#11: CARES Act Live Q&A feat. Toby Mathis

Welcome to the Passive Income MD Podcast, where we talk about creating your ideal life through multiple streams of income. I'm your host, Peter Kim. If you enjoy hearing about this stuff, make sure to hit subscribe so I can bring it to you every week. Now let's get on with the show. Hey, everyone. Today's podcast episode is a little different. It's the audio recording of a live Q and A that I did with Toby Mathis, who is one of the co founders of Anderson Business Advisors, a huge law and tax and asset protection firm. And we were talking all about the CARES act and what it means for physicians. He was willing to give us his time and talk and essentially answer questions specifically from the people in my Facebook group. And so I wanted to share that with everyone. For those who are not familiar with the CARES act, it is a large stimulus bill that was passed by Congress recently to really jumpstart the economy and really keep it from falling off a cliff. There's a lot of money at stake here. It's a huge stimulus act. I wrote about it in a blog post recently, so you can check that out as well. It does apply for physicians and high income professionals. There are a lot of things in that bill that people can take the benefit of and there are opportunities there. So I think it's in your best interest to learn about it. And we are learning more about it every single day. CPAs and tax advisors, they're all scrambling to figure out more about it as well as us on the ground. So I wanted to share this episode with you. Enjoy and let us know if you have any questions. And everyone stay healthy and safe. Thanks.

Thanks so much for being here, Toby. Really appreciate your time.

Hey, appreciate you having me on.

For those who are kind of new to this whole thing, the CARES act, all the SBA loans, the point is that it's a stimulus plan. Right. That the government is trying to inject some money into the economy in the hopes that it'll kind of help stimulate economic growth during this time and basically keeps us from falling off the cliff. Is that right?

Yep. They're trying to dump some money into it. They're trying to get access to capital so that we can survive. I wouldn't even say it's a stimulus. I would say it's a Trying to Avoid Economic Destruction Act.

Okay. How much of this applies to physicians in particular? I mean, are there things that physicians can specifically get out of this?

Yeah, absolutely. I would say 100% of everybody's affected by this act. So, number one, if you're a physician who is an independent contractor, sole proprietor, S Corp, small business partnership, whatever. There's provisions that affect you. If you're a physician who's a W2 wage earner, there are things that will affect you not just through your employer, but also individually. There's everything from the tax stimulus payments, I guess that's what you'd call it, where they're giving free money out to people to help them go through this period of time, which most physicians aren't going to be eligible for because you're going to make too much money. And then there's things like removing the excess gains limitation on deductibility. They allow you to carry back for five years business losses, so investment losses too. So there's some things that might free up some money pretty quickly.

Gotcha. And is there an urgency to this, by the way? Is there like a time that people have to kind of get on this sooner rather than later?

Yeah. First off, a lot of these programs, they have a pot of money. So like the EIDL, they put 10 billion in under the PPP program, which is the paycheck Protection program, I call it 3P P. They put $349 billion and it's first come, first serve. Everybody's going to be trying to walk through the door at the same time. So it's. If you know there's a million applications that are going to come in in one day, you might want to be one of the first ones. Otherwise you're going to be waiting a long time.

Yeah, I heard that. Like you said, 350 billion for this. But how many small businesses are there out there that are probably going to that could apply for this? Right. I think it's like 30 million or something like that.

It's going to be ridiculous. And here's the thing, what we know is that when they first put the money out under the second act, there's been three in the family's first Coronavirus Act. And they put the money for the eidl, which is the Economic Injury Disaster loans. Well, those are directly through the sba. The SBA is not a lender. They're buying their loans and guaranteeing loans, but they generally operate through under their 504 programs and their 7A programs, which most people might be familiar with. Those are the traditional loans. They operate through local lenders. So all of a sudden they're making loans. Well, their system broke last week on like there was down for days where too many people were trying to use it and it broke. They can't handle it. So I would guess that they're not nearly equipped to do the Eidl program and that we should expect to see that kicked out to the private sector as well through their network of lenders. The PPP program is. You can't even get a loan yet that doesn't kick in until after. I think it's gonna be this week, at the end of the week. But the banks are telling me. Cause I just spoke to a bank VP this morning, they don't even know what the forms they're gonna be using. The SBA hasn't released them. So the SBA is under siege and everybody's gonna be trying to get money from them. So I imagine it's gonna be pretty brutal trying to get funds out of these guys.

