Founder Sara Khaki of Atlanta Divorce Law Group recently hosted Tax Attorney Jason Wiggam to discuss alternative small business relief programs including the Employee Tax Retention Program, the Main Street Lending Program, and the 2nd phase of PPP lending.
Sara Khaki – Let’s in response to the support we wanna give to our community of small business owners and I am really excited tonight to have my good friend Jason Wiggam, join me again. Jason is an a very well known an amazing tax attorney here in Atlanta. He’s also the co founder and partner of Wiggam and gear and Jason has his LLM in tax law firm, which is the master’s in tax, from NYU, so it’s always a pleasure to have him because he’s really my go to person, for all things, tax, SBA funding and all the PPP craze it’s been going on. Jason thank you so much for joining me again.
Jason Wiggam – Yeah thanks for having me, Sara.
Sara – Absolutely. So, all right. Last time you and I spoke, we basically you gave us an hour consult on the PPP, and it was right before everything went crazy and everything did go crazy and I think you gave some amazing advice. Today is April 20th, 2020 and it’s important to note the date, because things are changing every day, and whatever we discuss, could there could be some changes to it made in the next day or two. But basically Jason’s here to give us the most updated relevant information and just from myself going to Jason, relying on him to give support to a lot of the small business owner clients of Atlanta Divorce Law Group and a lot of our friends and family, and all business owners and myself included. Which I’ve really learned from Jason is that the PPP craze left us all, leaving a lot of other things on the table or not fully analyzing all the other options and opportunities and resources that the government put out for us. So tonight we’re going to go over those, so he missed out on the PPP, we’ll talk about if there’ll be funding, more funding or not that’ll come up. But we be first wanted to just really share some information about the employee tax retention tax credit, the main street lending program, and also some other local county programs that’ve been offered and a lot of us have been missing out on them or haven’t really spent the time to fund it because PPP was the coolest kid in town. It continues to be so. But I think, Jason you’ve given me some very valuable information that I’ve shared with business owner clients and I wanted to extend that to our entire community. So, let’s start first with the payroll tax credit benefit. And can you kind of give us a highlight of that and why are so many people overlooking this one.
Jason – Yeah, so the the employer attention credit, which is a payroll tax credit was included in the cares act. And the stimulus bill and didn’t get as much attention as the PPP loan or economic injury disaster loan benefit. And the reason as you acknowledge the one or the other, the PPP or the employer retention credit. So I think a lot of people deserved to go for the PPP. So the employee retention credit is good if you didn’t get the PPP. I think I should quickly mention that it looks like Congress was gonna add more PPP.
Sara – Yeah.
Jason – But I read, not a political prognosticator or anything it’s just what I read in the news today was 300 billion for PPP, additional 50 billion for economic injury disaster loans. So obviously if someone missed out on that as upset or disappointed. I would, you know, keep your place in line or if you didn’t apply go ahead and apply if that’s what you need to do. But, you should also check out the employer attention credit. So, it is a payroll tax credit. And I’m sorry for shaking the desk there. So, it’s a little complicated, nothing in tax law very few things in tax law. Are are not complicated right? They’re usually very complicated not simple. Someone tried to make it simple. Basically you can get up to a $$5000 per an employee payroll tax credit. And So what’s a tax credit? It is a free payment from the government basically. It will reduce your tax liability dollar for dollar. so when you’re an employer, you’re responsible for half of the employees Social Security and Medicare the, it’s referred to as FICA taxes. And then the employee pays half, and then their income tax withholding. So that’s all are what are considered payroll taxes. So you can get a $$5000 per employee tax credit, from this employee retention credit. How it works is, it is 50% of qualifying and wages, so that means you have, if the employee is paid $$10000. You can get the credit, you’re eligible for it from March, 12 of this year through the end of the year. So first, second, third, and fourth quarters of 2020. And how do you qualify? Well, there are two ways, First, if you are in any, they look at it like quarter by quarter. So, we’re currently in the second quarter. First quarter is January 1 through March, the end of March. Second quarter April 1 to the end of June. Third quarter July 1 through the end of September and then the fourth quarter October through the end of the year. So we’re in the second quarter, First, if the jurisdiction that your business resides in and had a stay at home order or some kind of governmental order that, you know, partially suspending your business or fully suspended it, you’re eligible. So, here in Georgia, in the city of Atlanta everyone was eligible for the first and second quarters, I believe. I’m in the city of Atlanta, and they are earlier in the States. So,
Sara – Yeah, we got news today that may shake things up a little bit with reopening.
