💰SBA Loan Stimulus Package EXPLAINED 2020 | SBA Loans Explained - YouTube

All right, welcome everyone today I've got a special guest we're gonna be talking about the SBA loan forgiveness some tax credits and cool stuff

This is my father-in-law Jeff McMullen Jeff. Thanks for jumping on here with me today

Great to be here with you. This is a

wonderful topic

I've been addressing questions from clients all day long and all weekend long as it relates to this as we had this bill signed on

last Friday and it

It contains a lot of stuff in this field

So we'll see if we can cover some of the things that he'd be most applicable to your listeners

Perfect. So anyway, so he's a CPA and we were chatting last night and he was telling me about some of these tax credits

So this SBA loan forgiveness, if you're a business owner this pertains to you you have less than 500 employees

Which most of you watching this more than likely fall in that category?

So when he was telling me this I was like man, this is huge for any business right now

So I thought you know to my jumping on here sharing some of the different insights

He did a full on trainings like 90 minutes long

With all his clients. I listen to this morning

And so what I did was kind of like, okay

I pulled out some of the the key points for you guys that we can go through and discuss

so the first one let's chat about kind of some of these SBA loans and

How they can potentially be completely forgiven to help companies get through this difficult time right now

well, the SBA has always been in the business of offering loans for

disaster relief situations

and so what they've done is they've had those existing loans and now they've added a an

addition or layer upon those loans that are specific to this whole

coronavirus and over nineteen

Implications that have we've all incurred here

Trying to help these small businesses

Keep their doors open keep people paid and the whole purpose of all of this is just to keep payroll flowing

particularly in situations where individuals have either

Had to close their doors because some of the restrictions that the governments have placed on us

Or have suffered a great reduction in their revenue stream, so

from what I

Kind of just like cliffnotes of this part of it

Basically, what they'll do is if you do not lay off any employees because the whole idea this is to you know

Avoid unemployment rates going through the roof

So what they do from what I understand is they take a look at what your payroll on average was in 2019

Across all the months and then you can get a loan of up to two and a half times

Whatever the monthly payroll is. So let's say your monthly payout payroll is 100 grand then 2 and 1/2 times. That would be

$250,000 loan

That could potentially be completely forgiven. If you do not lay off any of those employees or reduce their salary and wages, correct?

That's right. And so if you've gotten a loan for

$250,000

There again, that's two and a half times your average monthly payroll for

2019 assuming you're in business for 2019 and there are provisions for those people who are not in business for all of

2019 and those get kind of detailed and so we'll bypass those

but if you've got that low and say for

$250,000 you can use those funds for

Payroll, and for other costs it's not used exclusively for payroll so you can use it to pay your rent to pay your utility bills

in in my terms, basically to keep the doors open and business going now you can't use it for

Executive excess compensation you can't use it to expand your business to advertise and to grow your business

It's intended to just keep life moving their business

Gotcha

Cool. Ok, and then another key point that I pulled out of the trans

I was listening through to it was this tax credit and

So kind of going to this and I don't know I like the differences between the SBA loan the tax credit

But from what I understand is if during this time

your business had a completely shut doors because maybe it's a physical location or

Maybe you didn't have to shut your doors but your revenues from this time last year dropped by 50% or more

Because of the whole situation of everything that's going on

And you can have some sort of tax credit

Is that kind of anyway kind of kind of dive in and explain that a little bit. Okay, and so

Before I get too far into that

Let me go back and rest a little bit more on the SBA loan because it does tie into this tax credit side of things

So if you've got the SBA loan

and once the dust settles on this we give back to business you can go to the SBA and request that that loan be

forgiven and that

Loan can be forgiven up to 100% assuming as you mentioned earlier that your payroll costs and the number of employees

Has stayed consistent through this period of time as to what it was during

2019 so if you had 10 employees in 2019 and you've got 10 employees throughout this process in

2020 and you've paid them the same amount of money as what you did in 19

then you can have a hundred percent of that loan forgiven if however you

Cut your workforce back and say you've kind of backed by 25 percent

So you're left with 75 percent of your employees or 75 percent of your wages?

during

2020 during these this typical challenging times, then you can have 75 percent of that loan forgiven rather than the full amount

Gotcha. Now how does that come into play with these credits? The credits are set up

and

It's not an either/or situation, but there is a balancing act between them. So, let's assume four minutes do you have

prior to this process of getting a loan you've continued to keep people on your payroll you can now go through and

