Paycheck Protection Program Application - PPP Walkthrough | Incite Tax

Hey guys, I wanted to take a brief video. I'm just seeing a lot of stuff out there, getting frustrated that there are non-experts trying to act like experts on this loan scenario. Um, right now, the most prevalent information I feel like that you would need is instructions on how to fill out the application. Um, as of this Saturday, April 4th, it is, uh, 1:30 Mountain Standard Time. I don't know of any banks that are actually processing this because I haven't heard information that SBA and the banks have reached an agreement. So you might hear other banks or certain banks or only some banks and your bank isn't taking applications. Taking applications at this point doesn't mean anything because they can't actually process it. Based on my experience with Chase, That's why I wanted to quickly show you how to go through this SBA, SBA form, because the way it worked with Chase is I put in some really basic information, like really basic business name, EIN, address. And then I clicked next. And then it says, hey, an agent from Chase is going to call you to finalize the application. I will get to what they want, what they're asking from me. But one of the things that they're asking for is they're saying that this SBA form is going to need to be filled out. So whether you have to fill out this exact form or the banks are going to put the information on their website or however that works, I think this is the information that most banks are going to ask for. So let me share my screen. And here it is. So you're going to have to identify what your entity is. Sole proprietor, meaning you don't have an EIN or a structure. Partnership, if your tax return is a 1065 tax return. C-Corp. Not likely. S corp, it could be an S corp, LLC, independent contractor. It's funny to me, sole proprietor, independent contractor, eligible self-employed individual, all these 3 things could mean the same thing. Feel free to check all 3 if you want. I don't think it really matters as long as you check one of them. Business legal name, that is the legal name. Likely if you don't know exactly what that is. It's going to be what is put on your tax return. When you set up the entity, it's going to be on those documents that you would have gotten through the state or your attorney. Business legal name there. DBA or trademark if applicable. So for example, my tax firm, we have one legal name and then we have Insight Tax as a DBA. So I would put Insight Tax here, but if you don't have that, You don't have to fill anything out right there. This line, not sure where they have it, you can leave that blank. Business address, that's the address, that's the legal business address for your business. So if that's your home address, put that. If that's your brick-and-mortar location, put that. Business TIN, EIN, Social Security number. So this is either your federal EIN number Which is in the form of number, number, dash, and then more numbers, or obviously your social, which we're all familiar with. If you're a sole proprietor, independent contractor, eligible self-employed individual, don't have a business thing, this is where you put your Social Security number. Business phone, pretty straightforward. You're going to be the primary contact, and then your email address. Average monthly payroll. If you were in business all of 2019, you're going to use your 2019 W-2 information here. Let me jump down to the part of the form where it says, with respect to purpose of the loan, Payroll costs consist of compensation to employees. So that's W-2 people who are based in the US. They add all this language in the form of salary, wages, commissions, similar compensation. Basically, they're saying what is on the W-2. Payment for vacation, parental, family, medical, or sick leave. So Unless you have a formal fringe benefit policy, this is not referring to how much did you personally spend on your trips. Some of you might be laughing, but I've gotten the question. So for most of my small business clients, again, the only thing they're going to be using is the W-2 information from last year. This other stuff they don't do. If you do happen to do it, then for sure include it. Payment for the provision of employee benefits consisting of group health coverage. So if you have a group health plan, you're going to increase that in there. You can use that to increase the W-2 amount, I should say. If you do employee matching and you have a 401 plan or some, some form of Group retirement plan and you're matching as the employee or as the employer for your employees, you would increase that amount. Again, most of my small business clients don't have that, especially if you're a gym. Payment of state and local taxes assessed on compensation of employees. I would not worry about what that means and add anything to the W-2 amount. And this is where some people are getting confused. And For an independent contractor also, or sole proprietor, wages, commissions, income, or net earnings from self-employment or similar compensation. Here's the way, as I understand it, how things are being read right now. Again, as of 1:30 