Jason – I don’t think the third or fourth quarter gonna work on that one. So the other way to qualify is, the first day of the quarter, the revenues were down 50% year over year, you’re now eligible. So you can qualify either way, with a stay at home order, or to decline in revenues once you
Sara – Weather you have to be both declining revenues and a stay at home order one or the other, we’ll do.
Jason – Right, exactly. So, once you get the declining revenues qualification you keep it until your revenues are 80% of the prior year. So it’s possible one could qualify and then keep it to the end of the year. And so the goal would be to try to get, you know, $5000 per employee.
Sara – Because that’s the cap, it’s $5000 and 50% of their wages per quarter, whichever is the lesser of the two.
Jason – Yeah. 5000 total not not per quarter so if you, you know if you got five and second quarter for you know, Joe, the employee named Joe, you don’t get it for Joe in the next quarter.
Sara – Right
Jason – You know, but if you only got 2000 for Joe in this quarter, and then you could get 3000 in the next quarter. So the interesting thing about it is you can get the benefit now, so you could just stop paying your payroll taxes. You know, typically you’re on payroll, your payroll company that you use will pull the funds, out of your bank account on the same day that net payroll is taken out to pay the employees. So you could ask them to stop doing that. Because it offsets the entire payroll tax liability, not just the employer shared that offsets everything. And if the credit exceeds your tax liability, which is really possible for a lot of people, they will refund the money to you.
Sara – So then you can actually get cash back from the government.
Jason – Yeah, so if your payroll tax liability was $5000 for the employee retention credit was $15000 for the quarter, you would get a $10000 check from the IRS. And so, for a lot of people, they were paying wages on March 12, and they were, they’re eligible through today. So you’re talking to first and second quarter. For the first quarter returns due by the end of April. My payroll tax providers already filed my law firms returns so it’s highly possible. You know there’s as has already been filed, you know, teed up to look at amending or if it hasn’t been filed yet claiming it. Yeah, so that’s,
Sara – You can get this NPP it’s one or the other, Correct?
Jason – Correct, yeah. So in what situations, would you wanna do this over the PPP I guess? Cause it, for most people, I think the PPP will be better. So when would the employee retention credit be better? Well if you, The PPP is based off of your payroll for the last year or a lot of banks did 2019 is the measuring stick. So, if your payroll now, is a lot larger than average. That one year average, It’s possible this could be better you know if you hired a lot of employees in the fourth quarter.
Sara – First quarter
Jason – Yeah, first quarter.
Sara – Yeah it’s been an interesting thing Jason the SBA guidelines I believe it says the rolling 12 months since all this has been happening but really the bank, the banks and the lenders, when you’re applying for PPP they’re really just looking for the 12 months of 2019. And they’re not really looking for rolling 12 months. So somebody had, if you want to go to your bank and start educating them on the SBA guidelines and say no I should get the higher amount because my average if you look at my first quarter of 2020 is hired, some of them pay attention, some of them won’t, it’s also crazy that you probably just roll with it. But for some that the first quarter of 2020 to your point, made all this new hires and their average went above what the average was from 2019, this could actually be the better program than PPP.
Jason – Yeah, possibly definitely, it would need to do the math to see. Cause you’re one to offer, one you can get the other. You can still do the EIDL economic injury disaster loan if you do the employee retention credit. So if you did the employee retention credit, I would definitely do the $10000 grant, with the EIDL program. You know so, other scenarios where it could be better if if you know you’re going to have a payroll tax liability, so the, you know, my area of practice is tax resolution out a lot of people who can’t pay their taxes are unable to or haven’t filed payroll tax penalties are insane. They charge late deposit penalties, late payment penalties. So those can combine to be anywhere from like 30 to 50% of the liability. And then they charge interest on unpaid tax and penalties. While the interest rate is currently 5% next quarter, it will be 3%. You know, so it’s low. It’s still a lot of money. So, you know, you get those like quote and quote savings too with the payroll tax credit, because it’s a free payment on a tax liability you weren’t going to pay. I still think though the PPP, if you’re using the funds to pay payroll, you would use it to pay your payroll taxes too. so it’s probably still better, but you know I would check. The other situation would be if you don’t think you’re going to be able to get forgiveness with the PPP so let’s say you had to lay off a lot of people and
Sara – Yeah if you’ve downsized and you probably don’t plan to expand for a while again.
