To Our Valued Clients and Friends:

Over the past year, we’ve talked a lot about loans from the U.S. Small Business Administration (SBA) under the Paycheck Protection Program (PPP), enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES), signed into law on March 26, 2020.

These loans have been and are being issued to small businesses to help offset losses due to the pandemic and, most importantly, to help employers keep employees on their payrolls.

PPP loans are forgivable to the extent that the loan proceeds are spent on eligible covered expenses within either the 8- or the 24-week period (covered period) immediately following the disbursement of the loan.

PPP borrowers have until 10 months from the last day of their elected covered period to apply for forgiveness of their loans.

Initially, eligible covered expenses were limited to:

A. Payroll and related costs, consisting of:

  • Gross wages, including paid leave for vacations, sick time, parental, family, or medical leave
  • Health insurance costs paid by the employer (employee-paid premiums are not deductible)
  • Employer contributions to retirement and/or profit-sharing plans, such as 401(k)s, etc.


B. Lease/rental payments, so long as the lease or mortgage was in force before February 15, 2020

C. Mortgage interest payments provided the mortgage was entered into prior to February 15, 2020

D. Utilities (later guidance specified that businesses’ internet expenses were eligible as ‘utilities’), provided service began before February 15, 2020

Expansion of eligible covered expenses:

Since that time, SBA New Interim Final Rules (IFRs) and legislative activity via the Consolidated Appropriations Act (CAA), signed into law on December 27, 2020, and the American Rescue Plan Act (ARPA), signed into law on March 11, 2021, has expanded the definition of ‘covered expenses’ to include:

  • Essential supplier costs
  • Personal protective equipment
  • Other expenses incurred in compliance with state-issued safety regulations
  • Property damage from vandalism unreimbursed by insurance


Initially, payroll-related costs had to amount to 75% of PPP loan expenditures; however, this was later modified to 60%.

Changes for self-employed Schedule C filers: 

Initially, self-employed business owners who file Schedule C along with their individual tax returns were permitted only to apply for loan amounts based upon the total of:

  • Payroll-related costs, if the business had employees in addition to the owner, and
  • Net profit, representing “owner compensation.”


However, on March 3, 2021, the SBA issued a New Interim Final Rule (IFR), which provided that self-employed Schedule C filers can now base their PPP Loan amounts on gross income, rather than net profit. This is, at least in part, to allow loan coverage for business operational costs which had previously been permitted for those PPP borrowers who file business tax returns but not to the self-employed business owner.

These newly eligible covered expenses include:

  • Mortgage interest payments
  • Business rent payments
  • Business utility payments, if these are deductible on Schedule C
  • Covered operations expenditures, to the extent they are deductible on Schedule C
  • Covered property damage costs deductible on Schedule C
  • Covered supplier costs deductible on Schedule C
  • Covered worker protection expenses deductible on Schedule C


Unfortunately for those who had already applied for a PPP Round I or Round II Loan, these changes are not retroactive. They are applicable to PPP Loans applied for after the issuance of the IFR only.

Other changes of note:

The IRS ruled in 2020 that, while forgiven PPP loan amounts were not taxable as income, eligible expenses paid with forgiven PPP loan proceeds would not be tax-deductible. Despite pushback from legislators and business leaders, the IRS maintained this position until the enactment of the CAA, which specifically mandated the tax deductibility of such expenses.

An additional change made via the CAA was that previously if a business received both a PPP loan and an Economic Injury Disaster Loan (EIDL), any advance made on the EIDL had to be deducted from the forgivable amount of the PPP loan. Per the CAA, this requirement was rescinded.

These represent the most current changes to the requirements governing forgiveness of PPP loans – if you’ve been reading our emails, you know there have been quite a few SBA New IFRs we’ve reported on.

Next week, we’ll discuss the actual ins and outs of the forgiveness process as it stands at present and revisions to the forgiveness application forms and required documentation.

Stay tuned!

If you have questions on the PPP regarding applying either for a new loan or for forgiveness of an existing loan, please click here to email us directly – we are here to help.

