How to Apply for PPP Loan Forgiveness under 50k | Main Street Business Podcast

Welcome everyone, to the Main Street Business podcast with Matt Sorenson and Mark Kohler. We are excited to be here, of course, talking about a topic all of us need to get a little educated on. Forgiveness.

Yep, we need forgiveness. We all need it.

We're going to be, we're going to

be throwing out holy water. You guys are all going to just feel a little better when this is all over today.

That's right. You'll. You'll know the steps to go get forgiveness. And turns out there's actually an application for it.

And the application is really the confession part. But you know, you can do it from home now.

Yeah.

Thanks to Covid. You don't have to go anywhere.

Yeah. Yeah. Now this, this forgiveness application is for your SBA paycheck protection program, your PPP loan. Remember this loan? Many of you small business owners out there rushed out and got. After the CARES act went into place in March, there's lines and banks were turning people down. Not getting people in fast enough. Well, a lot of people got those loans. Trillions of dollars went out on it. Excuse me. Billions. Hundreds of billions. I think it was 5 to 600 billion. What was the end up number?

The end number was 525 billion in and change at that level. Change is whatever.

PPP loan. We mean like 30 million.

Yeah, just a little change. And then there were 5,212, 128,000 loans processed. So 5 million plus business owners got some money.

Okay, now the deal on this loan was, right, you go get a loan from the bank, but if you use it for qualifying purposes, primarily payroll and there's some other things, you get the whole thing forgiven. That was the reason everyone went out and got it right. No one was just going to have to get a loan. We were getting loans that could be forgiven. So this is the critical part of ppp and now is the time people are starting to go ask for forgiveness. Yep.

And this is what the show's about today. And we want to welcome anybody that may have found this video on YouTube or on our podcast on itunes. And Stitcher. We hope that you find our pretty dry, some might say non humor enjoyable. We hope that we can keep this topic light, keep your attention. I'm a tax attorney, CPA and lawyer. Matt is also a tax attorney. We're both authors trying to help small business owners around America. We've been doing this podcast now over 10 years. We have over a million listens and YouTube views of over 2 million. So I think we're doing, we're getting Some good stuff out there. So if you find this enjoyable, please subscribe to the podcast or on the YouTube channel. Subscribe and hit the bell, icon, because we go live oftentimes one or two times a month with some Q and A opportunities that are great for small business owners.

So.

But today, the topic du jour. Does that sound good?

I'll have that

start out with a dumb and dumber quote. How could it not get any better? And you know what? Just forgive me if this. Ooh. There's no pun intended for one last religious reference. But the nice thing about applying for forgiveness under the PPP loan, you will get an email or a letter from the SBA telling you you're forgiven. Now, in some religious, you know, experiences, you're never really sure, are you, Matt? You know, were you really forgiven?

But did you actually go through the proper steps? Yeah. Did you have, you know, pure intent? I don't know. Yeah. I don't know.

You'll find out someday when you're going into that space where there's an escalator going up.

Yeah.

Going down. So. But for this PPP loan, you will get notified. So that's good.

Yeah, that is good. And you can frame that. Put it up somewhere special in your home. But all joking aside, there is some nerdy rules here. We're going to get into some kind of technical stuff. There's some SBA forms that. Some of them look like a tax return, so there's some boring stuff here. Don't worry, we'll get to that. But we wanted to make a couple preliminary points about the process. First, go through some of the form options so, you know, kind of which form you're going to use. Then we'll go through some of the common questions.

I think I like that, because there's. If you have less than $50,000 loan, there's a process that can be very streamlined, extremely simple. In fact. It's called the simple application. Then there's the ez. I don't know where they came up with simple is tier one, and easy is tier two. But apparently simple is better than easy. So.

That's Right.

So easy is from a 50,000 to $150,000 loan, and we'll go through which one is how to do it. And we're going to try to keep this really. We have. We've done multiple Q and A's on this already, so we've kind of vetted what we think the common questions are. So I like, Matt, what you said, let's start with some General concepts, so that we know what type of net we're casting here, who's included in this, in the process, before we get too detailed. I like that.

Yeah. So the first thing I just want to hit is let's just go over the process first and how you do this. So the first thing to know is you're going to apply to the bank you got your PPP loan for. Even though there's SBA forms, which is what you're going to complete, you start with your bank. So you're going to submit your application for forgiveness to your bank now, Mark, a lot of banks are like not even taking them yet though, right?