Okay, so bottom line is, the more organized you are, the more you can attack this sooner rather than later. Try to figure out what's going on, increases your chance significantly that you'll get anything out of this. Right.

And there's other options. So yeah, like there's immediate cash that you could get both from your retirement plan. For example, they have new laws with regards to. They doubled up the amount you can borrow out of a qualified retirement plan, like a 401k, 403b, 457, they doubled up that, and then they have penalty free with withdrawals over that you're supposed to pay back within three years. And there's question about the language they used as to whether it's taxable this year, next year, the next year. They didn't use pro rata, they used something called ratably, which means, hey, if you pay it back within three years, you don't pay any tax on it at all. So there's other ways to get money and it's just making sure you're doing it correctly. And then if you do have a large ira, like what we would end up doing is creating a qualified plan under some other entity that you're working. Like if you're an investor, probably, probably create a management company, create a 401k, roll it into the 401k. You could borrow up to $100,000. If that's what you have in there, you could take the whole thing out, borrow that for another spouse. You got $200,000 right there. If you have more, you could do the early withdrawal. So for a married couple, I say it's about 400,000 that you could get immediately without asking anybody to do anything. You may already have access to those funds.

Gotcha. That'd be tapping your retirement accounts for that though, right?

You'd be paying that back. You would be tapping a retirement plan. You'd have three years to pay back the early withdrawal you'd have under the new tax laws. You'd have a deferral for one year, then a five year payback under the qualified retirement plan.

So what if you decide to keep that money and not pay it back? What if you didn't pay back? Then what happens then?

You'd pay tax on it under the early withdrawal. You could spread it out over three years. If it's under the other, you're paying that back pro rata. You're paying it back on a quarterly basis beginning a year from now. So you'd be deferred for a year and then after that you'd be recognizing the income that you didn't pay each quarter on that portion. So you'd recognize it over a five year stretch. Literally it's over six years technically from the date that you took the money.

Gotcha. Okay, I want to dive into the actual SBA loans and all that stuff because I think that's what people are really interested in knowing, I guess in their particular situation, which seems to be the best option for them. And so, you know, obviously everybody has a unique situation, but maybe we can start talking about those loans based on the individual physicians. And I have all these questions from our Facebook group and I'm going to try to get through them as much as possible. So you obtain an EIDL grant, but then reject any loan offer, like if you just want the 10k grant. So I think what the question is that, yeah, first of all, can you explain what the Eidl grant is for people?

So when you apply for an EIDL loan, which is economic injury, disaster loan, you're basically certifying three things, which is you live in an area that's been affected, you've been affected, and you don't have any government liens. So it's pretty easy. It's pretty low lying fruit. And when you apply, you can, you could request a grant in the first, that would be paid out in three days of $10,000. Now that $10,000 grant is free money. Now it interacts with the PPP loan, which I don't really want to get too deep into this. It offsets how much you can Forgive underneath the PPP loan. If you get that 10,000, but you're not required to do anything else. If you don't want the loan, you don't have to Take the loan, you get to keep the 10,000.

Gotcha. So if I have it right, under the CARES act, there are a couple different types of loans that are available for physicians or for anybody. Right. For small businesses, you got the Eidl that you mentioned, which is one of them. You've also got the PPP or the 7A. Can you explain that a little bit what that is?