Based upon certain limits as you file your next payroll tax reports

receive a

credit against your payroll taxes

assuming that you have kept people

employed

and that your

Business has either been closed down because of government regulations or inside

Situations that are or as you mentioned your revenues have decreased by 50 percent

So once you're in that situation when you file your next payroll tax reports

You can get a credit against those payroll taxes now. That's a credit only against the employers portion of FICA

now on their payroll taxes

as an employer you're paying half of half of the payroll tax and the other half is being withheld from the employees paycheck and

Then you have the typical federal and/or state

Withholding that has withheld from employees paycheck the withholding still needs to be remitted

The it's the payroll tax side of things that can be reduced by up to fifty percent of an employee's

compensation during this period of time and so you'll want to keep track of

compensation being paid to employees or employees who really aren't working or who have been reduced in their

number of hours

okay, so

Is that is that apply I guess for the next couple of months or is it for the entire corridor or?

What's the time period on that? It'll definitely be for this first quarter of

2020. Okay, it'll likely continue on into the next quarter

so we don't have I

Unfortunately don't have an answer directly for you there

But it'll apply for at least the next quarter or two on which you'll be able to

Apply for those credits and that's a way to get that money in your pocket or keep money in your business

Without waiting for a loan now actually minute ago about the loan forgiveness provisions in the SBA loans

To the extent you've taken the credit on your payroll taxes, then the amount of the loan that is forgiven

Assuming you get a loan will be reduced the forgiveness amount will be reduced by the credits

So there's not an opportunity to get ball get the credit and also a forgiveness on the loan. Gotcha

Okay, so they weren't kind of together on that. They do. Yeah. All right. Well anyway

before we move on to the kind of the next topic here anything else you

Like to add on like the SBA loans or this tax credit right here

You know the the SBA loans, it's really interesting the the initial

Disaster recovery loans that were provided by the SBA you were required to file online to get those loans

With this new level that is provided for us now

You actually have an opportunity to go to your lending institution to work through them to get those loans. And so

The SBA is going to be completely swamped with these loan applications

So it's important that if you're in a position to where you can utilize those loans and be beneficial for you to do that

Then get in line with your banker and lender and get those loans in process

The other

information on here

Let's assume for a minute that you do cut back your wages and your payroll

During these difficult times and you go out and get this loan

but you want to be forgiving of a hundred percent of the loan if you

Reinstate your wages and your employees before June 30th, then you can get up to that 100 percent

reduction or forgiveness in your loan

Okay, there's provisions there and here again those loan funds can be used

to pay rent

Utilities and those types of things I've had several clients that have said hey, I I am the landlord. I've got people who

are operating businesses in my buildings or commercial real estate and

They're coming to me saying I can't pay my rent

Well as a landlord

We're instructing our landlords to encourage those

individuals that are their tenants to go out and get these loans so that they can pay the rap because the landlord's don't have any

Recourse on this they don't have any opportunity to go to the the government say pay us for this rent that we're missing young

Yeah, not totally that makes sense

So anyway, let's move in kind of towards. I know you guys were discussed

I mean, there's obviously a lot of things going on here. There's a lot more that we'll probably not even get into in this video

But let's talk a little bit about

Those maybe nearing retirement, or maybe they only they need a little bit of a personal type loan themselves with this Roth IRA

So if you have a Roth IRA

which I've talked about here on the channel before and the benefits to that but typically in the past we'll

Normally always you have a penalty if you pull money out

Before you're fifty nine and a half

Whereas now they're allowing you to I think it's pull out as much as a hundred thousand dollars with no penalty. Is that correct, right?

And so what they've done is they for individuals that are impacted on this that have got money in retirement

and this applies to

IRAs and retirement plans not specifically just to Roth IRAs

And so there's a little bit of a difference in here

But if you have just a regular IRA in which you have taken a tax deduction

When you put money into that IRA or you've got a 401k plan

You can now go and pull that money pull up to $100,000 out of the IRA or out of your 401k

without that 10% penalty

Now typically when you pull money out of those

You're subject to the 10% penalty. Plus that income is subject to your income tax

And so you'll pay income tax on that plus 10% penalty. So the 10% penalty is waived and

If you pay back that

Money that you've taken out within the next three years. You will not have to pay tax on that money

