All right, welcome everyone today I've got a special guest we're gonna be talking about the SBA loan forgiveness some tax credits and cool stuff
This is my father-in-law Jeff McMullen Jeff. Thanks for jumping on here with me today
Great to be here with you. This is a
wonderful topic
I've been addressing questions from clients all day long and all weekend long as it relates to this as we had this bill signed on
last Friday and it
It contains a lot of stuff in this field
So we'll see if we can cover some of the things that he'd be most applicable to your listeners
Perfect. So anyway, so he's a CPA and we were chatting last night and he was telling me about some of these tax credits
So this SBA loan forgiveness, if you're a business owner this pertains to you you have less than 500 employees
Which most of you watching this more than likely fall in that category?
So when he was telling me this I was like man, this is huge for any business right now
So I thought you know to my jumping on here sharing some of the different insights
He did a full on trainings like 90 minutes long
With all his clients. I listen to this morning
And so what I did was kind of like, okay
I pulled out some of the the key points for you guys that we can go through and discuss
so the first one let's chat about kind of some of these SBA loans and
How they can potentially be completely forgiven to help companies get through this difficult time right now
well, the SBA has always been in the business of offering loans for
disaster relief situations
and so what they've done is they've had those existing loans and now they've added a an
addition or layer upon those loans that are specific to this whole
coronavirus and over nineteen
Implications that have we've all incurred here
Trying to help these small businesses
Keep their doors open keep people paid and the whole purpose of all of this is just to keep payroll flowing
particularly in situations where individuals have either
Had to close their doors because some of the restrictions that the governments have placed on us
Or have suffered a great reduction in their revenue stream, so
from what I
Kind of just like cliffnotes of this part of it
Basically, what they'll do is if you do not lay off any employees because the whole idea this is to you know
Avoid unemployment rates going through the roof
So what they do from what I understand is they take a look at what your payroll on average was in 2019
Across all the months and then you can get a loan of up to two and a half times
Whatever the monthly payroll is. So let's say your monthly payout payroll is 100 grand then 2 and 1/2 times. That would be
$250,000 loan
That could potentially be completely forgiven. If you do not lay off any of those employees or reduce their salary and wages, correct?
That's right. And so if you've gotten a loan for
$250,000
There again, that's two and a half times your average monthly payroll for
2019 assuming you're in business for 2019 and there are provisions for those people who are not in business for all of
2019 and those get kind of detailed and so we'll bypass those
but if you've got that low and say for
$250,000 you can use those funds for
Payroll, and for other costs it's not used exclusively for payroll so you can use it to pay your rent to pay your utility bills
in in my terms, basically to keep the doors open and business going now you can't use it for
Executive excess compensation you can't use it to expand your business to advertise and to grow your business
It's intended to just keep life moving their business
Gotcha
Cool. Ok, and then another key point that I pulled out of the trans
I was listening through to it was this tax credit and
So kind of going to this and I don't know I like the differences between the SBA loan the tax credit
But from what I understand is if during this time
your business had a completely shut doors because maybe it's a physical location or
Maybe you didn't have to shut your doors but your revenues from this time last year dropped by 50% or more
Because of the whole situation of everything that's going on
And you can have some sort of tax credit
Is that kind of anyway kind of kind of dive in and explain that a little bit. Okay, and so
Before I get too far into that
Let me go back and rest a little bit more on the SBA loan because it does tie into this tax credit side of things
So if you've got the SBA loan
and once the dust settles on this we give back to business you can go to the SBA and request that that loan be
forgiven and that
Loan can be forgiven up to 100% assuming as you mentioned earlier that your payroll costs and the number of employees
Has stayed consistent through this period of time as to what it was during
2019 so if you had 10 employees in 2019 and you've got 10 employees throughout this process in
2020 and you've paid them the same amount of money as what you did in 19
then you can have a hundred percent of that loan forgiven if however you
Cut your workforce back and say you've kind of backed by 25 percent
So you're left with 75 percent of your employees or 75 percent of your wages?