Yeah, so the easiest way to look at it is I'll use 7A. That's the flagship program. When you're not doing asset loans, you're just doing operations loans. It used to be that was a loan of last resort. You had to say, hey, I can't get another loan elsewhere. So they removed that condition, they removed the personal guarantee, they removed the collateral, and they said, hey, we're going to do a paycheck protection program underneath 7A, which means it's through a local lender. The SBA is going to buy those loans for 100% of the loan amount, which is way different than what they usually do. They're going to pay the local bank a percentage of that loan. So basically you're probably going to get 5% of the loan or some amount. It's going to be a statutory amount. So your local bank's going to give you money and it's going to be based off of your payroll. And they're going to look at average payroll over a term. Generally speaking, it's going to be the previous year from the act, I think it's till I want to say that it's the previous 12 months or something like that. There's a formula for it and you have a few different options if you're seasonal. But anyway, they're going to take a look at your payroll and what they do is they shave the payroll down by anybody who's making over $100,000. So the max you can take into account here is 100,000 bucks. Let's say you have payroll of $200,000. They're going to give you a loan for 2.5% of that amount. So if your average payroll's 200,000 and you're going to get a $500,000 loan, now that's forgivable. That's going to be a 10 year loan, under 4%, no personal guarantee, no collateral, but it's still a loan, then they're going to say it's deferred for at least six months, possibly a year. And they're going to reduce that loan by, in the first eight weeks, all, all of Your payroll costs, your mortgage interest that you already had by February 15th. So you can't go out and buy a property and do this. Rents, utilities, and they're going to reduce that amount by that loan amount, and that's forgiven. And if you're familiar with loan forgiveness, usually that's taxable. And they said no, you don't have to recognize it as taxable income. So it's literally free money. But here's the catch. You lose the ability to do your employee payroll credit. That's also in the CARES Act. So if you do that ppp, I might have just cost myself all my payroll credit in that payroll credit is up to $5,000 per quarter per employee. So if I have 20 employees, it's $100,000 a quarter. I have to do the math to see which one's going to be better for me. But that's in a nutshell, how it works.

Gotcha. Oh, no. It sounds like it's important to understand how, you know, you don't just take the loan because that can ultimately impact other, like, credits that you can get. Right.

They all interact.

They all interact. Okay.

But you can do a ppp, the paycheck protection program and the eidl. You just can't use the money that you get from the ideal for the same thing that the PPP is used for. So you can't use it for pay. Like if you use the payroll protection program or paycheck protection program. If you use that money to cover your payroll, you can't use the Eidl to cover your payroll. That's all. Use it for something else. For, you know, making sure that you're recovering from all that's been going on that's impacted your business.

So, okay, so you can apply for both. That was a common question. Some people would ask, can you apply for both? Sounds like the answer is yes. You just can't use the money for the exact same thing for both. Sounds like.

Yeah.

Just have to be smart about how you utilize that. Now, what if you're a W2 physician, you're not working now, you're unemployed. Is there any benefit for someone like that in terms of the. These loans in particular or this grant, or is that they have to kind of get that cash somewhere else?

Well, the giveaway is the Small Business Administration. If you're not a small business, there's nothing here for you. If you are a W2 and you're working with an employer, you could encourage your employer to go out and get that. Maybe they won't furlough you or they'll have money to pay you. Otherwise you're going under the different sections of the of the CARES act and you're looking at, hey, am I able to get some relief either through retirement plans, Is there any sort of relief for me in here under any of the other tax sections? Do I have some losses that now I can carry back? Can I amend some returns? That's usually how you're doing is you're looking for money that you've already paid previous years and maybe I'm going to go back and fix that. So there's a number of things that they made for us so that all affected individual.

I mean if you're W2, but then maybe you have an LLC on the side, you've got some other 1099 income on the side. Is that something then you are considered a small business, then you can go apply for some of these grants.

Yep, absolutely. And so there's really no methodology under the eidl, the Economic Injury Disaster Loans, there is a precise methodology under the 3P the PPP program, which is two and a half times your average monthly payroll. Under a typical 7A program, there's no limitation either. As long as you show the ability to repay, then they'll generally low you. But they could require collateral, they could require a personal guarantee on those. So you're walking through different doors. We're going to be looking at all the different doors. When we work with clients, I just tell you I'm looking for money. If my client needs cash, and cash is king, I'm going to look for it from every source possible. And I'm going to be looking under rocks. So I'm not going to just say, hey, let's just go this one door. No, we're going to walk through 10 doors. We might be walking through them all at the same time. Or we may say, hey, we're going to try these two doors first. Then we're going to go over here and go through this third door. If those don't work, then we're going to try these other four doors. Like you're going to just, you're going to build a plan and you're going to, you're going to operate underneath the plan. It's no different than anything else that you would do in life. You're just going to look at it and say, what do I need? What's the fastest way to accomplish it? And if you can't under different scenarios, you're going to check it out.

