THE MILLIONAIRE DENTIST PODCAST

Episode 52: PPP Forgiveness: What you need to know

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EPISODE 52: PPP FORGIVENESS: WHAT YOU NEED TO KNOW

CPA and Attorney Steve Levy speaks with Casey Hiers about the most current information on PPP forgiveness.

 

EPISODE 52 TRANSCRIPTION

Announcer:
Hello, everyone. Welcome to the Millionaire Dentist podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry, finances and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.

Casey Hiers:
This is Casey and I wanted to add a disclaimer. This podcast is rich with detail and content, but is somewhat technical. Now I like to listen to podcasts while multitasking, but I would not recommend multitasking during this one. Hello and welcome, this is Casey Hiers and we're back at it today on the Millionaire Dentist Podcast. Today, we're going to be talking about PPP forgiveness, and I ask Steve Levy, who is an attorney and CPA here at the firm to join us. Steve, thank you.

Steve Levy:
Hi, Casey.

Casey Hiers:
Pleasure to have you joining us. Listen, this year has been wild to say the least, PPP, EIDL, all of those acronyms, but for PPP forgiveness, we want to keep this on people's radars. So I'll just start off, Steve, why are we talking about this now?

Steve Levy:
Well, banks are continuing to open up their forgiveness process since it appears there won't be any changes to it. The house passed a law on late September to streamline the process for loans 150,000 or less, but it stalled in the Senate. It does have a streamlined process for loans that are 50,000 or less, and has a quote unquote easy form for those that meet certain requirements, which are no reductions in salaries and either no reductions in employees for a certain amount or the borrower couldn't operate in the same level as they did on February 15th. So-

Casey Hiers:
All right, so say those levels again. You said, "If it's over 150,000."

Steve Levy:
Right. So over 150,000, they're certainly going to have to go ahead and apply. There's legislation that actually passed in the house for the loans that were 150,000 or less, but it hasn't cleared the Senate yet. And as we know in these times, there's not a lot of things getting through in terms of laws right now. So banks are thinking, okay, this is what it is. And if it's 50,000 or less, you get the streamlined process, above that, you're just going to have to go for it. So banks, what banks do is send an invitation to the clients that have applied for it and have received the funds. And then the borrower is to use their specific portal most of the time to go ahead and apply for the forgiveness.

Casey Hiers:
So people will be alerted. So the financial institutions is the onus on them to reach out to these folks for the forgiveness or for the steps that need to be done?

Steve Levy:
For the most part, that's what they're doing. What we've been doing also in case that's not happening, or maybe we're not being forwarded the emails, is we're checking their websites, the bank's websites to see if they've announced an opening of their process, or even a link to the portal where people are to apply for forgiveness.

Casey Hiers:
Now, Steve, you had mentioned stream, a streamlined process. What does that mean?

Steve Levy:
So for those loans that are 50,000 or less, that means a very short application and also very little in terms of submitting supporting documentation. Now the next level up is the EZ form, which also a smaller application and less supporting documents. If you don't qualify for either one, then you've got the full form and a decent amount of supporting documentation that needs to be submitted with the application.

Casey Hiers:
So Steve, what should a practice owner be doing about the PPP forgiveness right now? What should they be aware of or know?

Steve Levy:
First they should try to find out if their banks process is open, that can be done by either getting the invitation via email, which is a typical way of doing it.

Casey Hiers:
So in some financial institutions are sending out alerts.

Steve Levy:
That's correct.

Casey Hiers:
But as we know, you can't rely on those, right?

Steve Levy:
Yeah, certainly. So some, maybe aren't even ready. So they may want to either check with the bank's website or just call up their banker, see what's going on because some really haven't opened it at all. There are different processes for different banks. For example, a smaller bank might just go straight for the SBA form and straight with the supporting documentation that the form has.

Steve Levy:
Larger banks and some small banks have a portal to apply for forgiveness that's specific to that bank. And so any recipient of PPP would want to know what that process is because if they start filling out the SBA forms and submit it to their bank, the bank might actually reject it and say, "No, I know you did all this work, but this is not our process. Our process is very specific." So that's the kind of knowledge Four Quadrants has.

Casey Hiers:
Well, and Steve, as you know, some of our listeners are our clients, but many aren't, many are dentists and specialists and practice owners around the country who like to listen to different dental podcasts, try to learn as much as they can. I've had a lot of conversations with practice owners who are, aren't our clients and going through this with little to no help has been a daunting task. And so we've tried to help with some of these kind of public service announcements to help people, but give a 60 second from Four Quadrants' perspective how we help our clients and that'll help our listener maybe get a feel for if you have a team helping you with this, what that looks like.

Steve Levy:
Right. So I think what would help here is to go over what the process is of completing it. So there are some calculations to be done in the forgiveness process in order to get forgiveness. First, there's an employee count to be calculated for really four different periods, a 2019 period, a specific 2020 period. And then the 24 week covered period, plus February 15th, 2020. So there's really four periods where you have to figure out how many employees you had. And that's a complicated process. You have to go through each period and figure out, okay, is this employee part-time or full-time? And calculate what's your average hours per week, really on a 40 week period [crosstalk 00:07:01].

