How Jim Dew Unlocks the Secrets to PPP Loan Forgiveness: Essential Updates and Advice

Hello, I'm Joe Polish with Genius Network. And when this pandemic started, there were all kinds of things that entrepreneurs needed in order to get help and assistance with. And so me and Jim do and Tony Rose, they're the experts here. We did a call that we turned into a podcast. It's on geniusnetworkinsights.com geniusnetworkinsights.com in this recording also. We will put it up there too. And, and it was incredibly beneficial with guiding people on understanding PPP and the government programs. And there's been some changes that have just happened and just been announced and we wanted to be one of the first ones to help you with how to guide it and how to navigate it. And that's why I've asked Jim Doo and Tony Rose to do that. So Jim Du has been my personal Advisor for over 20 years now and he's written a book called Beyond a Million an amazing Guy. And then Tony Rose, who's also the president of Genius Recovery foundation, he's a cpa, super amazing guy, bright guy, and he can help and guide and direct you guys. So Jim or Tony, I don't know which one of you guys want to go first, but give some context of what's going on and then I'll let you guys explain everyone what they need to know for their businesses and how to navigate this.

Maybe I'll just tee it up to say that if you think back to March 27, the CARES act was passed. Within the CARES act was the Paycheck Protection Program loan provision. And that was a big deal for entrepreneurs like you to get loans to survive the difficult time. Well, just last night, Congress has passed the PPP Flexibility act and there are some provisions in that concerning the forgiveness of your loan that you need to know about. So just a couple big ones and I'll let you kind of jump in. Tony as well is the eight week period that you may be familiar with under which you have to pay those qualified expenses to get forgiveness has been extended to 24 weeks. The other main change to the forgiveness, so you have a lot more time to actually pay those qualified payments to get your loan forgiven. The other big piece, and there's others as well, but the other big piece is you used to have to spend 75% of those expenses had to be payroll, so and they dropped that down to 60%. So you have to spend 60% on payroll and the rest can be on things like rent, utilities, interest on mortgage. One clarification though, if you didn't spend 75% on payroll, you were reduced how much you got forgiven. There's a gotcha in this new law where if you spend less than 60%, you get zero forgiven. So it's like a cliff. And Tony, you want to add any color to that or other information?

Well, actually, you've talked about the meat a bit. There's a number of different items that's going on. And in fact, since March 27, there has been, I don't know, 50 or more different clarifications by the SBA. They call them Frequently Asked Questions. There's been publications by the Treasury Department, interpretations back and forth, so on, trying to scare entrepreneurs into not taking the money. But right now, and I don't know what the latest. If you've seen that, Jim, there's still about $150 billion left in the program. The first $350 billion got sucked up in about 10 days and then there was some delays. Then they. They voted another. I think it was $310 billion. So there's $150 billion left. Part of this House bill called HR 701-07-0010, which to my knowledge has not been signed yet, but has passed both the House and the Senate. The Senate by. I think it was unanimous.

Unanimous. Had to be, because they were out of session.

Yeah, right. Provided for a number of things. Number one, the original PPP had a minimum length of two years. Any new PPP loans can now be five years. And any of the financial institutions that have already given you a loan can extend your loan for a minimum of five years. Doubt if they will, frankly, but they can. Number two, there was this other feature of the CARES Act. I think it was section 2301 having to do with the deferral of the amount you have to pay to the federal government for employment taxes. The employer side, not the employee side, but the employer side. So that's employer portion of FICA and Medicare that can be deferred for basically up to two years. 50% has to be paid back by the end of 2021 and another 50% in 2022. The original cares act said that if you got any forgiveness, you could not defer your employer taxes. That has been rectified. You can do that.

Tony, can I add one thing to that piece?

Yeah, please.

So my understanding is that you can defer the Social Security part, but not the Medicare part. The 6.2%, but not the 1.45.

That might be the case. Jim, I'm an 80% guy, so I.

Believe that's the rules that you can defer your Social Security tax. The same thing if you're self employed, half of your Social Security taxes that you pay. But one thing you should know, like Tony said, you can Defer half until December 31st of 2021 and the other half till December 31st of 2022. But you have to plan for that from a cash perspective because you still owe the money. You're just deferring those payroll taxes.

Now there's another important thing, especially for those of us in the hospitality business who are furloughing employees and may not be able to have them back for quite some time. The original act said that by June 30, you needed to rehire your employees or, or there would be points off against you in calculating how much gets forgiven. That has been extended to December 31st. So theoretically you could hire someone for New Year's Eve and they would not count off for your full time equivalents. Now, the SBA and the bank that's going to be offering you forgiveness is going to ultimately be the judge as to whether you get forgiven or not and whether you're abusing the system. So for example, hiring someone on December 31 and then firing them on January 1 probably is a bust. There was a lot of talk about the certification if you took a PPP loan, whether you needed to show that it was necessary and what the definition of that was. There still is a lot of question about that. The SBA has reserved the right to come in and look at your stuff to see whether you really needed to have the loan. Now, I don't know any of my clients who's taken a loan that can't justify that by keeping good records and good notes about what's happening. So they're going to continue to scare you. And these audits, if they come in, will be serious. But it's not a reason to not follow the law and do the best practices for your business.