Yeah, I went to Wells Fargo yesterday just as a kind of a test case. Their PPP forgiveness portal, their confession room. Sorry, I've got to get off this analogy. It's way too much. Everybody's.

We beat it to death.

We beat it to death. I will. No more. No more. Okay, so the Wells Fargo PPP portal, they have stated that you will get an email when they're ready for your application. They want to streamline it, they want to have it digitized. Some banks already accepting applications, some aren't. And that's okay. We're going to come to the deadlines here in just a moment. But if your bank is not allowing you to apply for forgiveness right now, that's okay. Let's prepare. You don't want to just turn off this podcast or video right now at this point. Still, there's things you can do so that when they are ready for your app, boom, you're Johnny on the spot.

Yeah. So let's go over when to apply. So if you remember, PPP came out in like March and April and the first people were starting to get their PPP loans in April. Well, at first when everybody got ppp, it was all right, you get eight weeks to use the money, so hurry up and go use it. You got to hurry up. Right? And so people were stressing, and then in June they extended and said, you know what, let's give you 24 weeks to use the money. Now, almost everyone, and we can, we'll hit some, maybe some common questions later on this, but you can pick, do I want an eight week period to where I use the money or do I want a 24 week period to use the money? Well, if you want more of it forgiven and you used it over 24 weeks, most people, I think 95 or so percent at least are going to go 24 week covered period. Okay. So once you're Done with your period of when you have to use the money. So if you started in April, you're now up in October. That 24 week period is ran now. You have 10 months after your covered period to then apply for forgiveness. So you're ready now. You can file. If you got your PPP in April, you'll be able to be filing now in October and you have a 10 month window now to go and request loan forgiveness.

Okay, now on this, this is so tricky and I love Matt that you brought this up first. When you see the application up in the right hand corner, it's going to say that the form expires October 31, 2020. Do not let that throw you off. SBA has already said they're going to be updating the form regularly, which has been a common situation this year as we get updates constantly. But the basic takeaway is you're going to have 10 months to apply. For all of you that got your loan after June 5, you have until really October of next year to apply. Not that you'll want to wait that long, but you do. So don't stress out. If you're like, oh, I've got to hurry and apply, we'd suggest, if you can, we're going to talk more about that, great. But you don't have to worry. You've got 10 months from when you're period ended to do this.

Okay, all right, now here's the process. Okay, you're it's ready, you know your covered period's up, you got your within your 10 month window now of when to apply for forgiveness. Now you send that application into the bank, you got the PPP loan from. The bank, then has 60 days to make a decision and say, oh, we need more information, we're going to deny it or cool, you're good to go. Now the bank, once they decide within their 60 day window, they then push it to the SBA and say, hey SBA, they requested forgiveness. Pay us back their loan, by the way, because the bank wants to get paid. The SBA is going to pay the bank on your behalf for forgiveness. Here SBA has 90 days to review. So you got 60 days from the bank, 90 days from SBA. Now they might be going, hopefully doing it faster, but these are the guidelines that that have been set by law. Now once the SBA decides, they will pay the bank, credit union or whoever you got your loan from, and now your loan is forgiven.

Now any amount that you didn't get forgiven and there's a chance I'm sure there's going to be lots of people that didn't. I don't know what the ratio will be. We'll find out in the years to come. But if you didn't get any of your loan or part of your loan is not forgiven, those payments do not start until after the determination by the sba. That's what everybody's going to really face. If you were to just. And there will. There's these people that just put their head in the sand. My business is destroyed. I'm not even going to apply. I heard Congress was going to automatically forget it. That hasn't happened yet. People, we're going to talk about where Congress is on, on the tax ability of this and is there automatic forgiveness? There's none of that yet. So some people are just going to put their head in the sand. If you don't apply for forgiveness within 10 months after your covered period, the payments on your loan must start to be made. And this is going to be a. And there's going to be those people. It's just, it's inevitable. So you don't. If your business failed, if it's been a disaster of a year, if your spouse died, if it failed, family member died, that was part of the business. Take some time to grieve and get your life back together emotionally to some degree. But don't put this off. You've got to address it. So you've got 10 months to apply. Payments don't begin until the SBA decides. And if you don't apply, payments begin at the end of 10 months.

All right. Okay. Love it.

Oh, hold it.

Yeah.

If your loan, if you receive money before June 5th.

Right.

And part of it wasn't forgiven, you have two years to pay back the part that's not forgiven. If you received your money after June 5, doesn't matter when you applied, when

did you get the money?

