in this video I'm gonna explain the Paycheck protection program and the
emergency injury disaster loan from the perspective of a real estate agent
realtor or broker if you haven't heard of these programs basically they're
alone that when used for qualified purposes are gonna be treated as free
money and forgiven yes you heard that right from a CPA telling you that you
may receive quote-unquote free money I'm also going to answer the top ten
questions I received from my clients about these programs yes you qualify so
stay tuned alright so before I get into the details let me just introduce myself
my name is Navi Maraj I'm a CPA that helps clients around the country save
thousands of dollars in taxes I have an itch in my business where mainly my
clients are real estate professionals so your Realtor agent or even broker
alright but the purpose of today's video is to talk about the Paycheck protection
program or PPP and the emergency injury disaster loan or you may hear me refer
to it as EIDL program and what it means to you as a real estate professional
now I'm gonna kind of treat this video in sort of like a Q&A format and so you
may see me read from time to time I've got about 10 questions that I've kind of
summed up from clients and they're all kind of touching on the same basic theme
so I decided to reword those questions and answer them for you here in this
video so the first question is what are the PPP and Idol programs and why should
I care about them well basically these are programs that are available through
the passing of the cares Act you know by now you probably realize that there's
this pandemic going on right and so you know we'll dive into the
details here soon but you should care about these programs because a you
qualify and B if you use the programs to your advantage and you treat them the
way you're supposed to the money you receive in the form of loan proceeds or
even a grant and I'll get into that here in a second will be forgiven meaning you
don't have to pay it back basically the government is trying to stimulate
the economy and pay to have you on payroll or to keep your small business
afloat for the next couple months so it's it's not a scam it really is free
money it's probably the only time I've been able to say this and like I said
the government is trying to stimulate the economy so let me unpack these
programs if you will and kind of dissect each one so the Paycheck protection
program it's primarily you know you can figure in the name its revolving around
payroll right and they defined payroll costs a few different ways now if you're
thinking to yourself hey Navi I'm a real estate agent or realtor I have employees
or if I'm a broker I typically don't have employees I have independent
contractors you know you don't qualify you're wrong you do qualify you know
typically you either are taxed as an S corporation and you have payroll record
you pay yourself a salary or your tax as a sole proprietor and the calculation
for finding out how much you could apply for is based on your net earnings of
your business the amount that you'll qualify for is
equivalent to about two and a half times your payroll expenses if you're an S
corporation and if your attacks as a sole proprietorship then its equivalent
to two and a half times your average monthly earnings or your net income and
you know I'm not going to get into all those intricate details here but on my
website at navimarajcpa.com I actually have not just these ten
questions but over 25 questions with detailed answers that can kind of
explain the details here now if you use the loan proceeds for payroll mortgage
interest rent expense or utilities you could have the entire amount forgiven
and I'll get into the details here in a second all right so that's PPP emergency
injury disaster loan or idle as you'll probably hear me call it from here on
out the idle program has the word loan in it
right but there's actually up to a $10,000 at
Vance feature that you can apply for and these are the SBA words not mine
but it the first 10k through the advance that you receive will be actually be
treated as a grant so you don't have to pay it back if you use it for qualifying
purposes there are some new reports coming out that you know it depends on
the number of employees you have so it might be you know $1,000 per employee
but I still encourage you to apply those of you that are real estate investors
stay tuned because you may be able to apply as well all right so do real
estate agents or realtors qualify who does not qualify so yes real estate
agents and Realtors qualify and again I mentioned at the beginning you know you
may not understand this because this might be a little bit of accounting
language but basically if you're a real estate agent or realtor you either forms
an LLC or a PA or corporation and your tax as an S corp so that's one bucket
that you fall into or you didn't do any of those things and you're treated as a
sole proprietorship and you to qualify no matter which of
those two buckets you fall into so to qualify though the main that requirement
is that you know you needed to have sales in your business prior to February
15 2020 you know this program is to help existing businesses and not new ones so
if you're a business that was not formed but you weren't closing deals prior to
February 15 2020 then I'm sorry that's the one situation where you know you may
not qualify for this program now also you know this is for small businesses so
if you are an employee right and not an independent contractor or not an agent
or don't have a small business then you won't qualify for these programs but
there are programs in the cares Act for you the employee who has an employer
where can I find information on all these programs well this is going to
sound biased but I mentioned a little bit ago that