Gotcha. Awesome. All right, here's some specific questions. So the max allowable W2 wage is 100k. If your payroll wage for a doctor, it's normally higher. Can you reduce their wage temporarily to qualify for the loan? So this person's an S corp and they're the sole employee of the S corp and their salary is higher than 100k. But they're just trying to figure out how to get some cash here.

You're not disqualified if you're over 100k. The amount over the 100k is removed. So if you made $120,000 for purposes of this, it's 100.

So it's not that up to 100k.

Yeah. So it's, you're not hosed if you go over 100, it just reduces. It says, hey, you can only count 100. That's true under the pay the gosh, bless it, the fica, the salary tax credit as well. That's true for that as well. It limits so that you can't say, hey, I'm going to jack up my pay so I don't have to pay the employment taxes. It's limited to the 100,000 on an annual basis. Not a month but an annual base.

Gotcha. And you can use the Eidl or these things. In terms of payroll, it doesn't distinguish who is anybody on your payroll. It can be another physician, for example.

It can be another physician. It can be part time as well. It doesn't have to be full time. So what they're looking at is how much and there's a reduction formula. I should tell you this, that if you reduce somebody's pay by more than 25%, the amount that's over 25% get taken out of the loan. So I can't just go jack, like say, hey, I have all these employees but I'm going to cut their pay in half. It doesn't work that way. What they want is people to be working and at a minimum getting 75% of what they were getting paid before. And they're going to give you a tax credit. You know, not even a tax credit. They're just going to give you the credit. They're going to reduce the amount of the loan. So this is essentially a payroll grant. If you keep your payroll, you can't use this to invest in a building. You can't use this money to go buy a car. You can't use this money to distribute to yourself. You have to use this money for payroll, utilities, rents or the interest only on a Mortgage that existed before February 15th. Like, they're trying to close all the loopholes before.

Yeah. When do they think this grant will.

Be ultimately given the grant, the ppp.

It'll be the Eidl. Like the Eidl grant. I mean, the plan is they're hoping for next week.

Oh, the Eidl is already going out. So Eidl are already going out. Yep. It's just. They got smashed, so they're looking at three weeks. So we apply for these all the time. So what we're being told right now is ones that we did last week or three weeks out. The grant was just done under the CARES Act. So the 10,000, we're looking at that. There's a $10,000 grant, by the way, under the PPP. So it's not just EIDL. The PPP is through your local provider. So you have to have a local banker who does SBA loans. And you go to them and say, what I would suggest is anybody is use somebody who knows what they're doing to tell you which one's better and which one you should be and what's the interaction between them? Do I lose anything doing this one versus that one? You know, it's just so you don't step on a landmine and blow yourself up. You know, you just want to make sure that. You just want to make sure that you're getting the benefit and that you don't undo a benefit by running around. Just applying for anything that you saw on the Internet says you should just don't do that.

Okay. Yeah. Because I saw a YouTube video and I kind of published in the group where someone said that there's X number amount of the grant available for people. So it's going to be on a first come, first serve basis. It is that. Yeah. So I mean, the question is, are we past that first come, first serve basis? Do we know now?

In some states there are. So, like, this is the federal side. There's also the state sides, like Santa Clara county ran out today of their grants. There's lots of little local pots of money that they made available to small businesses to try to weather the storm. This is $10 billion for the EIDL. It's 346 billion, I think it is under the. Under 349 billion underneath the Paycheck protection program. So there's big pots of money, but everybody's gonna be trying to take a piece. Now, the limit on these, by the way, is $10 million under the PPP and up to 500 employees. So if you're over 500 employees as an organization, you can't do it. Now, they did say this. If you have multiple locations, then they're waiving the association. So you could have one person, one group coming in there that has multiple locations across the U.S. with 300 employees in each one and take a huge chunk of this money. So, yeah, you want to make sure you're in there sooner than later.

Okay, so to confirm, just to clarify, so if you're an LLC and you file as an S Corp or a single member LLC of whatever or sole proprietor, all these people are eligible to apply for this Eidl, is that correct?