If you got the money after June 5, 2020, and you don't get some part of it forgiven, that you have five years and all those loans are at 1%. So it's not the end of the world. It's amateurized over five years or two years. Okay, Matt, I just want to get that. So that's the leftover crap. So it's off the table here.

Okay, cool. So, all right, so we got the timelines down. 60 days at the bank, 90 days at SBA, wait till your covered period is up to apply. Now let's talk about which application to use. Okay, let's start with.

And let me Say this Matt Sorensen has an article on this. We'll make sure it's down in the description below. Matt's article is on the 50,000 or less. So scenario. And there's links to the application and instructions. My article is on the easy application and there's links to the application and instructions too. So, Matt, I liked where you're going. I just wanted to say that as you start to describe that first option.

Yeah, yeah, thanks. We got all the details there. Those are on Entrepreneur.com and on our sites too. So let's hit the simple start, baby steps. All right. This is actually a pretty good application. It is one page calculations, no formulas. This is like the math teacher that's like, just give me the right answer and put your name on it.

Okay. I love those teachers.

You love that teacher, right? The full blown PPP app. And even the EZ is kind of like, can you show your work? All right, show me your work.

I hate those teachers.

I know.

So the substitute teacher, you know, and just because Eddie Van Halen did die this month, we should make a reference to the substitute teacher that said, here's the right answer. We all have that sub. That was hot. Thank you, Eddie Van Halen for the song Hot for Teacher. Okay, there we go. Just a little. We're gonna give a little credit to him.

I don't know how you were bringing that back around.

I was bringing it back, baby. That's a payoff. They call that in the. You know, because if you're a comedian, Matt, you would know in the industry that that's called a payoff. You start the story, you come back.

Sure.

That's the payoff.

Okay. All right. Thanks for clarifying. All right. The simple 50,000 or less. It's a one page form. Let me, I'll just, I'm just going to read the box. You put your name, business name, of course, your business tax ID or identification number, your PPP loan number and stuff. This will be on your note that you got when you got your PPP loan. You should have a copy of that. Your bank knows it. Now, there is two things you got to know on this in addition to everything you're going to certify here, which I'll go. But there are two boxes where you'll need to put some information. Course one, you're going to put the forgiveness amount. So if you got a loan for 25 grand and you've used it for appropriate purposes, which we're going to hit here throughout the topic today, you're going to get forget, you're going to request forgiveness of 25 grand. Now you do have to in order to file the simple, the loan has to be 50,000 or less. But you also can't have a change in the number of employees. Okay. There are formulas that reduce the forgiveness amount if your employee headcount changed from pre pandemic levels like in February 2020, till when you actually got the loan and used the money. So if your employee count went down, and there's some exceptions and reasons we'll talk about, but if your employee count went down, you're going to have to use the full blown, the regular PPP app. Even if your loans under 50, let's assume you didn't have an employee headcount change.

Also, I want to say this for everybody listening. If you're a sole proprietor, independent contractor side gig side hustle, and you got a PPP loan which was probably under 20 grand, maybe 8 grand, 9 grand, 12 grand, we've got all sorts of clients that have emailed questions that are in that range. You are the only employee, so there's no change. It's easy. So you're going to be able to say, I paid myself, I was the only employee, I got the money, I tried to keep my business alive. And that would be you. That's perfect. So don't stress. It's a lot of people I'm. Well, I don't have employees. You're the only employee in a sole proprietor.

Yeah. So. All right. Now the next item on there that you do need to know is an EIDL advance or grant. So if you got an Eidl advance or grant, we're not talking about a loan that you pay back. This is the money that SBA gave out. First they were doing 10,000 and then they started doing 1,000 per employee up to 10. But if you've got an EIDL advance, you subtract that from the forgiveness request. They don't want you double dipping on that free money essentially. So if you got 2,000 bucks from SBA under EIDL, then your forgiveness request was 25, because that's how much you're PPP loan was. You're only gonna be able to request a max of 23 for forgiveness. That's it. Now then you just certify that you use the money appropriately under penalty and perjury, imprisonment and fine if you're lying and you're good to go.

Now here's a technical problem that some of you, we've had questions on this. I Will say there is one last thing. You do have to submit some very minor, simple documentation. And one of them is they just want to see that you even cut a check for payroll or you cut a check for rent. And they said, we don't need the receipt. We don't need 941s. We don't need pay stubs. We just want to see that it went out of your bank account or

even a transfer from your business account to your personal account. They want evidence of payment.