my website I've created an entire webpage strictly for you know
coronavirus and how these programs can be applied to you as a real estate agent
or realtor so I would encourage you to go read that information because I'm
writing it in layman's terms from the perspective of an agent or realtor you
can also find information from its source and I recommend doing that
because there's a lot of misinformation out there already and you can find
information about the PPP program as well as idle on the SBA's website which
is sba.gov alright the next question I got was what should I be doing or
avoiding now in my business to help maximize a loan and the forgiveness
amount excuse me to forgiveness amount so you know let me kind of dissect that
for a second so you know there's two parts of that question maximizing the
loan amount and making sure I get it all forgiven to maximize the loan amount you
want to ensure that you're including all payroll expenses and I don't want you to
overthink this the details are on my website but basically you know if you're
an S corporation you should be paying yourself a quote-unquote reasonable
salary and typically you're doing that through hiring a payroll company or you
have your accountant doing that so you'll include your individual salary up
to a hundred thousand dollars as well as employer contributions right so if your
business is paying for health care or retirement benefits to you as an
employee you can add those expenses as well you're not just capped at the
hundred thousand dollars as salary if you're attacked as a sole proprietorship
right you're not an S corporation then you know this includes a net profit of
your business as well as again health insurance and your retirement plan to
maximize the loan forgiveness you will need to ensure that you're using the
loan proceeds for the qualified purposes right and so for both the program's the
government wants you to use these for a few things they want you to use it to
maintain your payroll so if you're an S corporation you know don't lower your
payroll limits here in q1 or q2 or q3 of 2020 keep those
consistent with what they were prior to coronavirus to make sure you get all
them all the amounts forgiven you can use the funds for the PPP program for I
mentioned a moment ago mortgage interest not the principal but the interest rent
expense and utilities now my average realtor clients don't have this but my
brokerage clients do have those items right and so you can pay that but the
important thing to know that note that you know it's called paycheck protection
program right so the government wants you to use 75% or more of the loan
proceeds for payroll cost and you can use 25% you know I would advise you to
use a little caution there let's try to keep it at 20% or lower for those other
expenses that I just mentioned to make sure all of it is forgiven you also want
to make sure that you know you're using the funds that you receive over the next
eight weeks once you've received those funds right if you if you you know don't
have payroll expense for eight weeks and then you increase it let's say in q4 of
2020 well that's not how the program is designed it's designed for you to use
over the next eight weeks as you receive the funds all right the next question I
have is what time period your borrowers use to determine their payroll cost to
calculate the maximum loan amount now this one's important in general you know
you can different banks are saying different things but basically you can
either use 2019 expenses payroll cost or the last 12 months prior to the
coronavirus hitting the US right so maybe it's February 1st 2019 through
January 31st 2020 but there is a little caveat if you weren't in bed in business
from February 15th 2019 to June 30th 2019 then you may use the average
monthly payroll cost for the periods of January 1st 2020 through February 29 20
20 so why that's important is you know
you don't want to lower your loan amount by you know looking at your payroll cost
if you weren't in business right so if you weren't in business prior to those
dates you know you want to maximize the loan amount you can qualify you can
apply for by using January 2020 and February 2020 amounts all right next
question question 6 what is forgiving for realtors and 1099 independent
contractors well you know all realtors are independent contractors right but
you know what is forgiving the specific guidance believe it or not hasn't
actually been released yet that's one thing that's unique with this cares
program the government kind of rushed through it to make sure it's available
to you and you can apply as quickly as possible but the specific details on how
you're gonna get the loan amount forgiven have not really been explained
just yet one thing I would guide you on is to use
the loan proceeds whether you do the PPP or idle and make sure that you are you
know maintaining salary levels that I mentioned so you're using the loan
proceeds for payroll expense the mortgage interest the rent the utilities
as I mentioned earlier also that ratio that I just talked about you need to
make sure that 75% or more are used for payroll and then 25% or less is used for
those non payroll expenses ok next question what documentation should we
prepare when submitting the application well you know if you're an S corporation
it can get a little bit confusing but you're gonna submit your payroll
documents so they Mont the bank might want to ask you for your w3 940 ones if
you're not familiar with these documents this is documents that will be provided
by your payroll company or if your accountant or CPA does payroll manually
for you then ask them for the documents they can provide it for you well you
want to submit all of that basically the way the banks are doing this is they're