Jason – Yeah, I mean I guess you could like hire everyone back pay them three weeks and then lay them off again. But you know I talked to a company, it’s an events company, and, you know, they’re not expecting to do an event for a very long time like possibly until you know the first quarter of 2021. So they, you know, laid off like half their staff quite a lot them I guess. And, you know, the issue as they received the PPP, and how forgiveness is set up, if your headcount is decreased the amount of forgiveness decreases pro rata. And then if pay has decreased by at least 25%, it reduces the forgiveness too so in his case, you know, our our concern is making sure he gets the maximum amount of forgiveness and planning around that but you know if you know you’re not gonna be able to get it. Maybe just do the employer retention credit because then, there is no strings attached. You get it as long as you’re paying wages so to employees. And so those are
Sara – Just to point out the PPP forgiveness portion has a rehiring requirement of how many people you have on payroll whereas this one doesn’t have that requirement.
Jason – Right. Yeah, I mean you could. I guess you could not rehire with the PPP and just repay the loan,
Sara – Right,
Jason – Or get like partial forgiveness. But yeah, there are no strings. No requirement like that with the employee retention credits. So that’s another benefit to it. And for businesses that is in that scenario, where they’re not sure if they’re gonna bring everyone back, they probably qualify for the, you know, 50% reduction in revenue. So I think they’ll probably get the credit through the end of the year, or at least for, you know, maybe the definitely the second quarter, probably the third quarter too. And then yeah, who knows, maybe I hope these, I hope things start to return back to normal, but you know, if stay at home orders extends further, credit would extend further too.
Sara – So we’re on the topic of the employee headcount, we actually just got a question that popped up, and it says, Is it both a 25% pay reduction in the headcount that you take into consideration for forgiveness, or is it one or the other.
Jason – It’s both.
Sara – Yeah.
Sara – So you have to spend that that PPP 25% of it has to go towards payroll and you have to keep the headcount?
Jason – Yeah that 75% thing was added later. So, the idea there is you can only allocate 25% for rent utilities, I think the reason they did that was because smart people like us, or anyone probably would have said okay if I can’t pay the employees I’ll just prepay my rent for, you know, a year or two or whatever right or prepay utilities. So I think it was important for them to put a cap on that. Because it was designed to keep people employed. But yeah, out of that 75% of the loan that is being used for payroll. If you want that payroll portion forgiven in full, you have to meet the headcount reduction requirement, And the pay requirement. So pay can be reduced just not more than 25%. And look if you don’t even meet these fully it’s, it’s just a pro rata reduction so it’s not like you lose it completely, you know, but you still want any surprises. If you’re stuck with a two year loan, you want to make sure you’re able to repay it.
Sara – Yeah, and that’s for the PPP that requirement is not in for the payroll retention tax credit.
Jason – Correct, yeah. And like I said you can you get this now, you would just stop paying your payroll taxes which probably done for like if you are a successfully human being who plays by the rules, paying not paying your taxes probably sounds wild to you,
Sara – Yeah.
Jason – But I represent people all the time who willingly don’t pay the taxes. So you’re in good hands.
Sara – And some people may be eligible for this already from Q1, Correct? They mahybe eligible for deposit already.
Jason – Correct, yeah they probably already paid the payroll tax funds, but you can at least get the benefit when the first quarter return is filed or we can amend it, you know, we could look into that.
Sara – Okay, so that’s with the payroll tax credit, let’s talk about another program that’s designed for a little bit more midsize business small to midsize businesses which is the main street lending program, which it’s not getting any attention at all but for some successful businesses who are hurting, who were successful and are hurting bad right now it’s huge. Can you go over the highlights?
Jason – Yeah, and I think the reason it’s not being advertised as much currently as because we’re still PPP madness.
Sara – Yeah
Jason – And I think banks are very excited about this program, I think you’re gonna see banker, it’s administered by banks. So you’re gonna see a lot of commercial bankers, start pushing this on their clients, I think.
Sara – So this is a loan backed by the Federal Reserve?
Jason – Yes,
Sara – Given to you or presented to you by the banks.