Yep. Now, here's the hard part, and we don't have the answer right now. For some of you that are sole proprietors, you say, Well, I got 10 grand, let's say, and let's hope you'd put it right into your business account, not your personal account. But anyway, you put it in your business account. And then what happened was a lot of people said, okay, I got to pay bills, I got to pay this, I got to pay that. Utilities, rent, buy inventory, pay this, pay that. You didn't have any employees. Did you really pay yourself? And you may not have a transfer for 10 grand paying yourself. And that might be a weird documentation concern. So what we've told people that if you don't have that paper trail that's squeaky clean, gather your documents, put it in a folder, set it on the corner of your desk. Just wait. We're expecting to have more clarity from the SBA and Congress on this, which brings us to Matt, the current legislation. That's pretty sweet. Why don't you want to cover that?

Sure. Yeah, There's. Let me say on that, too. Remember when we were. I mean, if you were listening to podcast before, when we said you're getting a PPP loan, we recommended setting up a separate exclusive bank account for those PPP funds so we could track what the heck you spent it on or your account, because we knew there was going to be. Well, how do you document this? So if you drop this in your personal bank account and you just spend it on personal expenses, it's hard to say this was used for personal purposes. We won't be able to show it went to a separate account. Here's the transfer for the rent. Here's the transfer check I cut from that separate account for payroll or to pay myself. So if you did that, you're good. If you just kind of put it into a commingled account, like Mark saying, that's the side of the destiny. But as Mark mentioned, too, there is pending legislation, bipartisan. It's in the Senate. Hopefully you'll get attached to whatever. Pelosi and what's his name. I forget the song. Oh, I don't know. I love that dude. As I've said before, he's like. He's like the Secretary of the treasury from Central casting in Hollywood. The guy's just like, perfect. He looks at, he sounds it. He's also pretty dang smart, too, so. Yeah. But anyways, they're still hammering out the deal. Hopefully this bill will get part of it, which would give forgiveness for loans of 150 or less by simply certifying that you used it properly. No documentation there. So that would be. The banks and the banking industry, of course, is clamoring for that because they don't want to process these and check all these for these smaller loans in particular. But what I would say, if you, if you're the 50 or less, you've got your ducks in a row, you're through your covered period. And we've already had lots of clients do this. Submit it, you're done. You're ready. You don't need to wait. It'll take you literally. It should not take you more than 10 to 15 minutes to do it. Yeah.

Now, if some of you. I'm going to digress. And Matt brought this up. If some of you had maybe been listening to our podcast, some of you might be kicking yourself going, well, freak, my accountant or lawyer or banker, whoever, they never told me that things were tough. It was pandemic time. I was freaking out. I just took the money and I did what I thought I was supposed to do. And now you feel like you're getting beat up. Please allow me to say this, and I say this with all due respect and from my heart. We've been doing this podcast every week, literally, for 10 years. Newsletters every week, free. We do workshops every year. We both got books out there. We are begging you to realize you are the captain of your own ship. And so many small business owners never learned how to be a small business owner. And they just think, well, my accountant will take care of it. Or I can just do it on TurboTax, or I can, I can ask for forgiveness later. The IRS and Secretaries of States and court actions, they don't say ignorance is a defense. If you didn't know what to do, it's on you. So, in summary, I just want to say this. If you're finding our information helpful whatsoever, I just beg of you to try to listen to the podcast every week. Get signed up on our newsletter, the links down below and and we're not going to, you know, pelt you with $10,000 boot camps in Vegas to try to sell you, upsell you crap or that's not our style. We want to help you. So hopefully you found a place where you can get clear answers for the future. All right, now, Matt, what do you want to say next? Sorry, I got off track.

Yeah, let's let you want to transition to easy. So that's simple. I'm glad you mentioned there is some documents. Let me hit, let me hit this.

Let me go back before we do easy. Yeah, let's hit more general stuff.

Yeah, let me hit like what the requirements are. So when you're requesting forgiveness, you need to show that you spent the money on qualifying costs. Now, you could spend 100% of your PPP loan on payroll to yourself. Now, if you've got a PPP loan and you're the only employee, or let's say you're an employee and you have other employees, obviously. But for compensation to a business owner, the max cash compensation of a business owner you can claim forgiveness for is $20,833. Okay, so you're only going to max out at 20,833 for PPP forgiveness for yourself. Your other employees though you could, you know, you'll be able to count as well on top of that. Plus you can have another 40% of qualifying costs that can be rent, mortgage or utilities. Now, you could do 100% all payroll if you want. And now the covered period is 24 weeks. Almost everyone, you know, we were getting PPP loans for basically about 10. 10 weeks worth of payroll is two and a half months is what they estimated your loan amount when you got it in the first place. Well, now you have 24 weeks to use it. So most people we're finding that are requesting forgiveness now had all the payroll. They don't even have to worry about submitting their rent and mortgage and utilities and they just show all. They spend it all on payroll to themselves or their employees and you're going to meet the requirement.