gonna take your word for the amount that you're applying for hoping you did the
calculation correctly and then they're gonna ask for these documents to
sort of substantiate that yet reasonable that you asked for these amounts because
they can see the documents that you submitted along with your application
now for the idol program you know you actually I'll touch on this in a second
you actually apply for that program directly through the SBA and you don't
need a lot to apply for that 10k advance you're gonna need you know your name
your social security number or your EIN your revenues and they'll even ask you
for cost of goods sold which most of my Realtors you know don't have cost of
goods sold that's mainly for businesses that have products that they're selling
not providing a service is the forgiving loan amount taxable no that's the great
thing about this it's explicitly written in the Kara's act that the amount that
you receive that ends up being forgiven will not be taxable income to you right
so it's it's really free money guys you need to be applying and researching this
information next question should I apply for PPP or idle can I apply for both
well my recommendation is that you apply for PPP first and if you don't qualify
for some reason then apply for the idle program the reasons why you might not
qualify for PPP are usually fall into two buckets one is you know you formed
an S corporation but for whatever reason you weren't on payroll you weren't
taking a reasonable salary and so you don't have you know proof of payroll
cost to submit for the loan application right you know if you're doing that
reach out to me that's probably a big red flag for an audit and you need to be
paying yourself the reasonable salary but that's this besides the point here
you know that's why an S corporation may not qualify if you're a sole
proprietorship you may not qualify if you didn't make any money all right if
your if your net profit is zero or an even negative then you know you're not
going to qualify because you the calculation is based off your net profit
so in those two scenarios then you may want to try applying for the idol
program directly the SBA they're not asking you to submit
payroll cost in the application and if you get the advance then after you get
the money and SBA reaches out to you you can prove out to them hey you know these
are my expenses and see if they will give it make it forgiven if the loan
Amit they're saying hey it's not forgiven then just give them the money
back you know what do you have to lose just apply I mean the language on the
SBA website a deck that I noticed just said hey if you're not sure if you
qualify apply anyway they want to see businesses come out of this coronavirus
and survive okay they're gonna be a little bit lenient with some of the
stuff it's not going to be 100% black or white all right question 10 can I apply
for Idol if I had investment real estate now this is interesting you know for
those of you that have real estate property that you have a tenant in you
know I would encourage you to apply for Idol not PPP right because you typically
don't have payroll if you're a landlord but for the Idol program you might want
to consider applying because you know have you had conversations with your
tenant and are they gonna continue to pay you rent for the next you know two
three months maybe not so maybe if you apply for the advance and you receive
those funds and then your tenant stops paying you you'll be able to prove to
them that you know you were impacted by this coronavirus disaster
also maybe if you don't have a tenant in there right now right and you can prove
that you've rented out this place before and you can make the argument that you
know I couldn't get a tenant in here because of the other I couldn't show the
property and so as a result of the disaster you know I was injured right
those are just two things to think about here's a bonus question I said I was
gonna be ten questions here's question eleven where do I apply so for the PPP
program you know this is a little bit information that's all over the place
out there but basically you're gonna apply for wherever your business
checking account is that Bank should have a program set up for you to apply
and initially all of the banks weren't ready
but now they all are pretty typically they're all they're already at this
point now you might run into a situation where the bank you know you know
wherever your bank is not accepting applications well in that in that
opportunity you might want to in that event rather you might want to call your
more community banks who have set up small programs with the SBA and they're
helping more than just those customers that meet the regular guidelines so they
might ask you to kind of to apply even though you don't bank with them already
all right for the idle program you actually don't need a bank you don't
need a banker you go directly to the SBA's website sba.gov and the link is
also on my website and you apply directly through the SBA's website that
application kind of scares you it says it's gonna take two hours or so to
complete honestly it should take you twenty minutes if that alright so as I
mentioned on my website I've got over 25 frequently asked questions
I'm helping small business owners and real estate professionals get through
this mess right I'm not charging for it it's information that I've researched
over the past couple weeks I spent hours upon hours developing the frequently
asked questions go there read it if you have a question reach out to me you can
email me at navimarajcpa.com is the website or navi@navimarajcpa.com
is my email address if you found this video helpful please either comment
share it with your fellow realtor like and subscribe and I'll see you in the
next video