And one thing about that, Tony, is they drew a line in the sand about $2 million of proceeds on a loan like this. So they came out with a safe harbor saying if you have less than 2 million in that loan, you're going to be assumed that you certified appropriately and that if it's over 2 million, we're going to try to audit the 30,000 odd that got more than 2 millions now. Then they came back a little later and they said, well, but we still can audit people who took less than 2 million. So they can't. But I think that does kind of show us that the SBA is going to be more concerned about entrepreneurs that took more than 2 million than about entrepreneurs that took less than 2 million.

I think that's a good bet. This is fertile territory for whistleblowers though. So we're going, you know, it is still a dangerous area. Another, another thing that's not in this new bill, but it's something that, that there has to be clarity around for all of you is that there is a form, the PPP Protection program. I don't know. Can you see this? This is the form for forgiveness, the so called 3508 that is going to have to be filled out by people that are requesting from their banks or the other institutions forgiveness for their loan. There are certain documents that are going to have to be submitted, calculations you're going to have to show. You're going to want to make this very easy for the institution to understand. Whether you qualify for, for forgiveness. Your advisors will be invaluable in helping you compile the information. I saw one accounting firm that, that published information about the forgiveness and the forgiveness form and what can be taken and what couldn't be taken that I know is representing one of the banks in our area for forgiveness and I actually think their impressions were incorrect. So there's likely to be a lot of dispute in this area. So you want to walk this area very carefully.

And can I add one more thing from this act that was just. Did you have something to say, Joe?

Yeah, I was just gonna say if you guys could touch on too, like Tony just said, you know, speak to your advisors for any genius network members that know you guys, they can reach out to you directly because I want to make this recording available for them to share with anyone. I don't want to put your direct contact. People can do it on the private Facebook group if they want to reach out to either one of you. And I'd like you guys to give out maybe your websites and stuff towards the end of this if anyone has any questions. But where would they get that form you talked about, Tony? Where's all that housed? And then if we can put links with this, we can add those on the comments below. And then secondly, just some advice on how to talk with your advisors because a lot of people may have someone that they really feel confident and trust and certainly anything we're sharing here, you need to check with your own professional advisors. Okay. We're just sharing information here.

Thank you.

So, yeah, it's up to you though.

To.

Do the right thing here and talk to your advisors. I just want to get your guys suggestion and tips on how they should best do that.

Okay, well first of all, if someone wants to take a look at what we've written at our firm about all this stuff and it's been iterative so there's a number of little blasts. RSJCPA.com has a whole lot of kind of makes sense commentary about this item.

Jim so we send stuff up out on a regular basis on the PPP act and to get on that list, if you go to makerichreal.com, makerichreal.com there's actually a nine question wealth planning checklist that you can download without giving any information. But you can also leave your email or whatever you'd like if you want to be on our list where we send stuff out about the ppp. And then as we wrap this up, I just want to mention one other thing about the hiring people back in the full time equivalents if we're getting close to the end.

Joe no, no, take your time. Let's cover whatever you feel we need to right now. We'll continue to do follow ups to this for all of our members and stuff.

So in the Flexibility act that was just passed, they also set things up because you probably know business owners, let's say restaurants, who are trying to hire people back and for whatever reason people are getting their unemployment checks, they don't want a job. So these business owners are saying, well how can we qualify for forgiveness if we're trying to hire people back and we're unable to. So there's a few provisions both in the Flexibility act and before. So one thing is if you can prove that you've made a good faith offer to a former employee and they reject that offer, that doesn't count against you in the new Flexibility Act. If you're trying to hire and you can't find the qualified people, they are not showing up. They are not answering the call for your job app for your job advertisement and you can show that that doesn't count against you. And then in addition, if you can show that the government has still had you shut down due to state, local or federal laws and you can't open your business, that doesn't count against you. Now as Tony said in the new law, you have till December 31 to hire people back. So you've got an extended period of time to do that. But during the time when you're trying to get forgiveness, there are some caveats for you not to have to hire people back. If you're trying now, I wouldn't game the system, but if you're really trying, you do have those, those opportunities to avoid getting hurt on your forgiveness.

The keys to that, Jim, are giving written callback offers at the same salary and the same hours. Another very, very important point here is that in order to suck up the forgiveness money so that you could be forgiven, there's a lot of entrepreneurs that were going to pay their forgiveness 401k contributions, pension plan contributions early, things like that, the 24 weeks permits you to run your business like you normally do. So rather than try to lump all of your. If you would not normally pay your pension contributions until closer to the time you file the tax return, which might be September 15th, you don't have to shove that into the eight week period now you've got that extra 16 weeks to do that. And so the most important thing for all of you is to run your business the way you think to run it, to sustain it for a long term period. If you don't get forgiven, you've got a 1% loan for two years on the outside, five years. It's a very good loan. I was just. One more question before we kill this thing. Yeah.