Until next Wednesday –

Peace,

Eric

To Our Valued Clients and Friends:

One significant change for all of us this past year has been the explosion of remote work. Some of you may have already been doing this, even if just part-time, but I’d bet many of us have done a great deal more during the pandemic. And I think that, when the dust settles, we will find that remote work will be part of the “new normal” for a lot more people than it was before COVID-19 hit us.

For my team and me, this has been a relatively easy transition. Every one of us had already worked remotely at some time. We’ve been set up for that potential need since Katrina’s aftermath, and some of my team members, whom I’ll probably never meet in person, live in other states.

The flexibility of remote work is an excellent benefit, of course – and I’ve taken advantage of that. Having been through a bout of COVID-19 myself, I am leery of the city – let’s face it, most people don’t visit New Orleans to behave sensibly.

So, I have spent a lot of the past year working from one of my favorite vacation destinations, Park City, Utah. The scenery is glorious and gives my heart a sense of peace, and I’m an avid skier and mountain biker as well. The wildlife is an inspiration – I “shot” – with my camera, of course! – several deer and other animals while there. 

And I’ve packed up my family with me. My wife, Jennifer, can work remotely and our daughter, Meghan, is taking virtual Junior year courses at Centre College in Danville, Kentucky.

Of course, I love being there. The quiet helps me focus on my work away from the usual distractions and noise. Plus, getting the chance to quarantine with my beloved family has made the challenging time more rewarding. 

But Park City – and working remotely – have their own distractions.  There is something to be said for being a present part of my bustling team. That confidence and busy atmosphere can get lost, a little, when I’m a thousand miles away and I’ve found myself missing being in the office.

Then, when I return home, I miss Park City, it’s quiet and peaceful. The human paradox – we miss what we don’t have at the moment.

The option to work remotely had, of course, been picking up steam before the pandemic hit, but COVID-19 has jet-fueled it. Remote work or WFH,  in some form, either part-time or full-time, is likely here to stay – reduced driving reduces air pollution and of course commute time, and many employees love the flexibility. 

However, it’s necessary to have the proper remote work protocols in place to ensure the workflow doesn’t get disrupted. When all one’s team is working remotely, it becomes more difficult to ensure scheduled tasks are covered when an emergency arises for one or another of the team.

What are your thoughts on remote work over this past year and generally? What peaks and pitfalls have you encountered? And how do you maximize the one and minimize the other?

Please click here to email me directly – I’d love to know your experiences.

Feel free to share this email via the buttons below. 

Until next Wednesday – 

Peace,

Eric

To Our Valued Clients and Friends:

On Wednesday, March 3, 2021, the United States Small Business Administration (SBA) released a new Interim Final Rule (IFR) governing Paycheck Protection Program (PPP) loans for self-employed persons who file a  Schedule C with their individual income tax returns. Such self-employed individuals now may use gross income, from either their 2019 or 2020 Schedule C, rather than net profit, to calculate the loan amount they are eligible for.

Previous guidance held that for individuals filing Schedule C, loans were to cover payroll costs only, defined as the total of employee compensation if the Schedule C business has employees besides the owner, and net profit, representing self-employment earnings. 

The new IFR acknowledges that the prior definition failed to consider fixed and other necessary business expenses, which ought to be considered.

If a self-employed PPP loan applicant has no employees, s/he can calculate the loan amount based on either gross or net income (for most, the former will be more beneficial, naturally!).

If the applicant has additional employees, s/he can calculate the loan amount based upon:

  • Payroll costs (gross wages, employee benefit programs such as employer-paid health insurance, and retirement plans), and
  • Proprietor’s expenses (formerly ‘owner compensation’), based either upon 1) net income, or 2) gross income minus costs reported on lines 14 (employee benefit programs), 19 (pension and profit-sharing plans), and 26 (wages).

Schedule C expenses newly eligible for loan calculations and forgiveness:

  • Mortgage interest payments
  • Business rent payments
  • Business utility payments, if these are deductible on Schedule C
  • Covered operations expenditures, to the extent they are deductible on Schedule C
  • Covered property damage costs deductible on Schedule C
  • Covered supplier costs deductible on Schedule C
  • Covered worker protection expenses deductible on Schedule C

 

However, if using gross income for loan calculations results in a loan amount greater than $150,000, then the borrower will not automatically be deemed to have made the required good-faith certification and may be subject to review by the SBA.