And let me say this another way. You don't have to use 40% for these other expenses. That's only if you need to. So that's why we're seeing most people. Now I'm going to get a little technical here. 90% of our clients are going to say, hey, whether I got my money before June 5th or after June 5th, I got my 24 weeks and you get to choose. So I would say at least 90% of our clients are going to say, oh, I'll take the 24 weeks. And then you just. If soon, let's say you got $30,000, soon as you can show payments, gross payments of payroll or to yourself of $30,000 without going over the limit to yourself, you're done. Fill out the damn form. Have some, you know, show the bank statements of where the money went and submit that to your bank. And if the bank says, yep, makes sense to us, you're going to be done. The SBA is worried about auditing these people that got loans of $2 million or more. I suspect these are going to go through with lightning speed if you can just show some reasonable documentation. Here's the technical point. If some of you say, well, I couldn't bring back the same level of employees. So this is for those of you that had other employees. And you're like, well, they opened my restaurant, then they may be close again, then they opened again, then they closed it. And you say, I don't know what my headcount is. And then I had employ. It wouldn't even come back to work. So I'm all jacked up at that point. Please get a consultation. Our numbers down below. You can talk to one of our tax lawyers. The appointment might be two or three weeks out. There's no rush. But get a consultation and determine if maybe you should go with the eight weeks and throw in some rent. Because if you've got a change and pay, pay and change, an employee account. There's some exceptions, like they didn't come back and they. You tried and they were on unemployment, on the gravy train or whatever. And there was your state reclosed. There's all these exceptions. It's too much.

Let me describe those too. I want to.

And I was going to say it's a little much for this podcast, Matt, if you would describe them in general. But this is where we got to get knee deep in almost every person's situation because the timing of it's critical. What type of business you have is critical, what state you were in is critical. And then if you can claim that exemption, you're back to 24 weeks. But if not, you might want to stick with the eight weeks. So that's where things can get tricky, people.

True. Yeah. So if you had employee headcount changes, you will want to get a consult for sure. Because there are a number of different strategies and there's just exceptions that are pretty easy. Like Mark hit them pretty quick there. Yeah, yeah, I'm sorry, there's two that are really common, that are actually really nice. And it was like, thank you SBA for recognizing this. The first was, you know, let's say you lay people off and you tried to bring them back but they refused to come back because they were freaked out of COVID They were on the gravy train of unemployment, whatever it is. And they're like, eh, not coming back. But you got to document that you have a written record that you made them an offer, I want at least an email, but ideally want a letter. Second, they also expect you to send them to the state unemployment office. That was in the guidelines. You're supposed to tell state unemployment. I tried to hire them back and they refused. The other exemption though that's common is the is if your business was affected by Covid such you couldn't bring back workers. So the restaurant Mark talked about that was able to open and then they had to shut back down or open back up only at 50% capacity. So I can only have 50% of my workers. You're going to be excused from having to bring back all of your employees. So there's going to be a lot of exceptions to that. And I think even in an office environment or you can't maintain social distancing, you know, you're going to be able to possibly rely on some of those exemptions. Again, why a consequently matter? Because if you don't have the same number of employees from pre pandemic, the percent of your loan gets reduced by the percent of your employee headcount change. So if you only brought back 60% of your employees, you're going to take your forgiveness request and you're going to only get 60% forgiven. So it's really important that you you work through that.

And I'm also going to digress and say this here too. Don't fudge on the numbers. Don't fib, lie, trick, white lie, whatever you want to call it. If you said, well yeah, my employee count was different, but I'm sure I qualify people. This certification Matt's talking about is perjury, criminal prosecution possibilities. And we had some phone calls in just the last three days from people that needed our help. Probably were too busy to help them. And it's not our area, but they're getting IRS agents showing up at their door going, what the freak? You know, IRS is already on top of this. They're already looking for fraudsters. So it is serious. So again, there are exceptions. We don't want to make a mountain out of a molehill Here. But don't just lie on this thing. There was people that got PPP money that shouldn't. You're going to only add insult to injury if you go and try to get it forgiven. And you should have never got it in the first place. And I know you're listening right now. I've had, we've had clients that did that. They applied on their own, they said, oh, a 1099 is.