They're all eligible. The one thing that I would say on the S Corp where they kind of hose the S Corp owners is they don't let you count your K1. They only count the salary that you took. So if you make $300,000 a year and you pay yourself a salary to avoid some of the old age, death or disability and survivors insurance, then you're only going to be counting the $100,000. You're not going to be counting the full amount, but it phases out anyway. So for most of you guys, it's not going to be that important because most of the doctors that I know are in excess of the phase up.

Gotcha. Okay, so does the amount that can be forgiven, used for payroll, have to be spent after the loan is received by the business, or is it retroactive to February 15? Meaning is it worth it to hold out and not pay expenses until the loan is allocated?

That's actually pretty smart, I would think, that you're able to. It's called covered period and it's the eight weeks following closing. So they're looking at that snapshot saying that's the amount forgiven. What they don't want you to do is they don't let you pay off the principal of a loan. It's not prepay your rent like, hey, I'm going to pay the whole month. It seems to be during that period. So I would say don't necessarily hold stuff because, you know, pigs get fat and hogs get slaughtered. It seems like you're trying to milk that. They may hit back at you. But if you have some certain expenses, like don't pay them super quick. If they're in the ordinary course, wait until the loan closes and then pay it after the loan.

Gotcha. Okay, so this says when calculating the numerator denominator for FTE for the loan, can you hire family members? If they do legitimate work.

Yes. So the answer is it's the number of full time or part time employees. So when you're looking. Yes. So what they're talking about is how you track the amount the loan forgiveness gets reduced by the factor of how many employees you had full time, part time employees now versus over a certain period. And so you could use a certain period. I could look down. I can't even read my own scribble. At points. You use either February 15, 2019 to June 30, 2019, or the average of January, January 1 of this year till the end of February, February 29 of this year. And then you look at the period, the average employees for that eight week covered period. So during that eight week period, if you had 100 employees and in the previous time you had 120, you're gonna see a slight reduction because you got rid of employees. What this paycheck protection program's there is to make sure you're paying for your employees. So that's what it's designed to do. So if you're not doing that with the money, they're going to hit you. That's why you do the Eidl, that's why you do the other seven loans.

Gotcha. Somebody just asked here whether they have to apply separately. And the question I can pretty much tell you the answer is yes. Is that correct for PPP and Eidl?

Yeah. You apply separately. One's through a local lender. The 3P is through a local lender. The Eidl is directly with the sba. I'm still going to just say you want to. It's going to be tempting for you to go in there and type a bunch of stuff and just know that when there's millions of people, you want this thing to be tight. You don't want to have questions because all that's going to do is you're going to be last in line. So I would caution against people doing this themselves.

Yeah. So you have to basically go to a lender. And so I would utilize whatever lender relationships I guess you have right now, I guess with a big bank, if you have one, a banker lender. So those are probably. You should be approaching. Right. For this.

Yep. You want to find somebody who's an approved sba, the SBA has it on their site or you go through a national. I like ubs. I like a few others locally in my neck of the woods. I have a really strong relationship with a local bank. I'm going to go to them I've already been communicating with them, so it's like I know where I want to take my clients.

Gotcha. Here's a really specific question. An independent contractor llc, they applied for unemployment last week thinking they wouldn't qualify for cares. Looks like they can apply for the payroll protection. How much per month do I apply for and what is the max I could receive over the eight week period? If hoping to recover just compensation loss, there's no other employees or major expenses and how can they be sure it's going to be forgiven at the end of the day?

So first off, if they're a sole proprietor through an llc, they would take a look at all of your compensation period. The weird thing is you're supposed to include health plans but a sole proprietor can't get a health plan. Like you're not going to get group. They also are silent on disability and long term care and vision. So there's some areas we're assuming that they meant for all of it disability. I would add it all in. When you apply and you say here's my payroll cost, you're going to get your average monthly payroll cost. So if that's $20,000, you're going to qualify for a $50,000 loan, you're going to ask for $10,000 immediately in the form of a grant, it's going to reduce the loan amount. So you get a $50,000 loan. Then as soon as you close, you're going to have an eight week period where any of those expenses and it includes your payroll, includes all those things that you're using in your calculation, includes interest that you pay on a loan for your place, it includes any rents you pay, includes your utilities. You're going to add all that up and that reduces the loan amount. And how do you know it's statutory? It's black and white. Tells us the formula.