during
2020 during these this typical challenging times, then you can have 75 percent of that loan forgiven rather than the full amount
Gotcha. Now how does that come into play with these credits? The credits are set up
and
It's not an either/or situation, but there is a balancing act between them. So, let's assume four minutes do you have
prior to this process of getting a loan you've continued to keep people on your payroll you can now go through and
Based upon certain limits as you file your next payroll tax reports
receive a
credit against your payroll taxes
assuming that you have kept people
employed
and that your
Business has either been closed down because of government regulations or inside
Situations that are or as you mentioned your revenues have decreased by 50 percent
So once you're in that situation when you file your next payroll tax reports
You can get a credit against those payroll taxes now. That's a credit only against the employers portion of FICA
now on their payroll taxes
as an employer you're paying half of half of the payroll tax and the other half is being withheld from the employees paycheck and
Then you have the typical federal and/or state
Withholding that has withheld from employees paycheck the withholding still needs to be remitted
The it's the payroll tax side of things that can be reduced by up to fifty percent of an employee's
compensation during this period of time and so you'll want to keep track of
compensation being paid to employees or employees who really aren't working or who have been reduced in their
number of hours
okay, so
Is that is that apply I guess for the next couple of months or is it for the entire corridor or?
What's the time period on that? It'll definitely be for this first quarter of
2020. Okay, it'll likely continue on into the next quarter
so we don't have I
Unfortunately don't have an answer directly for you there
But it'll apply for at least the next quarter or two on which you'll be able to
Apply for those credits and that's a way to get that money in your pocket or keep money in your business
Without waiting for a loan now actually minute ago about the loan forgiveness provisions in the SBA loans
To the extent you've taken the credit on your payroll taxes, then the amount of the loan that is forgiven
Assuming you get a loan will be reduced the forgiveness amount will be reduced by the credits
So there's not an opportunity to get ball get the credit and also a forgiveness on the loan. Gotcha
Okay, so they weren't kind of together on that. They do. Yeah. All right. Well anyway
before we move on to the kind of the next topic here anything else you
Like to add on like the SBA loans or this tax credit right here
You know the the SBA loans, it's really interesting the the initial
Disaster recovery loans that were provided by the SBA you were required to file online to get those loans
With this new level that is provided for us now
You actually have an opportunity to go to your lending institution to work through them to get those loans. And so
The SBA is going to be completely swamped with these loan applications
So it's important that if you're in a position to where you can utilize those loans and be beneficial for you to do that
Then get in line with your banker and lender and get those loans in process
The other
information on here
Let's assume for a minute that you do cut back your wages and your payroll
During these difficult times and you go out and get this loan
but you want to be forgiving of a hundred percent of the loan if you
Reinstate your wages and your employees before June 30th, then you can get up to that 100 percent
reduction or forgiveness in your loan
Okay, there's provisions there and here again those loan funds can be used
to pay rent
Utilities and those types of things I've had several clients that have said hey, I I am the landlord. I've got people who
are operating businesses in my buildings or commercial real estate and
They're coming to me saying I can't pay my rent
Well as a landlord
We're instructing our landlords to encourage those
individuals that are their tenants to go out and get these loans so that they can pay the rap because the landlord's don't have any
Recourse on this they don't have any opportunity to go to the the government say pay us for this rent that we're missing young
Yeah, not totally that makes sense
So anyway, let's move in kind of towards. I know you guys were discussed
I mean, there's obviously a lot of things going on here. There's a lot more that we'll probably not even get into in this video
But let's talk a little bit about
Those maybe nearing retirement, or maybe they only they need a little bit of a personal type loan themselves with this Roth IRA
So if you have a Roth IRA
which I've talked about here on the channel before and the benefits to that but typically in the past we'll
Normally always you have a penalty if you pull money out
Before you're fifty nine and a half
Whereas now they're allowing you to I think it's pull out as much as a hundred thousand dollars with no penalty. Is that correct, right?