The safe-harbor limit for non-self-employed borrowers to be deemed to have certified their need in good-faith is $2 million. The SBA considers that the self-employed may be more likely than others to have issues with liquidity.

Also, the new IFR allows businesses whose owners have non-fraud felony convictions within the past year to apply for PPP loans – for which they were previously ineligible.

The new guidance applies to both First and Second Round PPP loans – as long as the application is dated after the issuance of this IFR.


New and updated forms:

  • Updated PPP Round I Form 2483.
  • Updated PPP Round II Form 2483-SD.
  • New PPP Round I Form 2483-C for Schedule C applicants.
  • New PPP Round II Form 2483-SD-C for Schedule C applicants.


While the window to apply for PPP Round I or Round II loans is set to expire on March 31, 2021, on March 16, the U.S. House of Representatives passed a bill to extend this window through May 31, 2021. The Senate passed the measure on March 27, 2021; President Biden is expected to sign the legislation.

Stay tuned – we will continue to monitor the PPP and the SBA’s ever-changing guidance.

If you have questions on whether you should apply for a PPP loan, either Round I or Round II, and how to best navigate the process, please click here to email us directly – we are here to help.

Until next Wednesday –

Peace,

Eric

As most of you know, I am committed to a philosophy of life-long learning. It’s exercise for the brain – learning keeps the mind active, supple, and growing, and the benefits spread throughout all aspects of life.

A friend recommended I check out The Feynman Learning Technique; first, I checked out Feynman – was he someone who might know what he was talking about, or was this just a time-waster?

Well, Richard Feynman, Nobel Prize-winning physicist, a man who was building makeshift fuses and repairing radios at the age of 11, who worked on the Manhattan Project, who mastered multiple disciplines (because the world was too interesting to limit himself to one), traveled the world and taught himself numerous languages, is definitely someone who knew how to learn.

And his learning technique is worth pursuing and worth writing about, in my opinion.

How does it work? There are four steps:

  • Step 1: Contemplate teaching the subject you’ve been applying yourself to – to a 12-year-old. Write your explanation out on a blank sheet of paper, using words and concepts a child that age can comprehend. Because it turns out we often use advanced jargon to disguise our lack of thorough understanding. If you can explain the subject in simple words and concepts, you have it down. If not, you don’t.
  • Step 2: Review what you’ve written, and identify the gaps you’ve left in the explanation (they will be there!). It’s filling in those gaps which solidifies our learning of the subject and its concepts and precepts. Go back to your source material; augment those sources with others on the topic. Remember, it’s wiser to be honest – especially with ourselves – than to pretend we know what we don’t. When we’re honest, we minimize the mistakes we make.
  • Step 3: When you’ve filled in those gaps, organize your notes into a story you can tell from the start to the end. Where your explanation is confusing, make sure you can simplify it – remember, your target student is a sixth-grader. If you can’t, go back to your sources again (Step 2) until you can.
  • Step 4: Now, when you have a clear, coherent, and comprehensible narrative, teach your subject to someone. This step is optional, but why not test yourself and be sure you can convey what you’ve learned? You can tell your narrative to your team, like a presentation. You can ask a friend to dinner, asking for her help – a few minutes to explain the subject to her. You can volunteer to speak at a local school or a retirement home. Whichever you choose, ask for questions and feedback – and revise your explanation in writing to ensure you have addressed every item. Do this for yourself to ensure you have maximized your own understanding.

This technique can also enhance our ability to distinguish those who know what they’re talking about from those who don’t.

When an acquaintance discusses a topic in a way which confuses you, ask them to explain it as if you were 12. If they can do that, it’s likely you can trust their knowledge. If they can’t, smile, thank them, but don’t trust – except in the fact that you’ve supplied them with a tool which will help them learn going forward, if they use it.

Have you used any techniques to promote better learning, more thorough understanding? What were they, and how did they help you?

Please click here to email me directly – I am always looking for ways to improve my learning, and would love to know how you do it.