Okay, I think we just have to clarify this thing one time again because I'm getting question on Facebook live. But also down here, clarification. For the sole proprietor independent contractor with no employees, they make more than 100k. So do they qualify or they're disqualified because they make 100k more than 100k?

They qualify but you're limited for the calculation amount of 100k. I think I may have misspoke there for a second when I was using my calculations off the top of my head. If you're a sole proprietor making 20, I'm thinking of your total payroll. I'm not thinking of you.

Yeah.

So it's going to be about whatever it is, $8,300 a month. So you're going to get two and a half times that. You're going to find that this isn't very satisfying. The ppp, it's free money, so by all means, do it. But I'm also going to be looking at the ideal. I'm going to be looking at traditional seven. I'm going to be looking at your retirement plans, and we're looking at all these things of access to money that we can get. I'm going to be looking at whether it's better to do your employment tax credit. I'm going to be looking at the health of the company, because I want to see. Make sure that at least for my clients, I want the most money in their pocket so that they can weather this storm. And if it's something they don't have to pay back, Fantastic. It's just like you made it without having to pay tax on it. And again, to reiterate, the amount forgiven is not taxable. There's nothing quite like it. This is literally free money with no strings attached if you get it. So, I don't know. Somebody wouldn't.

Yeah. Go out and get it. Now, if I was running a couple different businesses, can I apply for every single one of the businesses that I have?

I believe that they aggregate you. So the answer is they have rules with regards to associated businesses, so you can't go through multiple doors trying to get. Yeah. So you would be looking at it saying, if I'm a common owner, I believe they're going to lump you all together. I haven't stared at it too hard. They removed the affiliate rules for number of employees, but I don't believe they removed affiliate rules for the loan. So they're gonna aggregate your businesses, and I'm 99.9% certain of that.

Gotcha. But you can use it for your multiple businesses when you get the loan.

You'Re saying, yeah, you can. So what they're gonna do is I can aggregate all my businesses for purposes of getting the loan and then use it among multiple businesses, but I'm gonna aggregate those under one loan.

Gotcha.

Okay.

Someone mentioned they have, like, an Airbnb business, like they rent out property and that sort of thing, and it's run as an llc. Is that something that applies for this as well?

Yeah. So under the paycheck protection program, you have to have payroll. So if you don't have payroll, we're not going to worry about it. And if you don't, then we're going to go under the eidl, and the EIDL is the Economic Injury Disaster Loan. So that's going to be under a different program. And again, you can get up to. You can get up to $2 million at 3.75% paid over 30 years. It's not a bad deal. The other route is if you have an asset and you want to borrow off the asset, the SBA has a 504 loan still, and you have your traditional 7A program, which, again, the Rapid loan went from 350,000 to a million dollars. So, like, there's other ways to get access to funds.

Gotcha.

And thanks, Airbnb, for refunding everybody. Like, I had a lot of clients that were like, are you flipping kidding me? So they just automatically gave everybody's money back. Maybe that's the right thing to do. But, man, they didn't tell anybody. And everybody just. I think it freaks you out when you look and you say, all my money disappeared.

So, yeah, I think they're trying to do the right thing. They're also doing this thing where with actually, for healthcare workers, I think they're subsidizing or giving some free type of states for especially physicians or healthcare workers that are separated from their families because of this health issue.

So I can't do judgment on anybody. So that's the thing is it's a really tough time. It's just communicating it, and I think.

Right now makes absolute sense.

Yeah. And so in my state, for example, we have Sisolak, who's the governor, and they'll just say, landlords can't collect their rent, and they'll say it on tv, and it means you can't evict somebody. It doesn't mean the rent's not due. They can't throw you out for not paying. It's just what they're communicating out there can be pretty devastating to a landlord who needs the money to pay their mortgage. So most mortgage companies have forbearance programs in place, but not all. And it's tough when they're lumping you in as a landlord. Like you're some rich guy and you're barely struggling to make a payment, and you're hoping that they hit those loans. They're not all fha, so they're not necessarily forgiven. You're going to have some nasty consequences. And they're getting up on TV making it sound like nobody has to pay their rent. Well, and what he says here is, oh, you're going to have to get together the Landlord and the tenants afterwards. It's frustrating for the landlords. I can tell you from here. They need to go in and look at the economic injury disaster loans. It's like this is something that's impacting them and every little bit really matters. Every little bit.