Yeah, that's the common one.

Yep.

Go ahead, give that example audit too. So if you did that, if you got a PPP loan because you thought, well, I've got a bunch of 1099 workers and I pay them, so I'm going to count that like it's employee wage. It's not the same. PPP was not for that. In fact, those 1099 workers could have got their own PPP loans and many of them probably did. So now the SBA has loaned out double the money on it. And it wasn't meant for you to go get a PPP loan for 1099 independent contracts. That was for employees on payroll. If you got that loan, you better pay it back. Figure out a way to pay it back. Because you requesting forgiveness because your business has been upside down and you're like, well, there's no personal liability on these PPP loans. They can't come after me personally. Yeah, in this instance they can't. So, so be careful. And there are, as you see on the application, there's fraud false statement affirmations you're making when you certify that you're eligible for forgiveness and you and you qualified for the loan in the first place. The last thing I'll just say on that is the SBA and IRS have a six year audit statute of limitations on this. So you also need to maintain your records. Even if, you know, we're assuming all of you out here, with the exception of a couple crazy people, the vast majority of you listening are going to do this, right? Everybody keep records for six years. If you are audited, you want to be able to show those records. Here's the underlying stuff. So just maintain it for six years.

Yeah. All right. And we'll give you some more kind of practical cautionary tips. We've still got a lot more to say. Let's. Before we get to the easy application, we've got a lot of questions about this and that is, am I going to pay taxes? Is that okay, Matt, if we hit that real quick? Because I know a lot of people are waiting to hear about that. So I'll give my little interpretation and it's always good to hear it a second time or in a different way. So. So I'll just quickly give my take. Magna will give his and between the two of us, hopefully this will make sense.

So basically, when Covid, if it doesn't, we're sorry. We don't have a third guy. It's only us.

Yeah, there's no third interpretation. Okay. When they passed the CARES Act, Congress, and if you've ever watched the old bill on a Hill cartoon when you were a kid, but when Congress was passing this bill, they had a lot of discussions and when they finally passed the CARES act, they said, we want this to be tax free for the business owner. They're going to get this loan. If they use it properly, we'll forgive it and it's not taxable. And they put that exact verbiage in there. And they had a lot of discussions around that. Well, the IRS saw that, not happy. They're like, whoa, whoa, whoa. We've got a, well, long standing law that says if you get forgiven any sort of debt and it was personally guaranteed or any debt at all, really, personal guarantee being the big one. And we are going, and there's accounts out there already ready to fight that issue because, Matt, no personal guarantee. Is it really a 1099 C? Anyway, sorry, I'm getting down the rabbit hole. But the IRS said, nope, we're going to tax it. And so everybody all summer long was freaking out going, you can't do that. You're going against the law. So just a month ago on September 22, the IRS came out with another notice and said, all right, fine, we've asked all the banks not to issue a 1099C in cancellation of debt. And that would happen in the date, the year you got it forgiven. Maybe it's this year, maybe it's next year. I don't know when you're going to get forgiven. So they said, don't issue a 1099C, but here's the deal. Any expense that you incurred with that money, we're not going to let you write it off in 2020. Which is nice, Matt, because now we don't have a carryover into 2021. If I was the IRS, that's what I would do. But Congress is still freaking out. They're like, no. And the AICPA said this wasn't even personally guaranteed loans, which shouldn't be cancellation of debt. And this is beyond what the, this is totally not what Congress intended So is there a resolution right now?

No.

So that. Matt, how would you describe. Wait. The current problem?

Basically, what that means if you didn't follow the logic there, and this is the tax law, and this is messy because like the original bill said, there's no forgiveness of that income on this when you get forgiven. And then the IRS did their little gymnastics on it, like Mark explained to say, well, but you just don't get an expense for it. In other words, let's say you had a PPP loan of $40,000. You go get forgiveness on that 40,000, use all of it on payroll, which is otherwise a business expense. Right. And you're like, ah, I spent on payroll. I'm obviously expensing that $40,000. What they're saying is, yeah, but that was on money that you got a loan from the SBA on that was forgiven. Forgive. Because of that, the expense is no longer qualifying. That means you're getting 40,000 of income, essentially, you're not getting the expense for it. Does that make sense? That's the best way I can explain it is you got that loan for 40 grand. It's income. And even though you spent it on payroll, you're not expensing it back out. Your net, Net net. At the end of the day, you got 40,000 of income from whatever, whatever your PPP loan was. It's. If you got 100% forgiven, the whole loan is going to be taxable income to you, which is a bummer. We'll see how it sorts out. And hopefully by the time people got to start doing tax returns in April of 2021, you know, there's some resolution on this.