Casey Hiers:
And head count and break those four periods down. You have 2019, you have the 24 week period that this covers, what are the other two?

Steve Levy:
So the other two are the first quarter of 2020. And then there's kind of a safe harbor period that goes from mid February to about late April. So those are really the main four periods in order to calculate what they call full-time equivalent.

Casey Hiers:
And so what you just said, some of the go getters out there that want to get ahead of this, they go and they do all the paperwork and all the legwork and proof source everything. And you're saying some financial institutions will say, "We have our own process." And in essence, you almost have to start over.

Steve Levy:
Right. So those will be the basic periods that any bank will want to see in terms of your head count. Not only is head count important, but what happened to the salaries, both in annual salary equivalent or their hourly salary comparing the first quarter of 2020, to your 24 week covered period. Did it drop and did it drop by more than 25%? And also, where is it at the time of applying for the PPP forgiveness? Those are three different periods where you want to see what was their average annual salary, what was their hourly wage rates and what happened from first quarter? What happened during the 24 week covered period? And what's going on now?

Casey Hiers:
Now you just referenced if something drops below 25%, what was that?

Steve Levy:
So if either the hourly wage rate or if they're on salary, if their annual salary drops more than 25%, then they have to rely on what happened, what's going on at the time that they're applying to see if they fall in a safe harbor. Did it drop? Okay, it may have dropped, but then did they bring it back up at the time of applying for forgiveness? And that's a way they can still get full forgiveness. Now, all this is what's happening here is they want to avoid a haircut in the amount of the forgiveness. If they have these reductions in full-time equivalence, if they have these reductions in salary rates, that can haircut the amount of forgiveness and every application requires these calculations.

Casey Hiers:
So needless to say, you're putting a lot of time and energy into this in any given week for our clients to tread through this. If you were a practice owning dentist, here's a hypothetical, without your background, are there a lot of areas for missteps to be made?

Steve Levy:
Certainly. The areas are what happens if the employee is no longer there? What do you do? You don't have the employee there at the time of applying for the loan. Also, what's considered a full-time equivalent? Many have part-time workers. And how do I figure out what their full-time equivalency is? There is a specific way of doing that in the application to determine that.

Steve Levy:
And so those are really the key ones. Plus we know what the periods are that you need to do the calculation because some of them apply to a safe harbor. Some of them apply to just the regular calculation. So there are complications here. And in terms of time, ourselves, it takes about a couple days to get through a typical forgiveness application. And we're folks that have knowledge of this process. So you could expect even more time for those without our knowledge to go through this.

Casey Hiers:
Well, I don't want to get you out of here with a couple more questions, but a little sidebar for our listeners. A lot of practice owners out there, they get what we call nickel and dime for a lot of this help. And they're paying a lot of extra fees for this help. Our clients, this is included in what we do for them because it involves their practice and it involves money. And that's what we help with. We don't nickel and dime all inclusive fees, our teams are helping with this proactively with our clients, so they don't have to, it's just, there's a lot to worry about right now, this is one less thing they have to worry about. I wanted to point that out. Steve, when will the practice owner find out if it is forgiven? So they realize they need to be up on this and they go through all these things. When will they find that out?

Steve Levy:
It's really of a situation of up to a certain amount of days. So the bank, once they get your full application for forgiveness, they get up to 60 days to review it. And then once they are comfortable with a decision, which they may not tell you what it is, then they submit that decision to the SBA, a federal agency who has up to 90 days to evaluate your application. Now, we do expect those that apply, especially our clients to have full forgiveness, except for having to pay back, what's called the EIDL Advance, that ranged between 1000 and $10,000, and that was received around April. We expect that to be the case because borrowers had 24 weeks to use the funds for mainly payroll expenses and most, if not all, have payroll expenses in that 24 weeks that far exceeded the loan amount.

Casey Hiers:
Well, hopefully our listeners have hung on for this last question. How does all of this affect someone's tax situation?

Steve Levy:
Well, it certainly does affect their tax situation. The IRS has come out with rules on the forgiveness. So as of now, and we don't expect anything to change, the rule is that there will be an increase in your taxable income by the amount of the PPP funds forgiven. Now, this is a rule, even if your actual forgiveness termination doesn't happen until 2021. And given that it can take up to 150 days to get that decision in, or maybe you're not even going to apply it. We know that that decision will fall into 2021. The key here is as long as there's an expectation of forgiveness, which as I mentioned, there is that expectation, then that will come in as taxable income in 2020. Now we at Four Quadrants, we factor that into your tax projections, that additional income which needs to be factoring, or you could have a big tax surprise come filing of your taxes.

Casey Hiers:
Well, Steve, this was quite the topic. Hopefully, I know this is great information that should help our listeners tremendously. Obviously they can always reach out with questions even if they don't work with us. Steve, thank you. Obviously, our clients, having an attorney and a CPA all in one is very helpful. Thank you, sir.

Steve Levy:
Thank you, Casey.

Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. And thank you to you, the listener, for tuning in. The Millionaire Dentist podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why year after year, they retain over 95% of their clients. Thank you again for joining us and we'll see you next time.