Okay. I think we're working through most of these questions. I think we got through a good amount of them. I think I'm getting a lot of the same questions, which is, can you apply for both? Yes, you can apply for both. The 100k limit. Yeah, it's just calculated up to 100k so you don't have to do any sort of funny business. It sounds like where somebody asked whether they have. They have a PA who was up to 105k, do they need to reduce their salary to 95 to be. Make it under. So basically it's fine. Right?

Yeah. My understanding. And I can only give you my understanding after reading the CARES act, you know, in the last four days, which is 800 pages. So is that you. You. You reduce the amount by the amount that exceeds 100,000. It doesn't say that. You don't count that person.

Gotcha. And so the best way to apply, you said, is for. Let's make it very clear, Eidl is directly onto. On their website. Right, the SBA.gov website. You kind of click through to different places. You look for the Eidl loan. If you're going to end up applying for the ppp, that's directly through a lender. And if you have a relationship with a lender, that's your best bet. Right. Because there are going to be so many different people applying for this. But again, you have to be careful. Again, I'm just summarizing what you said. Hopefully just tell me if I'm doing it wrong, saying anything wrong. But you got to be careful what you apply for because some of them kind of negate some other benefits that you might get elsewhere. So be careful what you're applying for. Don't just shotgun blast everything. You can apply for multiple. But be careful because it could trigger some other things. So just make sure that you understand those things before you do it. Whether you're an independent contractor, an llc, as an S corp, these kind of things. All of those. Any sort of 1099 or K1. Right. You can apply for these things.

Eidl and PPP loans, they opened up. Used to be. No. Now it is. Yes. So. And they said independent contractors, ICs, 1099, which is all really the same thing. And disregarded LLCs, which is a sole proprietor.

Gotcha. And one more time about the drawing from the 401ks, because some people had asked about that. The limits are now, like you were saying, it's now 100K. Right.

So the loan went from $50,000 to 100,000. They removed the 50% threshold. So you can borrow up to 100%. So if you have $100,000 in a 401K, you could borrow it tomorrow, you'd pay it back over six years, you'd have a one year deferment and then you pay it back quarterly over the next five years at federal AFR rates, which I haven't looked at them recently, but they're in the toilet. They're almost nothing. I imagine it's 1% or 1 point something percent. Last time I looked it was 1.9 and it keeps going down.

To clarify, you can hold it though. You said that withdrawal, you don't have to pay it back for three years. You're saying so could you not do any sort of repayments?

That's another one. So there's two. So there's the loan where I can borrow money from a qualified plan. I cannot do this with an IRA. If you need, you can roll your IRA into a 401k. So you can set up a 401k if you knew an organization that does it. The other one is you can actually distribute the money. And the rules are really weird. Like this is the thing is words matter and they use ratably over three years. So you withdraw that money, it is not subject to a 10% early withdrawal penalty. And over a three year period, it's ratably recognized over a three year period, which means any period over that three years, if you pay that back with no interest, if it's back in there by the third year, by the end of three years, it's treated as a 60 day rollover, which means no interest, no tax. To me that means three year free money. Put it back at the end of three years, no interest, no income if I need the money. And that's up to $100,000 per participant out of either an IRA or IRA type account or a 401K, 403B 457, any of those.

Gotcha. Okay, so within three years. Now if you keep it longer than three years, what happens then?

It's taxable in that third year. Like you have choices on how you recognize the income. I could spread it out over three years. I could say, hey, I took 90 out. I'm going to recognize income of 30 this year, 30 next year, and 30 the following. I could do that. Or if I had a really crappy year this year, I'd recognize it all this year. So I had that choice. It doesn't say pro rata. That's the thing now. There's no regs on these. God knows when they're going to interpret it or if they're going to interpret it. A lot of these are short term till the end of the year, only those loan amounts. I believe you have to take those loans out here pretty quickly. I believe it's June 30, but don't quote me on that. I think it's. There's usually a short period of time. These loans under EIDL and the 3P, the PPP, the Paycheck Protection Program, those have to be done by June 30th. So, like, there's lots of stuff here that we're probably never going to get real guidance on. It's probably going to be years before anybody actually looks at it and says, oh, that's a gray area. I don't expect the IRS to be harsh. They're being directed right now not to collect. So send anybody to collections. They're being directed not to go after people in their audits. They're literally being told to stand down, given what's going on.