on Saturday, April 4th, you are able to include in the cost of your average monthly payroll the amounts you pay an independent contractor, that will help you increase the amount of money you can borrow. However, if you use the loan proceeds to pay independent contractors, the amount that you're paying them is not going to be— not going to qualify for debt forgiveness. We have to understand, and I know it's a little upsetting based on all the stuff that happened over the last week, of these highs and lows where we basically initially thought pretty much our entire team member expense, whether they're W-2 or independent contractors, is going to get covered. We have to understand the purpose of this is primarily to keep people off of unemployment or to take them off of unemployment. So there— and unemployment is generally for W-2 people. So it's just, just look at it from that standpoint and It was the only thing I can do to get over my frustration with how terrible this process has been. At the same time, I don't want to sound ungrateful because they are trying to help us. So W-2 amounts. All right, let's go back to the top. So average monthly payroll. I was in business all of 2019. So what I did is I got a copy of my W-2 filings. For my entire company. And I generally— there's a summary on that if you're using a payroll company, or it's a W-3 form. And so I took the summary amount and I divided it by 12, and that's my average monthly payroll cost. If you do not have W-2s or W-3s, or you do have them but you don't know where to find them, You can then look at your 941 filings. And you're going to— those are 4 quarters. So you have a 941 filing for quarter 1, quarter 2, quarter 3, quarter 4. Add all those up, divide it by 12. Again, for— as the way I'm reading it, if you have independent contractors, you can include that amount here. I actually am recommending you don't. And there, I don't— my only reason is because it's, it's amount that's not going to be forgiven if you use it to pay your independent contractors. So why borrow the extra money? I know the interest rate as of right now is 1%, and that's great, and 2-year term, that's also great. But if you borrow $50,000 and none of it's forgiven, Just to give you an idea, $50,000 divided by the 2-month term, that's $2,000— $2,083 a month without including the 1% interest rate that you're going to have to now repay every month for the next 2 years. I personally feel like if you're applying for this PPP loan, do it for the W-2 amount because that's the amount that's going to get forgiven. Or you can use 20— up to 25% of this loan to pay your rent expense or to pay utilities. Again, run the math. So that's what I'm recommending here. Those are the forms that you're likely going to need. What you're then going to do is you're going to take that number, multiply it by 2.5. Now, if you are one of the lucky few who've actually gotten a $10,000 advance, You have some additional math you have to do in there. I, if you do that, reach out to your accountant to help make sure that you do it the right way. There's also examples that the SBA is providing, but for most people, it's going to be your average monthly payroll number times 2.5. Put that there. Number of employees. Now, this is the way I understand number of employees. I can't confirm this yet because Chase hasn't called me back to Process the rest of my application. But so in 2019, I issued 21 W-2s. But as of my last payroll that I ran, I have 16 equivalent full-time employees. So I'm putting 16 here. I'm using last year's information for my average monthly payroll, but I'm using my current number of Number of employees to put here, because that is super important. When we then, 8 weeks down the road from after getting the loan, they're going to look at the number of employees that you have, and they're comparing it to the number you put here to the number you have there. And you want those to be the same number so that you can have 100% of the loan forgiven. Here you can select the purpose of the loan. I personally checked payroll and utilities because utilities is a small amount. And I know that I won't go over 25%. Applicable ownership. This one only gives you 2 spots. If you have more than 2 owners that own more than 20%, I would just, like I said, attach a separate sheet if necessary using the same format they have here. But every owner needs to put their information— you need to put every owner's information here, I should say. That's their name, the title. If you don't have titles, feel free to call yourself owners. If you're part of an LLC, you can call yourself members. Don't get hung up on the title. I would use president, owner, member, shareholder. Those are all great titles you could use. Ownership percentage, and then the Social Security number of the owner, and then the address of the owner. Now there are scenarios where you might have a partnership So you have a partnership, Jim, and you personally own your percentage of that ownership in your S corporation. Theoretically, the correct answer would be to then put your business name here, put owner, and then you put the business EIN. You're going to want