And what I, we've told our clients is you should always hope for the best, plan for the worst. And so if there's a chance this is going to be taxable, which there is, we've told many clients, take 25%. Just take 25% of what you got in the PPP and set it aside if you can. There's some of you, your business has been salvaged. It's been okay. Business hasn't been terrible. You got the PPP loan, it was a nice resource, yada, yada. Okay, I can set aside 25% of that, those funds. So if I do get taxed, I've got a kitty to go to. Some of you are like, I used all the money and I'm still broke, and now you're going to tax me with the freak. And see, this is what the quandary is, because the IRS is Saying those people where their business actually did survive, that's free money. Hell no. They got to pay tax on it. But how do you decide that when you've got 5 million loans? So, so their blanket thing is let's just tax everybody. And the Congress is like, no, we realize some people are going to get some free money, but we've got millions of other people that really can't pay taxes on this. So they're saying let's let everybody off. So I think that's where it'll end up. But we'll, we'll see.

Yeah, okay. We shall see.

All right. Easy. Should we do the easy? I had something else I wanted to say about being cautious. You got the money, you didn't you. What do you do? Be careful of the fraud thing. It'll come to me. All right, so let me throw this out. Yeah, okay. On the easy app, it really isn't much different than the simple. Under 50,000 you still can't have a change in your. It's just a little longer form. You have to provide a little more documentation. But to do the easy, you still can't have a change in your fte. That's the full time equivalent. So you've got to be able to show that I kept the same number of employees. You'll want to rely on some of those exemptions to get there. You're going to probably have to provide more pay stub type information because people that got more money obviously had more employees. And so they're going to have 941s and pay stubs and things like that. You're probably going to be throwing in health insurance premiums for the employees, other things to just throw in and bolster your application. And so it's not the end of the world. It's just a longer application.

And let me say that employee pay, I would just want to know is what the employee pays. It's gross payroll. Okay, Use gross pay. So if you're looking at just, oh, I cut a check to them. What's the, you know, employee number one and number two and three just got a check. Well, that's not the amount you paid on payroll. You actually paid more because there's withholding taken out of that that you sent the IRS and state for federal and state income tax. There's some employer, there's some employee FICA that was withheld for Social Security and Medicare. Okay. That's part of compensation you're paying, but it's not showing up on the actual check to employee 1. 2 and 3. Yes. Being withheld and sent off and withholding. So look at your reports of gross payroll and so hopefully you're using a Payroll provider or QuickBooks or some service that you can just run a payroll report and that's what they want. More in these easy even in the simples. If you got more than, you know, employees other than yourself, it's going to be nice to to provide that. So. So that's the gross pay. There's a lot of questions on what's considered gross pay or sorry, what's qualifying payroll or not Just go with gross pay. That's the easiest. Well you don't include employer paid fica. That's one thing you do not even though you're going to pay some FICA 1 Pay your employees that's not part of payroll at the employer side of FICA is not.

I think that's everything. I'm literally I was scanning some questions from our last podcast to see if

there was easy the only other thing too I'll say that it's more of a show your work thing. Like I mentioned at the beginning on the simple is it is. It's not too bad, but it is more show your work and calculations to make sure you're qualifying and you're running your numbers correctly.

Here's a question from Dan. He said we are S Corp owners of husband and wife. Only two of us on payroll. We got a PPP loan on May 4th for about 40 grand. So that means they kind of maxed out their payroll for each other in 2019 and so they got a larger PPP loan. He says do we have the owner limit for the forgivable amount? Yes. And that's per each of you. So you'll both be able to get forgiven $20,833 each. It's not as total for all the owners. It's per owner. So. And you're. And he says is it going to apply over the 24 week period? Yes. Choose the 24 week period because you're not able to pay yourself that much in in the eight week period and still qualify. So you're going to want to go with the 24 week simple app and you're under 50 grand which is great. So you're going to do this simple and then just show your payments to yourself.

Yep. But another question that was about I had a few multiple I had a businesses. I had a sole proprietorship. I had an S Corp. I had one client asked about having three businesses and one of them got like 10 grand. One got 30, one got 25. I was like, if I add them all up, I'm over 50. But each one is actually under 50 itself. Can I do the simple app for all three of those? Yes. The rule is, if you have multiple businesses, as long as each individual one is under 50, you can use the simple app so long as the total does not go over 2 million. So. And you're gonna have an accountant and a team of lawyers if you got PPP over 2 million. So you're not even thinking about this. For those of you that are under this, don't worry. If you're. Each business is under 50, you can do a separate simple app for each one.