So you can pull it out

But you do have to pay it back within that three-year period in order to avoid the taxes on it

another key provision in there is not only

Are those that we talked about but it's also the opportunity that as you pull that money out the income is subject to tax

over a three-year period

so if you pull

$100,000 out you'll pay tax on thirty three thousand dollars of it in

2020 another thirty three thousand and twenty twenty-one and the other thirty three thousand dollars in 2022

Assuming you don't pay those those funds back. Yeah, because what can happen is if you took all that hundred thousand dollars out now and

Later that onto your income. It could push you into some higher tax brackets

so this is a way to

Bring that down to the point where it doesn't push you into those higher tax brackets. That's a tax

That's nice

now

Obviously if you're watching this, that's probably more of like a necessity

basis because if you've got your money and some of these retirement funds and there are different index funds mutual funds which would probably

sunk down

It's probably not super wise to pull that money out right now

But if it's a necessity and it's gonna help you out then obviously then that's why it's there. So

So yeah, that's a provision there. No, I'm gonna sidetrack this just a little bit your honor not that the

Value of our retirement funds that are invested in the stock market of marketable securities many of us have separate a decrease in those values

Jason you started off talking about Roth IRAs Roth IRAs are those

Funds that we have contributed into those IRAs for which we didn't take a tax deduction when that money went into the IRAs

And so when we pull those money out of a Roth IRA, we don't ever have to pay

tax on that money because it's been taxed once and we don't ever have to pay tax on the earnings on those funds so a

Roth IRA is a great vehicle

In many ways now you may be in a situation with the reduction in your retirement plan money. That is in a regular IRA

to now may be the time to consider converting that regular of those regular IRA funds to a Roth IRA now the

Consequences of those is that as you pull them out of your regular IRA?

As we talked about to go is you're gonna pay income tax on those funds

but if you're pulling in those

Funds out at a reduced amount since the values have gone down now is the time to move them into a Roth IRA

so that your tax

consequences of

Transferring them from a regular IRA to a Roth IRA are less than what they otherwise will be and as we hope that this market

Goes back up in value and that be spread out over the next three years, right?

Well, it's a little different provision on that. Okay, it could it could be

Yeah you I have not looked into this but you're raising a good question

if you pull that hundred thousand dollars out or up to that hundred thousand dollars out that you

Pay tax on you might be able to put that money back into a Roth IRA

But I I suspect they will likely tax that that they might be able to spread that out over three year period gotcha. Gotcha

Well, it's all interesting stuff guys

so in anything else

I mean we hit kind of the core right here SBA loans how they can be forgiven some of these tax credits

Through the payroll tax on the business side of things

also some of these

Retirement type plans how you can access that money and the difference, you know stipulations that are put in place there

Any other key things that maybe you've had clients keep asking you about that. You're like man

This is a hot point that we have covered that would be beneficial for people to know about right now

There are gonna be some businesses out there that just can't keep their doors open there. People are gonna be fired

They're gonna be furloughed

They're gonna be let go they may not bring them back into business at all

For those individuals that have been laid off in that situation. There's two key things that the government has done in these tax provisions

One is they've increased the unemployment insurance that somebody can claim and give benefits for right away

They've increased that by $600 a week and size of things. So if somebody's been laid off they can go file for unemployment

Start collecting on that instantly and in addition to the state unemployment benefits, they can get another $600 a week on that

So there's some key provisions there to help those people that have been laid off

So if you're an employer that has to have have let people go

And there's some help out there for those individuals

The other thing is we've all heard about these stimulus checks that are going to go out to too many individuals

$1,200 for

individual

$2,400 for a married couple and then

$500 for their dependent children, and so those provisions are out there

There's some key things on those is that if you're married and you've got children

Those children that are entitled to about $500 or actually that goes into the parents

So the parents that are entitled to collect that $500 for their children that is limited to children who are age

16 and under is you have to be under age 17. So 16 and under

Who?

So you've got some some funds there that are going to be made available to that

those are some of the key things there's other provisions in here that relate to business owners that apply this bill is full of

Other provisions, but those are the key key ones. They're awesome

Well, Jeff, I know you've been super busy today, so I don't want to take up any more of your time. But thank you

So much for jumping on here sharing some of the stuff with us

and if you guys have a question specifically drop it down in the comments and

If you know if you want to get in contact with him and work with them just reach out to me

I'll kind of filter those on a case-by-case basis, but

Anyway, thank you so much for joining us here today

Appreciate the opportunity best wishes to everybody and stay healthy through all this. Alright. See you guys