Jason – Yeah, if you could approach them. My understanding is they won’t be available until maybe mid May. The banks are currently negotiating with the Federal Reserve, and the Federal Reserve is going to issue guidance like they announced the program, put out terms, and then is being worked behind the scenes currently is my understanding. So it is a two long programs, one for like a brand new loan and then one that will sort of refinance your existing debt and give you new money, 600 billion, so a very large program, the qualifications are, yeah, you can do a much larger business and the PPP So, up to $10000 employees and 2.4, 2.5 billion in revenue. So definitely, small and medium sized companies. Right now the minimum loan amount is $1 million. I read in the news the banks are negotiating to get that down to 100,000, which I think would be very good. It’s a four year term adjustable rate, so it’s the Federal Reserve rate plus 2.5 to 4% interest. I don’t know if that’s gonna be like the PPP where in the cares act it’s up to, like a 4% interest rate and then the SBA settled on 1%. So I don’t know if the Federal Reserve will pick something in that range or banks are going to compete on that rate, but the Federal Reserve rate is currently zero, so it’s going to be 2.5 to 4% payments, year. Interest still occurs, but you don’t have to make me pay. It is an unsecured loan, no personal guarantee. And it’s there is a fee there’s a 1% origination fee so how do you determine, you know what you qualify for? A little complicated but it’s four times the business’s 2019 EBITDA, which stands for earnings before interest, taxes depreciation and amortization. So what I would say is start with your P&L, and then you add back those items or get with your accountant CPA bookkeeper and they can help you. But in simplest terms, if someone earned 250,000 in net income in 2019, four times that would be a million. so you need to earn at least 250, to qualify.
Sara – So as it stands now and we have somebody asking what it’s called. This is the main street lending program, that’s coming from the Federal Reserve presented through the banks. So, it’s the minimum rate now is your net in rough terms your net for 2019 P&L must have been a minimum of 250,000.
Jason – Yeah, could be saying what could be lower, because of how you EBITDA works, its earnings before interest, taxes depreciation amortization, so if you have any of those items you can add them back right. Keep it simple, we’ll say 250 today.
Sara – Right
Jason – So, you know, to be four times, they also look at your existing debt too. so if you have any existing debt that could potentially screw up the CAC. And then the max loan amount is 25 million, so some some pretty successful businesses will qualify, just looking at it I think the policy was, we want to give money to people that were successful, because we think they will take the money they will invest it, they will do good things with it.
Sara – They will benefit the economy.
Jason – Yeah, so
Sara – To that point Jason you pointed out something really important to me about it when you first told me which is this money cannot be used to pay debt for lines of credit.
Jason – That’s correct. Yeah. So you have to attest to the following things I’m just going to read it because I won’t get it right if I try to off the top of my head. The company attest that the financing is due to the pandemic. The proceeds of the loan they’ll use reasonable efforts to maintain payroll and retain employees doesn’t appear to be a requirement is that reasonable efforts, I mean obviously with that amount of money I think you, you would if you’re trying to grow your business that you meet the EBITDA leverage condition. And that you will follow the compensation stock repurchase and capital distribution restrictions that were contained in the cares act so. For most people, that’s not going to matter but for larger businesses that’s something they would need to look at, it’s complicated so I don’t want to get in to it today. But yeah your question was, can you, you couldn’t refinance debt? You can’t with the new money program, the other program, there is the ability to do so. But the idea is it’s new money they want you to do new things with it right not, and you also have to attest that you’re not going to cancel your credit lines and do some other things too. But, you know, if, like I talked to a business owner, he grows via acquisition. And so he views this as a way to go out and acquire a bunch of new companies that, you know, maybe now the cheaper than they were years ago, and the cost of the loan is so cheap, that it will be
Sara – This is like incredibly cheap money without any personal guarantee we’re talking up to possibly a million dollar loan, one year deferment, four year term and anywhere from was it 2.5 to 4% interest rate, that’s deferred for the first year I mean that’s really insane, but I think it’s also important to know that, when you analyse it as a business owner, do you have the infrastructure? Do you have the financial resources? or the investment savviness, to get that mind that cheap money and get it to work for you. Within a year before the interest starts kicking in. Otherwise, you have some large monthly payments to start making after a year on it. which I understand for some people, they’re probably at the book they’re in right now, they’re like, give me all the resources and then I’ll figure it out once the dust settles and I’ve gotten myself, you know, to a safe harbour. But I also think that, you know, it’s just important to be mindful of any debt we accrue during this time. And we use it to grow and, because that’s really what this one’s made for. Now Jason Do you think there’s any hope, because a lot of people will not have had meat that 250,000, or, today we’re calling it the net from the P&L but they really need a bookkeeper or CPA or tax attorney to go and look at the numbers and make sure that they’re getting the right calculation, but a lot of people will meet that requirement of what they actually brought in last year. Do you think there’s any hope that can reduce that requirement and create smaller sized loans with those same benefits for smaller business owners?