Can I make one comment on what you just said, Tony?

Pardon?

Can I make one quick comment on what you. If you do, if you're, you're, you're set up for the eight weeks and if all of your forgiveness was paid appropriately during those eight weeks, I wouldn't wait, I would go ahead and apply for it. I don't know how you feel, Tony, but get it approved while the lenders are not crammed. At the end of the year with all the bottleneck, I would go ahead and get it approved, get your forgiveness documentation and move down the road.

Now here's what I believe from reading the new bill. You can choose the eight weeks from the time you got your money or you can choose the 24 weeks.

Yes.

I don't believe you can say, oh, it's 10 weeks. I've used all the money I can apply for forgiveness. I don't necessarily believe that that's going to be okay to do. So I think it's either or.

I agree. That's the way it's written too. Yes.

The one thing I was going to ask you about because I know you're really tapped into this, there is another program called the Main Street Lending Program that a lot of entrepreneurs are looking for. We don't know anyone in our area that has created the criteria and the forms for that loan yet. Have you seen that in your area yet, Jim?

Not to the point where I'd want to talk about it. We're looking at that a lot and it's very close to seeing some things that would be really beneficial to the entrepreneurs. So I would say that would be something maybe we do another quick call on.

Yeah, and that's going to be very interesting. It's a great bill or it's a great loan program for accountants because you have to compute something called ebitda. And if you don't know what that is, that's good because you can pay people like me to tell you what that is. The problem is many banks might interpret the term EBITDA a little differently, which is also really good for us. So thank you very much for being here, entrepreneurs, because we need you. Baby needs new shoes.

Yeah. And just to be fair, just because when I listen to a call and someone throws out an acronym, I don't know what it means, it makes me crazy. EBITDA stands for earnings before interest, taxes, Depreciation or amortization.

That's what I was going to say. That's what I was trying to say. Well, let me also say this too. Again, we will put this up on geniusnetworkinsights.com that's where the original recording that we first did, which was really helpful to so many people. That's one of the reasons that I popped on with these two guys is when this first happened, we started putting out information to help entrepreneurs and people found it really valuable. And like we have mentioned, this is for just educating you and for hopefully giving you some direction. Now it's up to you to speak to your advisors. This is for educational purposes only. If you need to talk specifically, if you're a Genius network member, talk with Tony or Jim. And their contacts are obviously. We're Facebook Live in this right now to our members page so you guys can be the first ones to see this. And then I'll make this available because I know a lot of you are going to want to share this with different entrepreneurs. And because there are certain things that have not yet been even passed, we'll keep you updated on it. And so I would encourage you to look at Tony's website and and Jims. I'll ask you guys to give out that information one more time before we wrap, if you could. And is there anything that we did not discuss that people should know so they do the right thing, they don't get themselves in trouble? And they navigate this thing legally, ethically, properly, as best as possible.

I would say be sure to use your advisors. The interpretation of what can be paid and when it can be paid and the time period when it's incurred and all that kind of stuff is the devil in the details. You need professional guidance on this. It's not first blush. You can't prepay your rent, you can't do a lot of stuff. And you can do a lot of stuff like possibly even pay for your cell phones and have it be part of the PPP program. But you need to check with your.

Experts and every situation is a little different. But I agree with Tony. The number one thing is you have to have conversations with your lender, you have to have conversations with your wealth manager, you have to have conversations with your accountant. So the key to all these things is having a team of professionals that you have high confidence in that you can tap into and talk to about this. My fear is if you rely on Google and if you rely on your friends, you may not be getting the right information for your particular situation.

Great.

So if you guys could, if you can give out your websites one more time, and I will say to Genius network members that are watching, I mean, that's what we're here for, to help you with stuff. So you can contact Tony and Jim directly if you have any questions or you can comment on the private Facebook group where you're actually watching this video. And they'll monitor those and check and any updates that will happen, we will put that out. And again, any useful things that we can help you with, we'll put on geniusnetworkinsights.com and if you've not seen that page lately, it is filled with some really valuable areas of all areas of your business right now to help you navigate what's going on. So Tony, your website one more time and then you, Jim, and then any final last words?

RSJCPA.com I would say if you want.

To get updates from us, go to makerichreal.com if you just want to see our website, do wealth.com d e w w e a l t h.com Cool.

Awesome. Anything else, guys?

Everyone, good luck and very have a very, very safe end a week and weekend and hopefully we can open up for business very soon.

Yes.

Yeah.

Thank you guys for taking the time. I really, really appreciate it very much. And to everyone else, just stay safe and sound as best you can and good luck.

Thank you, Sam.