get rid of unless you think you’re really going out of business. That might be the only caveat to that one.

So, what’s next? Go file for unemployment. You can hop on to… Oh my God. Somebody sent me a question, “Can I get rid of my husband? He’s a major expense.” I did hear that divorce rates were way up right now so if you need a good divorce attorney I know a few I can probably help you with that. Thank you Marilyn that was very funny. Anyways, what we should do next, file for unemployment, file for the EIDL grant if they put that back up, get your loan docs together for PPP. Even if you don’t have everything together start the process so you can get into the system. Everyone that I have spoken to had to go back and forth to the bank a few times to make sure they had everything the way they needed it. And if you got your funding make sure your bookkeeping is set up so that you can track this stuff because holy molly that’s going to be a nightmare trying to track what dollars went to where after the fact to make sure that you get that forgiven.

And then calculate your potential employee retention credit. I have spoken to a few people who said it wasn’t worth it to stop paying people for various reasons and they’re still running their payroll. Well, you might qualify for an employee retention credit and we can help you calculate those things. Now, here’s the real question with employee retention credit. If you use a payroll service like Gusto, I love Gusto, or QuickBooks or anything else I don’t know how any of those payroll providers are going to handle the employee retention credit until we know more about it. Because right now you can’t even put it on a form. So, you might want to contact your payroll company if you fall into that category of wanting to claim those credits and start talking to them early. And just make sure it’s on their radar and make sure you know what you’re going to have to do to claim those credits as soon as you can.

And obviously I’m here. I’ve been fielding phone calls and text messages and trying to help people putting out a lot of information on Facebook. I have on my website the main page is going right to COVID-19 stimulus because that is mostly what’s happening right now. Some people want their tax returns I know but most people are really worried about just cash right now. And then, you’ve got free time so I would encourage you to hop on my business book club. I did this last year. It was a lot of fun. We read some really great books. So, we’re going to do Good to Great, which might be backwards I don’t know. You might see it backwards or upside down. Good to Great is a fantastic book. The author’s got free tools and things. Even if you don’t read the book you can hop on the Zoom call. A couple of us avid readers will have dug through it. I actually listened to it before so I’m going to read it this time and do… The perils of webinar’ing from home.

So, we’ve got that. That’s going to be in May. And I’m going to have some other webinars coming up for people who are starting new businesses, making sure you’re documenting things properly. So, you’re audit proofing your business, profit-first, make your business wildly profitable. I’m working with my friend Leslie Oppenheimer. We’re going to see if we can also get a book and maybe do something to help people get their business online and set up recurring revenue programs. So, that was a very preliminary discussion we had yesterday but trying to put information to get everybody money that they need now and help them with their business in the going forward so that we all survive.

Questions, I’ve been answering them as we went. If anyone’s got more throw them in there now. We’re going to finish a little early even. Hopefully I wasn’t speaking too much at the speed of light. So, and I found this quote yesterday I liked it. “Crisis and deadlocks when they occur have at least this advantage, they force us to think.” So, put your thinking caps on, get creative, try not to panic. It’s hard sometimes but try. And I’m here if you need help so shoot me questions. I’m going to scroll back through my chat and see if I missed anybody. I think I caught everyone as we went.

“Which banks are still taking applications?” I think all of them. I mean, all of them that are SBA lenders. I know a couple people specifically reached out to me from banks that if you’re still looking for a bank to apply to some are faster than others. I’ve heard the smaller banks are getting the loans out faster. I did my own bank of America and they stalled and stalled and then told me, “Oops sorry we’re out of money.” So, hopefully that changes.

All right. So that’s it. If there’s no more questions I’ll let you guys go. Enjoy. It’s a beautiful day out. Judy, I will call you. I’m going to, I’ve been recording this I hope so hopefully, I’ll stop sharing, I should be sending it out and I’m going to post it on my website also. And if anyone wants the slides shoot me a message, I’ll send them over to you. All right. Thanks guys.