Jason – I mean that that’s what the financial institutions want and I think they are pretty effective at lobbying but you know I have no idea if it was lowered to 100,000, you could have 25,000 net income to qualify so I could see the requirements changing I could also see the personal guarantee requirement, changing you know maybe it’s up to a certain amount you don’t have to. This is one of those where our disclaimer comes into play you know we’re reading information as it currently exists today, you know, the PPP things changed a lot over the next two or three weeks between the time we did the last video so,
Sara – Right
Jason – So yeah I think just be on the lookout and to Sarah’s point too yeah it’s a real bomb and so is forgiveness right, it’s not a grant so you’re gonna have to repay it, so if you have a plan, which you’re gonna use the money for, you know and how are we, how are you gonna invest it into your business to grow your business to repay the debt. But yeah, otherwise I agree with everything you said.
Sara – We have, we have a good question here, Jason and I’ll let you take a stab at this just from a noty. I don’t think you need to put your tax attorney hat on, but maybe just a bit business owner hats on. Interested to hear what we’re regarding theoretical purposes to use this funds received from Main Street lending. You and I had a side conversation about this last week, so what are you seeing some of your larger siever business owners that are investing what are their plans for what they would like to do with this fun with these funds.
Jason – Yeah, I mean I have talked to a few like I already mentioned that they grow via acquisitions so they roll up smaller competitors, smaller companies, you know, maybe like a solar bomb and popper or a smaller company. One guy has some partners that are much smaller like, he is the majority owner but he has some small partners in the business that has been looking to buy them out for a while and didn’t have the means to do so and now he does. I could see people investing in, you know, real estate,
Sara – Yeah commercial prperty.
Jason – Yeah, I mean, you know, it essentially whatever they were doing to grow their business before this happens. But yeah, I think a lot of savvy people will use the money to invest and acquire assets while they’re cheap, whatever, whether that’s acquiring another business or, you know, maybe marketing spend, you know, anything like that I mean I, there are restrictions on paying yourself, you know, and I don’t know why you would want to take out debt to compensate yourself. Anyways, you know, what’s the point you’re just, you know, mortgaging your future. But, you know, otherwise I think investing in anything new. Any anything beneficial for the business I mean, if the questioner has something in mind I’m happy to return it.
Sara – But I think a lot of atorneys this is a or any professional services where we are working virtual and we do have actual office spaces that we make clients, out of and we know for flaunting. Despite COVID-19, my office space isn’t going anywhere. Right?
Jason – Agreed, same here
Sara – And, yeah, and so it could be an opportunity to stop paying rent and take on a commercial real estate mortgage buy a building.
Jason – Yeah, I mean I don’t think I would wanna own a building on a four year note, you know, if I did that I would want to refinance it at the end term. you know, but I don’t see why any bank wouldn’t as long as you have the income to support it and you know, you have equity in the asset, I don’t see why they wouldn’t do that. It’s a good bet for them. Yeah, for me, I was thinking about what I would use a million dollars for, I think it’d be very difficult for me to spend a million dollars from my law firm, unless I did buy real estate. I mean I could, you know, there’s not a million dollars of marketing spin. I guess I could hire accelerate hiring plans, you know I could hire. We’re looking to hire senior associate. That’s our next hire so I could just go ahead and do it. You know so accelerating future plans. But even then, you know, probably not
Sara – What do yu think about the prospect of obviously, I agree with you a lot of law firms are sizes, we wouldn’t have enough opportunity to do anything with a million dollars, but if there is a portion of it maybe hold on to the rest of the principle to pay it back. If there is no prepayment penalties.
Jason – Yeah, there’s no prepayment, Yeah, you can do that and no prepayment penalties, I mean it’s very cheap, so yeah I guess from the standpoint of cash is king and you want to survive, get the loan, and then set in a separate account and you know don’t use it unless you absolutely need to and then, you know, hopefully, you don’t need it and you pay it back or partially use it so I like that idea.