Well, Toby, thanks for your time. I know that you have another. You guys do something called Tax Tuesdays right on your site. I know you got a bunch of Q and A to do probably after this. Is that right?

I have to do a Tax Tuesday here in about 15 minutes, so I'm.

Going to have to jump in. Yeah, yeah, no worries. I appreciate your time. One thing that you and I talked about is I was really curious about making sure I filled out everything properly and made sure that I have all the access to different loans, grants and all that stuff. And then you mentioned you had a service. So you had mentioned that you brought it to me personally. So I was like, do you mind if I share it with the group? And then can you tell them what you offered me?

Yeah. So here's what it is. It's $2,500. We guarantee that we're going to get you $10,000 or your money back. More than likely, we're going to get one of the grants. It's three loans. We handle everything, soup to nuts. We negotiate it. And the biggest thing is we're going to decide which ones are appropriate. So we will go through and negotiate with the SBA or your local lender, we'll help you locate one and then handle the process to make sure that we're maximizing everything. We'll do all the calculations on your payroll. You just have to provide us with the information. We'll make sure that your financials are done right, that everything that's done is done correctly. It's $2,500. There's a small amount that if we get over 200,000 to a million, there's an additional $1,500. If it's over a million, it's an additional $2,500 total. So it's basically, if we win and we get you all a bunch of money, it's up to $5,000 that you'd pay us total. Got you $10 million, it'd be 5,000. If we get a million, it's going to be. What would that be? About 4000. If it's 200,000, it's about 2500. But we'll apply for three different loans and walk you through the process and make sure that it's done correctly. Again, these things interact. So the paycheck protection program offsets the tax credits you get under your payroll taxes versus the EIDL has phase outs, like there's portions that offset on each other. So we want to make sure that we're getting you the right amount of money and that to the extent it's free money, that we get you the free money and that we maximize the amount that you're actually able to get and that we're minimizing the amount that you have to pay. And so we're going to look at all sources.

Okay, great. And you, for our specific listeners here, you mentioned the guarantee, but can you mention that guarantee again just so that it's very clear?

Yeah. We're either going to get you a grant of 10,000 or loans of 10,000 or your money back, period. Like, it's going to be the grant. That's what we want to get. So hopefully we're getting you a whole bunch of free money. And everybody's going to say, oh, I just go directly to this. Doesn't work that way. You have to do it right. So it's like all things, I use somebody dedicated to my office that knows the sba, and that's what I do. It's like, I don't want to try to reinvent the wheel. I know enough. But I also know that the people that deal with this, the lenders that deal with this, we want to make sure that we're getting everything that's in your best interest and not necessarily for everybody else. Right. And we want to be first on the bus. So I'm going to encourage you guys to do it. I'll give you a link pay Peter that you could send folks to if they want.

Okay, Perfect.

Yeah. But the way I look at it is if I can't get you four times your money, I'm gonna give you back your money. I'm just not interested in doing anything that's not beneficial for somebody. And we're gonna look at everything. We're gonna look at all sources, anything that we can get you guys, even if it's money that you already have. And then, as always, we're gonna look at your tax situation and see if we can't get you some free money there, too. Cause quite often, like right now, some of you guys probably had money freed up under some carrybacks that we can actually go back five years. Maybe we look at that and see if we can't get you some immediate money. Because we know if we file an amended return, we're going to get that money within three weeks. If we look at your retirement plans, we could probably get that money tomorrow. So we're going to look at everything we want to just make sure that if you need funds that we're helping you get it so that you can continue to operate.

Awesome. Well, I appreciate you for your time, your expertise, and let's do this again soon. Okay, you guys. Toby.

Thanks, guys.

All right, take care. Bye.

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