Yeah, this is questions from Sarah. She said she's got four or five questions, and they're really quick, fast ones. I've got good news and bad news on some of these. Again, she said the form's Expiration date is 1031,20. Since my bank has not opened the forgiveness process, I'm worried I'm going to miss the expiration date. Don't worry about it. That is just in. The SBA has already said that's just a clerical issue that is forcing us to readdress and create a new form in time. So don't worry, Sarah, you're good. She says, I'm a sole proprietor. What docs shall be required to show owner compensation on the Schedule C? I made two bank transfers from my business account to my personal checking of eight grand and seven grand. I do not have canceled checks. That's okay. I would just print out the bank statement that shows those two transfers to your personal account, and you should be fine. Here's the problem. My spouse also received PPP funds directly into our shared personal account as they did not have a business account. The PPP funds from that loan were used to pay our monthly expenses, but there were no transfers for wages or paying ourselves. Is this a problem? Yeah, it's a problem. I mean, you're going to. I don't know what to do in that situation yet. You're going to have to. We're going to have to wait for further guidance in those situations. What the banks are going to want to see, or you should be praying that Congress passes the automatic forgiveness. That's your goal.

All right. Naomi wrote in with a question. We've hit some of these, but I just want to emphasize, because there's some common questions. Is it definitely forgivable, and do we have to submit an application or not? Yes, you need to submit the Application. Even if this bill passes, we're Talking about the 150 or less, it's still an application. You're gonna have to sign off and certify that you use it for qualifying purposes. So this will not automatically go away. Even with the proposals that we've talked about. For those under 150 or less, even if those pass, even if Trump or whoever becomes president signs okay, this, you're still gonna have an application. The simple is not too bad. We know there's been constant changes, which is our next thing. But if you use it for qualifying expenses, as we talked about, these apps are not that bad unless you're in companies weird situations we've highlighted. Just go ahead and request forgiven. Also, yes, it will count as income in your business. We've talked about that. Taxable situation. Sorry. Also stay tuned. There will be litigation on that for sure.

Yeah. Well, for those that are seeing this on the YouTube channel, the sun is now changing the direction where I'm gonna have to start to take my shirt off and sunbathe. And I don't want to force many of you to see that. It would not be pretty.

You don't want to have to change the rating for the show.

That's right. You know, although many of you would be like, that's Mark's the eye candy here. You know, when we started this video today, Matt said you need to push the button that says improve your appearance and go up to 10. I was like, really? I didn't appreciate that.

But anyway, know that in zoom this, you know, some zoom tricks for everybody here. You know, if you didn't learn anything today, I want you to learn a couple of zoom tricks because we're all using it now in the video settings. Okay. There's a little thing that says touch up my appearance. And you can check it. There's also a little gauge where you can kind of turn it down. You can turn it up. So I told Mark, make sure you touch up your appearance. And can you put it on 10?

Yeah, he got me. I took it like a champ. Yep. Well, everybody, I don't have anything else on this. Please, I beg of you. We try to provide just real helpful, direct, understandable content every week. And we're coming up on the end of the year with important tax planning tips. We have a special on setting up a solo 401k next month. We want to make sure you get your kids on payroll, your spouse on payroll, or if you should or shouldn't before year end. Are you going to convert a Roth this year. We've got to do it before year end and do the back door. Are you going to write off an auto before year end? How are we going to. So there's so many little strategies that you're going to miss by December 31st. So for some of you that are, you've got some extra money this year and Covid treated you well. And it's really two different worlds out there. Those that just got destroyed and those that are like businesses blown up. Look at Zoom. Oh my gosh. Right? So please subscribe. We'll be here next week and just trying to help the world be a better place. And me was in that 80s. That was the World Hunger Tour. You know, Michael Jackson.

Yeah. Get a better plan. If you're still listening, thanks for being here. Give us a five star review maybe. We got another podcast too, the directed IRA podcast. For those of you that self direct your ira. We know many of you listen to that. So check that out. We're still. It's. We got some shows loaded already and they're up. It's on my YouTube channel for those podcasts for those of you watch on. On YouTube. But thanks for being here. We'll see you next week.

There we go. Look at that picture. That's looking so much better.

Oh, there we go. Yeah.

All right.

See you next grill.

Yeah, got to go fire up the grill.

Bye, everyone.