Sara – Let’s talk about some small local county programs that are also pretty good loans that they came and left before we even found out about them or we’ve been not saying
Jason – If you’re here in the cap, during a
Sara – It has put us in a complete windstorm and there was a lot of other things on the table that we weren’t paying attention to it. And this isn’t to say boohoo but it’s to say, keep your ears and eyes sharp, because, don’t be, and there’s there’s a lot of other stuff going on, that people are looking at for, because of the PPP.
Jason – Yeah. And speaking of that, like I’ve something I’ve struggled with is, you know, I pay everything on time and early, you know I try to treat people, how I want to be treated, It’s like a karma thing. But I know people that are engaged in activities which help them financially such as deferring their mortgage or different credit cards or renegotiating with vendors, you know, so I’ve, I’ve sort of debated with myself if it’s worth it. I ultimately decided to renegotiate with vendors but not deferred debt. You know, I can pay. But yeah, I would put like that in this category, so there there are two here in Georgia in Fulton County the cap County, there are some loan programmes for businesses located in those counties, you can go to aceloans.com that’s A-C-E loans., I’m sorry.org, not .COM. aceloans.org. Literally I found out about this I think late last week and Fulton County was open and now it’s closed. But it’s loans, between 15 and $50,000 with terms of like three to 10 years. There are a lot of requirements for the cap loan but not not a bad deal if you’re a business and either County, should definitely check them out. There was a city of Atlanta loan that lasted with event, invest Atlanta a few weeks so it’s kind of in that category. But yeah, I think just taking advantage of opportunities when they arise I agree with you.
Sara – Yeah. And if you’re not in Georgia if you’re whatever state you’re in and you’re watching this, you may want to just start looking up the different county or city resources and see what they’re the county in the city are offering, in addition to the SBA relief programs. Okay, let’s, let’s get back to the most popular kid in the room which is PPP. There’s been, like you said, I’m not a political head neither are you but anybody who turn on the news and see every hour they are this cose, every time we get an update is just, they use a base stronger adjective for close on a much further along on closing the deal. But can you give us the latest update on what you saw on the refunding the second round of the PPP funding.
Jason – Yeah, so it appears, because there’s bipartisan support and because they were negotiating this weekend that by Thursday or Friday, both the Senate and House will pass another stimulus bill including 300 billion for the payroll for the PPP program payroll protection program. Another 50 billion for the economic injury disaster loan program to the SBA, which also ran out of funding around the same time the payroll protection program did. You know, my tips there, they’ve released data on who process loans and that’s most of the companies have to. So, and then I’ve watched it with my clients so the people that received funding that I’ve seen were either very large loans, so I’m gonna a business owners math group, and I’m by far the smallest business, and everyone in the group who got loans well in excess of a million dollars they all got funded. I think large banks prioritised large dollar amounts, which, don’t, don’t blame them was more efficient for them to do so. You know, maybe not like morally or ethically right but I understand why they did it. Smaller local banks, all my clients who use them most of them got funded and then these like third party lenders I talked about before. So, some of the ones I mentioned before, I don’t think they did a very good job, but the ones who did readycapital.com.
Sara – Yeah I stand by ready cap, they were very responsive and very quick.
Jason – In lynda.com Lynda did the highest volume on loans, they’re not a lender, they get paid referral fees to connect people basically am their broker and Lindia was getting a lot of people who are in ready capital. They both have very easy to use portals that you see progress, which is nice.
Sara – Yeah
Jason – And, yeah, I mean, you know, if you’ve already applied, I think I would find out if you’re in line, if not I would go ahead and apply. I think speed is the most important thing here, because you know I haven’t seen, If, what the projections are on the 300 billion but you know coming in, like we had our video we knew the original trots was going to run out like that was known so for me it was important to cast a wide net and you know whoever was first, would be my business and that’s you know what happened. And then, you know, I had a lot of self employed clients who were disappointed, so, if you were self employed you weren’t able to apply until a week later and then the funds ran out. Well, it was a week later, but then the SBA delayed their guidance. So then it ended up, like it was supposed to be Friday and then it was the Monday after, or maybe Tuesday after and then the funds ran out like two days, so they basically all got screwed. So I hope some of those people get funding, because many of them are hurting.