Until next Wednesday –

Peace,

Eric

On Wednesday, March 17, 2021, the Internal Revenue Service (IRS) announced they would extend the deadline to file an individual income tax return and pay any taxes owed from April 15 to May 17 of this year.

This announcement followed calls from legislators and accountants for a delay, as taxpayers struggle with the effects of the COVID-19 pandemic.

The IRS is still processing 2019 tax filings; their backlog is reported to be approximately 24 million returns.

For those filing extensions, the deadline to file your return will remain October 15, 2021, and any tax liabilities must still be paid by May 17.

Note that deadline for estimated tax payments for the first quarter of 2021 has not been extended; these payments are due on April 15, 2021.

State tax filing and payment deadlines are not automatically subject to this delay, and you should check with your CPA to ensure that all your tax returns and payments are filed appropriately and timely.

If you have questions on the extended deadline, your state’s response, if any, or any other questions, please click here to email me directly – I am here to help.

Until next Wednesday –

Peace,

Eric

Today, we are talking estate planning. When your labors have borne abundant fruit, it’s natural to want to hold on to it as long as you can. It’s equally natural to want to provide for your family.

The two impulses, sometimes in conflict, can lead to a reluctance to take the steps to plan ahead. I’ve seen families with a great deal of money find themselves in chaos when a family head dies suddenly, without having done any estate planning.

One good reason to devise and implement an estate plan is so that your family won’t have to deal with a tangle of money matters while they process their enormous grief.

But there are, in 2021, many good reasons to develop your estate plan and put it in place without delay.

For 2021, the estate tax exemption is $11.7 million per person. For married couples, this means you can shelter $23.4 million from estate taxes jointly. At least on paper, you have through 2025 to implement an estate plan, with this large exemption (rising for inflation). Under current statute, for 2026 the exemption is set to revert to $5.49 million per person, representing its prior level of $5 million as adjusted for inflation.

However, on the campaign trail, President Joe Biden expressed a desire to return the estate exemption to $3.5 million per person, and it’s possible he could get this passed through Congress in 2021.

Some states, too, currently suffering declines in revenue due to COVID-19 issues such as business closures and lockdowns, among other things, are considering lowering their own estate tax exemptions where estate taxes are already in place or instituting estate taxes where none currently exist. Washington D.C. has already reduced its estate tax exemption for 2021, from $5.67 million in 2020 to $4 million in 2021 – a significant decline.

When you have assets worth protecting, it’s in your and your family’s best interest to start estate planning now.

Gifting now will remove not only the value of the gifted assets from your estate, but all the appreciation on those assets between the date of your gift and your passing.

There are also other ways of sheltering assets – through vehicles such as family trusts, charitable trusts, and many others.

Given the potential significant changes to the estate exceptions, you should not waste time reviewing your estate plan and documents with both your CPA and your attorney.

And if you don’t already have an estate plan, please consider getting one devised for yourself, and implementing it.

None of us knows what tomorrow will bring, so plan today.

If you have questions on estate planning, and how to best protect your family, your assets, and your legacy, please click here to email me directly – I am here to help.

Until next Wednesday –

Peace,

Eric

Seneca wrote, “There is no more stupefying thing than anger, nothing more bent on its own strength. If successful, none more arrogant, if foiled, none more insane—since it’s not driven back by weariness even in defeat, when fortune removes its adversary it turns its teeth on itself.”

As a person of Irish descent, I know a little bit about anger, and is it really a short-term motivator? Anger can make us feel powerful and impatient for action – and this has to be a good thing, right?

Or is it? Remember that anger is an emotional state, which releases Epinephrine, also known as adrenaline, mainly from the medulla of the adrenal gland into the body, which impedes reasonable thought. Now, acting from such a state, surely, is not a good thing under most circumstances.

If I act out of anger, I’m not rationally arriving at the practical solutions. I’m not calmly addressing a team member’s needs and concerns – in fact, my anger is almost certainly counterproductive.

Anger, in fact, can blind us to the path we need to take to get out of the situation or problem which angered us.

It’s a fuel, all right, but toxic fuel, and if we make that fuel our go-to, we’re going to find ourselves with burned out motors.