And so what they've done is they for individuals that are impacted on this that have got money in retirement
and this applies to
IRAs and retirement plans not specifically just to Roth IRAs
And so there's a little bit of a difference in here
But if you have just a regular IRA in which you have taken a tax deduction
When you put money into that IRA or you've got a 401k plan
You can now go and pull that money pull up to $100,000 out of the IRA or out of your 401k
without that 10% penalty
Now typically when you pull money out of those
You're subject to the 10% penalty. Plus that income is subject to your income tax
And so you'll pay income tax on that plus 10% penalty. So the 10% penalty is waived and
If you pay back that
Money that you've taken out within the next three years. You will not have to pay tax on that money
So you can pull it out
But you do have to pay it back within that three-year period in order to avoid the taxes on it
another key provision in there is not only
Are those that we talked about but it's also the opportunity that as you pull that money out the income is subject to tax
over a three-year period
so if you pull
$100,000 out you'll pay tax on thirty three thousand dollars of it in
2020 another thirty three thousand and twenty twenty-one and the other thirty three thousand dollars in 2022
Assuming you don't pay those those funds back. Yeah, because what can happen is if you took all that hundred thousand dollars out now and
Later that onto your income. It could push you into some higher tax brackets
so this is a way to
Bring that down to the point where it doesn't push you into those higher tax brackets. That's a tax
That's nice
now
Obviously if you're watching this, that's probably more of like a necessity
basis because if you've got your money and some of these retirement funds and there are different index funds mutual funds which would probably
sunk down
It's probably not super wise to pull that money out right now
But if it's a necessity and it's gonna help you out then obviously then that's why it's there. So
So yeah, that's a provision there. No, I'm gonna sidetrack this just a little bit your honor not that the
Value of our retirement funds that are invested in the stock market of marketable securities many of us have separate a decrease in those values
Jason you started off talking about Roth IRAs Roth IRAs are those
Funds that we have contributed into those IRAs for which we didn't take a tax deduction when that money went into the IRAs
And so when we pull those money out of a Roth IRA, we don't ever have to pay
tax on that money because it's been taxed once and we don't ever have to pay tax on the earnings on those funds so a
Roth IRA is a great vehicle
In many ways now you may be in a situation with the reduction in your retirement plan money. That is in a regular IRA
to now may be the time to consider converting that regular of those regular IRA funds to a Roth IRA now the
Consequences of those is that as you pull them out of your regular IRA?
As we talked about to go is you're gonna pay income tax on those funds
but if you're pulling in those
Funds out at a reduced amount since the values have gone down now is the time to move them into a Roth IRA
so that your tax
consequences of
Transferring them from a regular IRA to a Roth IRA are less than what they otherwise will be and as we hope that this market
Goes back up in value and that be spread out over the next three years, right?
Well, it's a little different provision on that. Okay, it could it could be
Yeah you I have not looked into this but you're raising a good question
if you pull that hundred thousand dollars out or up to that hundred thousand dollars out that you
Pay tax on you might be able to put that money back into a Roth IRA
But I I suspect they will likely tax that that they might be able to spread that out over three year period gotcha. Gotcha
Well, it's all interesting stuff guys
so in anything else
I mean we hit kind of the core right here SBA loans how they can be forgiven some of these tax credits
Through the payroll tax on the business side of things
also some of these
Retirement type plans how you can access that money and the difference, you know stipulations that are put in place there
Any other key things that maybe you've had clients keep asking you about that. You're like man
This is a hot point that we have covered that would be beneficial for people to know about right now
There are gonna be some businesses out there that just can't keep their doors open there. People are gonna be fired
They're gonna be furloughed
They're gonna be let go they may not bring them back into business at all
For those individuals that have been laid off in that situation. There's two key things that the government has done in these tax provisions
One is they've increased the unemployment insurance that somebody can claim and give benefits for right away
They've increased that by $600 a week and size of things. So if somebody's been laid off they can go file for unemployment
Start collecting on that instantly and in addition to the state unemployment benefits, they can get another $600 a week on that
So there's some key provisions there to help those people that have been laid off
So if you're an employer that has to have have let people go
And there's some help out there for those individuals
The other thing is we've all heard about these stimulus checks that are going to go out to too many individuals
$1,200 for
individual
$2,400 for a married couple and then
$500 for their dependent children, and so those provisions are out there
There's some key things on those is that if you're married and you've got children
Those children that are entitled to about $500 or actually that goes into the parents
So the parents that are entitled to collect that $500 for their children that is limited to children who are age
16 and under is you have to be under age 17. So 16 and under
Who?
So you've got some some funds there that are going to be made available to that
those are some of the key things there's other provisions in here that relate to business owners that apply this bill is full of
Other provisions, but those are the key key ones. They're awesome
Well, Jeff, I know you've been super busy today, so I don't want to take up any more of your time. But thank you
So much for jumping on here sharing some of the stuff with us
and if you guys have a question specifically drop it down in the comments and
If you know if you want to get in contact with him and work with them just reach out to me
I'll kind of filter those on a case-by-case basis, but
Anyway, thank you so much for joining us here today
Appreciate the opportunity best wishes to everybody and stay healthy through all this. Alright. See you guys