Sara – Some of these and we have a question, somebody said its lendia and what if the other one is ready cat ready C-A-P. Some of these like ready cap, they they got the queue started before they were receiving applications and then they actually honoured their que. Chase did the same thing they started a queue and then they actually honoured their queue. And now the question is the people that you went in on a queue with, are they going to honour their queue, or are they starting restarting the queue? We don’t know
Jason – Company by company and,
Sara – Yeah exactly,
Jason – They might know from their financial.
Sara – The best advice I think you gave on that first video we did when we talk about PPP, and I followed your advice and it really worked out for my benefit is put out as many lines as you can. And don’t rely on put all your eggs in one place. And what I found was, you know, for one company we went with our unknown bank Chase and they took good care of us for the other company, we didn’t have a relationship with Chase but for them and we tried Fargo we put out ready cap before a number of other lines out and Weills Fargo failed us and, you know, ready cap picked us picked it up. So I think that it’s important for people to know to put out as many lines follow Jason’s advice on that, and at the end of the day, I didn’t see any repercussions with that. This really, who gets SBA app number first that matters. Correct?
Jason – Yeah, I mean, what if someone I would be very sceptical of someone that gives you advice, not to move quickly. That’s all I would say there I applied at like four different places. And I actually found out I got the loan, because I went to a local bank. And I had in where I could they would apply for my law firm right away. And so I found out very quickly that I already had an SBA loan number. I had not heard it from the three places I had applied I literally found out from the fourth one. You know, and I apologise to them I was like look guys, if I knew you know I would have obviously not wasted your time. But no one communicated that to me it was very poor and then literally the larger bank is the one who came through I was surprised. You know, but yeah, I mean there were no repercussions for me applying through multiple places you know, I.
Sara – Yeah, I could once, ready cap got our SBA app number secured than Wells Fargo or any other places we have thrown a line out for a second company, they weren’t going to get through anyway didn’t really matter.
Jason – Yeah, so, of the three originals, I didn’t know which one had the loan, you know, it was kind of an odd situation so I started emailing them. And everyone ignored me. And I think it’s because, well the one institution I didn’t have a human being for, I never heard anything and that’s the one gave me the loan. The other two, I was able to find someone to annoy and ask them, and they ignored my emails, I think the reason they did was they were like, sideways is good and we tried to type of work right. You know, but I didn’t get a slap on the wrist you know there was no penalty I think that i think people are just afraid,
Sara – Cause the thing is some bigger banks like Chase and Wells Fargo they had a specific requirement by when you needed to be a customer of theirs with an operating account, most of them was like before February of 2020, you must have had an existing relationship with the state, I was one of the bigger banks. Some of the smaller local banks that are able to get the money a lot quicker because they don’t have all the FDIC regulations on them, they, some of them don’t have that requirement or if they do, you may find a sweet little branch manager, that is willing to work with you, you just, you kind of have to hustle the small banks, while you’re working your you know your lines with the other ones.
Jason – Yeah, and I would have everything put together, not only have your application completed as the payroll records and everything. It’s like the fourth option for me in a local bank. You know the guy’s like, hey, send me the stuff. They have their own form, I had to complete, So I did that quickly but I had everything else I emailed it to him same day, you know, and he was able to submit it like the next morning. You know, so I think it’s just being prepared. I had a lot of clients that were slow, you know, and I think it’s nothing against them personally, I mean I love them but you know I think they were indecision is a problem for them, maybe, you know, but yeah if it’s I mean, from my perspective, I wanted to make sure that you know my law firm was solving it and we wouldn’t have any issues, so you know I was, it was very important for me to act quickly on this. I also wanted to know more what it’s like
Sara – What makes more stories and all the documents so that people can have a list. I found a 2019 P&L to be a lot of the companies want the 2019 P&L. My main banks a lot of banks wanted it. They wanted Payroll tax documents, whether it was Payroll sales documents or Payroll invoices. They wanted, what is it the I940 tax form, am I saying that one right?
Jason – The 940. Yes its not important.
Sara – Sorry, you’re actually the anti. Mr. Government tax
Jason – Now you’re good so yeah I agree with all that, Yeah,
Sara – And then EIN number, the date that organisation was formed, and to Jason’s point, a lot of them will use sort of their own form, but if you have already prepared your SBA app, for the PPP then you can kind of follow up, follow what you’ve already prepared to answer the questions they asked you.