to talk to the bank specifically on guidance with that. To see if they want you to put the business name there, or if they want to go ahead and put that where the ownership ends up, which is you personally. I also know there's a lot of gyms out there where, like mine, for example, our coaches are independent contractors. So I'm not even applying for a PPP loan for my gym because I don't have W-2s. Payroll costs, and we're encouraging the coaches to get their own because they're eligible to fill this out themselves. So if they were to fill this out themselves, or you're looking at your S corporation as the person or the entity to apply for this PPP loan, you are then going to put your personal information here. All right, and then you just answer these questions. It's pretty straightforward. I'm not going to read all of the questions. It's either yes or no. I don't feel like any of these are confusing enough that I need to go through any of those additional explanations. Honestly, based on the— like, if you're like, I don't know what that's asking, then the answer is probably no. Okay. There's more questions here. Likely the answers are going to be no. Number 7. This one's important because you're only allowed to pay US citizens on this. So hopefully your answer there is yes. If the answer is not yes, you need to go back and readjust your payroll calculation and take out their things. Is this listed in the SBA franchise directory? You would know if you're a franchise. This does not include affiliate owners for CrossFit. But like F45 would be a franchise, Orangetheory would be a franchise. But yeah, most people are going to click no there. Then you read these things. Those need to be honest. And I mean, those need to be true for you because that's what you're certifying when you sign the application. And then in these boxes here under every single line item, You're going to type in your initials. Guess what? You can do your first name, last name. You can do your first name, middle name, last name, initials. So I could go JB, I could go JDB. There's no right or wrong there, guys. I'm only saying that because I know some people have so much anxiety over filling out forms. So I'm just trying to cover the basics. So you'd answer all these questions, or— sorry, you're not necessarily answering them. You're, you're Certifying that that statement is true. So, oh yeah, the true statement. Put my initials, put my initials, put my initials here. You sign it. This particular PDF that I have allows you to perform a really fancy certified signature. Print your name, date, title. When you do this part, if it's fancy like this one, you do have to just follow the promptings. It was the first time I did it, but I got through it. No problem. All right. And then here below are additional instructions if you need them. It talks about, you know, who really— who can apply. Like, we've already looked at part of this, and it's just disclosures, legal disclosures. So, I hope that walkthrough helps. The last thing I was going to cover is after I filled out the Chase application, Chase, then, you know, they said, be prepared, someone's going to call you, blah, blah, blah. So let me read to you what they sent me. And I'm guessing every bank is going to be very similar with these additional requests. You're going to want to have calculated your average monthly payroll. So if you've already filled out the form, you already have that number. They're probably going to want you to confirm some sort of relationship you have with that bank. And then let's see. We are going to ask you to fill out the SBA form. So to be helpful, you might want to fill it out beforehand. You're going to also need to know all the owners' information. Name, address, date of birth, title, percentage of ownership. So it's a— the date of birth wasn't on this form that I filled out, but you'll want to know that. And then be prepared by signing documents. They're saying have a printer or scanner, which, you know, most people do, or you can use your phone. So because people are— I'm getting a lot of questions about like, I need my 2019 tax return done. They're Going to likely look at whatever your last filed tax return is. They're not necessarily going to look at 2019. I don't have my 2019 return done. And I'm not worried about it. I'm going to send them my 2018 return. So again, hopefully this was helpful, guys. Do your best to stay off media as far as I'm concerned. Like, there's so much crap out there. It's getting beyond frustrating. I mean, I'm getting emails from companies. That do like programming or like workout tracking stuff, and now they're experts and saying, hey, we're going to do a webinar on helping you navigate these things. Don't waste your time, guys. Look, I'm not trying to be arrogant here, but the information that we've put out is as simple and straightforward as we can, trying to get rid of all the other crap. And as information continues to change, we're going to do our best to keep everybody up to date. Keep everybody updated. Sorry. All right, I hope you guys have a great Saturday, or whenever you watch this, and stay healthy and good luck. Thank you.