Those angry brain chemicals leave a bad taste in the soul. An unwholesome feeling in the heart and mind. It’s akin to hate, and, in the words of Dr. Martin Luther King, Jr.:

“Hate is too great a burden to bear.”

and so is anger.

How do you counter anger, when you feel it looming?

Please click here to email me directly – I’d love to know your strategies.

Until next Wednesday –

Peace,

Eric

The U.S. Senate is expected to begin deliberations on the version of The American Rescue Plan Act of 2021 which was passed by the U.S. House of Representatives last Saturday, February 17, 2021, as early as today, Wednesday, March 3, 2021. Up to 20 hours of debate and votes on significant amendments are expected (the dreaded vote-a-thon). Senate Majority Leader Chuck Schumer (D-NY) has expressed confidence that the bill will be passed by the Senate this week.

Senator Schumer’s comments came after a virtual meeting among Senate Democrats and President Biden on Tuesday, March 2, 2021, during which the President urged his caucus to be willing to accept some amendments they may not like, and not to hold passage of the bill hostage.

We anticipate that the Senate will pass a bill somewhat different from the House’s submission, which will then require a second vote in the House. Democrats in both chambers are working to get the bill signed by President Biden before March 14, as the proposed relief includes an extension and an increase to the Federal unemployment insurance supplement, which is set to expire on that date.

Highlights include:

  • Stimulus checks – direct payments of up to $1,400 per individual.
  • Federal unemployment assistance – the Federal supplemental payment of $300 per week will be increased to $400, and extended through August 21, 2021. Currently, over 11 million Americans are set to lose these benefits on March 14, 2021.
  • Enhanced Child Tax Credit – the credit is increased – for one year – from its current $2,000 for children under the age of 18 to $3,000, and to $3,600 for children under 6.
  • Education – additional funding for K-12 schools, higher learning institutions, and childcare providers. Some 20% of the K-12 funds are to be directed toward mental health services for children.
  • State and local governmental assistance – to state, local, tribal and territorial governments.
  • COVID-19 vaccines and testing – funds are included for testing, contact tracing and mitigation, the protection of vulnerable demographics, vaccines, and the hiring of additional public health workers.

While the House bill provides for raising the minimum wage to $15 in stages, with the full amount reached in 2025, the Senate is unable to even consider that provision in their version, as the Senate Parliamentarian, Elizabeth MacDonough, has ruled it out of bounds.

This is because the Senate, in order to pass the bill swiftly, is using the process of “budget reconciliation,” which sidesteps the filibuster rules and allows a controversial bill to pass with a simple majority vote. However, there are limits as to what measures can be considered when using this process.

Republicans in both House and Senate have objected to a number of the bill’s provisions, focusing on such items as spending on high-speed rail projects, what they consider overly-generous aid to state and local governments, and projects undertaken overseas, among other items.

Polls indicate that Americans, by a large majority (including a majority of Republicans), want the bill passed.

Stay tuned – we expect some Senate fireworks in the coming days!

If you have questions on the proposed legislation or, indeed, any subject, please click here to email us directly.

Until next Wednesday –

Peace,

Eric

We’ve all experienced it – the let-down, when we feel when our expectations aren’t met. When a highly-recommended film, or book, or restaurant disappoints us.

But what are our – possibly unrealistic – expectations actually doing for us? Are they perhaps closing us off to new experiences we might enjoy if we went into them without high expectations, just to find out what they actually are, what they might have to offer us? Are we perhaps suffering, some of the time, from the “I like what I know” syndrome?

That’s a comfort thing, and I’m all for comfort – up to a point. But I wonder where that point tips over into complacency and stagnation – I don’t think any of us likes the idea of stagnating in place.

If our idea of a good restaurant, deep down, is where can we get an excellent burger, and nothing beyond that, we won’t want to try fine dining, not American, French, Italian, Chinese, Thai, etc. Perhaps we line up regularly at Port of Call. But what if we do open ourselves up to the new? Jettison our expectations, and discover what unfamiliar food actually tastes like?

Maybe we won’t like it. Maybe we’ll love it. But we won’t know for certain if we don’t allow ourselves to experience it, freed of our regular habits and false expectations.