Jason – So I created a spreadsheet like when the Act was passed I just read it and started creating an Excel file, which I edited a lot, by the way, but I completed that ahead of time and then I thought about okay for each, and this is how I approach like an IRS audit or just negotiating with the IRS in general. What document do I need to prove this number, because they’re very formulaic, so if I can prove the number. Each little number to get the outcome I want you know that that’s how you succeed, so here you know I had to prove payroll, gross payroll, and then, you know, because of the hundred thousand dollar per an employee restriction, you have to prove what you pay each person. And then you can include healthcare benefits, so I had to prove you know, what the group health care expense was the last year you can include retirement. And the SBA later clarified it was any type of retirement so like we have the 401k with a profit share and I do, I share profits every year. And it’s, you know, a substantial amount of money, so you know I made sure to include that. And then the reason you had to do the 940 form Sarah, is because you get to include state and local taxes too. So you pay taxes to the feds and to the state of Georgia for unemployment. So that came from there. And you know most banks would do the list of documents to meet those items, but just going in, I was like okay what proves each so like health insurance I had my P&L, I highlighted the line, make it easy for them. And then I went into my health fund, Online account for my health insurance providers, printed off the Billings for last year, like there was a you know billing history. Retirement was easy, there’s a line item on my P&L, but I logged into my 401k administrator account and printing off the contributions I could sort it by whatever timeframe I wanted. And then, just the payroll reports breaking down the payroll by employee and then yes they wanted the payroll tax. So I would include it too I just downloaded all of that I put it in a file, and then whenever I applied it was just dropping whatever files.
Sara – Yeah, cause you actually do end up physically and not physically but uploading these documents virtually virtually to the computer. So it’s good to just have them prepared in a file to go and upload them up. Jason any final thoughts on second round on PPP?
Jason – I would move quickly, you know, I think hopefully it won’t go as fast as it went before but, and look, if you’re in the second round you might be better off because it’s eight weeks from when you get funds they have to spend money, so you know. Maybe the being pushed out some will, there’ll be more guidance you’ll have a better idea of what you need to do, so it’s not the end of the world, but if you if you’re huriedly need the money I’d move quickly. The, and If you’re self employed. You do have to, it’s based on the guidance for self employed individuals is that you have to use your net income from 2019, so you, for self employed you have a schedule C attached your tax return. They do not require you to have your 2019 return file, but you need to prepare because you have to show the Schedule C, and it’s the net income on that form, divided by 12, then multiplied by 2.5, and then it’s the same formula for forgiveness. So the good news is, whatever the number is for the self employed person they’re going to get forgiven. There’s no question there, if they don’t have employees. If they have employees it’s a little bit different but, so, it’s a long way of me saying get your tax return prepared ASAP. And then they required you to prove revenue. We were taking the position that if you have accounting records that should be enough. Guidance indicating statements, so I asked all my clients to send me their bank statements too just in case. And you had to prove your existence in February 2020 so I would have all clients, give me a bank statement for February 2022 too. So I’ve just started putting that together for the self employed, I could see that being a big problem, most of my clients wait until the last minute to file their tax return, because they’re not paying it, you know, and, look I always extend and file the last minute because I hate paying taxes, so I get it. But I would go ahead and get that done if you don’t have it done, you know, hire someone and get on that. Yeah, but other than that I’m having anything if anyone has any questions or needs help looking at these options you can reach me at 4042339800 or email me at J first initial last name right below @wiggamlaw.com, so last name and then G-E-E-R.com.
Sara – And that’s also the website wiggamlaw.com correct?
Jason – That’s correct. Yeah, and obviously we were a firm that does tax resolution, so we dispute alleged tax liabilities that are wrong, And, or we deal with those tax liabilities that are right that just can’t be paid and need to be worked out, and we do bankruptcy too, so.
Sara – Jason Thank you so much, continue to be step up and really be a leader of the community and give so much value back and I know you’ve helped so many people. I’ll just tell you personally, I’ve shared your information and your resources and to help you get in and our last PPP video, with so many family and friends who are business owners and it’s given so many people just something that lessen the overwhelm and that’s really the basis gift is just being so smart and knowing all this tax stuff that overwhelms the rest of us and you can just simplify it, in a way that can be consumed. So thank you so much, and I will have to do this again at some point to talk about forgiveness or any other craziness that comes out of this next round.
Jason – Yeah, I’m sure there will be more stuff so happy to do it and thanks for having me again and have a nice night.
Sara – Absolutely. You too.