If we read a glowing review of a play, a film, a restaurant, a wine, maybe we shouldn’t take that to have universal application. Our tastes may be very different from the reviewer’s, and assuming the reviewer is “right” can lead us into high expectations which may let us in for disappointment. Taste is only taste, it’s neither “right” nor “wrong,” it just is, and we are each entitled to cater to our own.

On the other hand, some of my greatest pleasures have come from visiting a restaurant, hearing a band, reading a book which was entirely unheralded. When I had no expectations at all, having nothing to base them on, and thoroughly enjoyed myself. Happy surprises bring their own particular brand of pleasure.

Not that we should have anything against the tried and true, either. I know people who re-read favorite books regularly, and I myself have been known to revisit a film or two I’ve loved. There are certainly favorite restaurants and vacation destinations I frequent.

Still, as someone who has had many transformative experiences when I wasn’t looking for them, I do think we do well to allow ourselves to be open – to let, as the legal maxim has it, res ipsa loquitur – the thing speak for itself.

Perhaps it’s a question of balance – like the old song goes, “make new friends, but keep the old.” I think that balance – the equilibrium between expectation and the comfort we feel when our expectations are met, and keeping our minds open to the new – is something each of us may have to work out for ourselves.

How do you achieve that balance? Please click here to email me directly – I’d love to hear your strategies and stories.

Until next Wednesday –

Peace,

Eric

This week, the U.S. House of Representatives will finalize details on their version of President Biden’s proposed $1.9 trillion coronavirus relief and stimulus spending package, and could potentially send the bill to the Senate as early as next week.

Unsurprisingly, most of the President’s proposed measures – though not quite all – appear to be included, based upon the various committee approvals.

Highlights

  • Stimulus checks – direct payments of up to $1,400 per individual. Full credit for children as well as adult dependents (who were not eligible for previous stimulus checks). The amount of the checks will decline for those individuals earning over $75,000 and married couples with income above $150,000, phasing out completely at earnings of $100,000 per individual and $200,000 for families.
  • Federal unemployment assistance – both the Pandemic Unemployment Assistance (which provides relief for freelancers, independent contractors and gig-economy workers) and the Pandemic Emergency Unemployment Compensation (for more traditional workers) programs will be extended through August 29, 2021 (both are currently set to expire in March). The Federal supplemental payment of $300 per week will be increased to $400.
  • Enhanced Child Tax Credit – a one-year increase, beginning in July of 2021, of the credit from its current $2,000 for children under the age of 18 to $3,000, and to $3,600 for children under 6. For the term of this increase, the credit will be fully refundable, meaning that families with incomes too low to receive the full credit under current provisions will now be eligible for the full benefit. In addition, the credit will be provided monthly, rather than on an annual basis as is currently the case.
  • Education – $130 billion for K-2 schools to upgrade ventilation, reduce the number of students per class for social distancing purposes, purchase personal protective equipment, and hire additional staff, as well as to prevent teachers being laid off. A minimum of 20% of these funds are to be used to mitigate the loss of learning students are currently suffering, through extended school days, summer school, or other provisions. For higher learning institutions, $40 billion is provided, and $39 billion is earmarked for providers of child care.
  • State and local governmental assistance – $350 billion to state, local, tribal and territorial governments.
  • COVID-19 vaccines and testing – $46 billion for testing, contact tracing and mitigation, $25 billion to address health disparities and protect vulnerable segments of the population, $14 billion toward vaccines, and $7.6 billion for hiring an additional 100,000 public health workers (this will almost triple the current number of such workers).
  • $15 per hour Federal minimum wage – to be phased in by 2025. This hourly wage will extend to those currently not covered by the Federal minimum wage provisions, such as those who are tipped, underage, or with certain disabilities.

The last provision listed is the most controversial at present, with two Senate Democrats, Krysten Sinema of Arizona and Joe Manchin of West Virginia already vocal in opposition. This is, of course, significant, as Democrats cannot afford to lose a single Senate vote, given the 50/50 split between the Democrat and Republican senators.

Notably absent is any further provision to help mitigate small businesses’ losses.

The coming debate should be interesting – stay tuned!

If you have questions on the proposed legislation or, indeed, any subject, please click here to email us directly.

Until next Wednesday –

Peace,

Eric

2021

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