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PPP Calculator by entity type

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Important note:

The video workshop is only available in Spanish, but you can find a complete transcription in English below.

 

PPP Calculator by entity type (transcription)

Kenny Salas

We’ll give you a guide based on what the US Treasury tells us, ok? We know that there are very particular cases, ok? So if there is a super particular case that cannot actually be covered, it’s difficult for us to give you a definite guide. In those cases, we recommend that you ask your accountant. 

So we’ll give you a moment to raise your hand, ok? If you… Right now, I’m going to lower the hands, ok? To all of you. So right now if you like… Here we already have a raised hand from Claudio Ricardo Lorca. We are going to let you speak. And then, when the tab appears, please, just click unmute, and you can ask us the question. Hello Claudio!

Claudio Ricardo Lorca

Hello, how are you?

Kenny Salas

Very well, how are you?

Mariette Martínez

Hello, hello!

Claudio Ricardo Lorca

Good. Very pending of the course that you are giving, really quite an interesting topic, very topical. Thank you for working with us. 

Kenny Rooms

You’re welcome! Do you have any questions, Claudio?

Claudio Ricardo Lorca

Well, look: I have an LLC, and last year I worked, and I paid everything I received with 1099.

Kenny Salas

Oh, so, did you pay all the people with 1099?

Claudio Ricardo Lorca

No, no, I have no employees, I charged… All the services I provided, I charged with 1099. Do I qualify for this type of loan?

Kenny Salas

Ah yes! In fact, that’s precisely the first case, an LLC, a business without employees. Let’s show how you qualify. As long as you don’t… Look, none of these conditions is, well, it represents how you run your business, ok? So right now we are going to talk about it. Thanks, Claudio.

Mariette Martínez

Let me tell you something. Sorry, thanks, Claudio. Let me just confirm something for everyone to understand because, again, I know that many times, when we talk about the LLC, sole proprietor and paying people with 1099 … It’s crucial to know, and it’s imperative to clarify that you can be a sole proprietor. If you are a sole proprietor, you may be doing a job, and at the end of the year, your clients send you a 1099. You qualify, ok?

But if someone, your lawyer, your accountant, your wife or your husband, told you “you must also make an LLC”… an LLC is just your protection, but really you are just the owner, you are an independent contractor, and if that is your situation and you have income, you have profit, earnings, you do qualify, and right now we are going to show you how. 

Kenny Salas

Perfect. Thanks for clarifying. So let’s continue here. And one thing that we told you that at the end of the presentation we are going to send you an evaluation. We have already made a very nice summary with the steps to follow for each of these three cases that apply to 90% of the people who are connected, ok?

Also, here: What is the structure? We will go over the calculation, and in the end, we’ll let you ask live questions, as Claudio did. And here, we’ve already reviewed this.

Very important note: the information presented in this virtual course is for guidance purposes only. It should not be considered professional legal or tax advice. Additionally, the course does not provide personalized legal, tax, investment, or business advice.

Perfect. Now, very quickly, I am going to review what the CARES Act is. The CARES Act is, in effect, the stimulus package to inject capital into small businesses. Nowadays, we have four different initiatives. The most popular are the Payment Protection Program, or PPP, and Economic Disaster Damage Loans. Today we are going to talk only about the PPP.

Now I am going to review what the PPP is. Well, the PPP is… They really did it to cover the payroll costs; that’s why we are talking so much about payroll because that’s what the loan is for. And precisely, the amount you can receive from the bank in this case, depends on the payroll, ok?

There’s also the possibility that you get that money and you don’t have to pay it again, wow! Ok? But you have to satisfy certain conditions. 

Third, and again those who already participated in the first part… This loan is offered by banks, credit unions, or community lenders, which is a local lender who calls itself a community lender. 

If you don’t know if you have a community lender close to you (because there are hundreds, if not thousands, in the United States),

I recommend that you contact the local Chamber of Commerce where you have the business. I am 99% sure that they will have two or three community lenders that they can offer you and can tell you if they are offering the PPP loan. That information is a little hard to find online, so I recommend that you go to your bank first. 

If you already have a relationship with a bank, go to that bank, and they are surely offering the PPP, and you should check with them. If they are completely saturated or you don’t see it well, you can, and I recommend you go with a community lender, and you can find that community lender through the Chamber of Commerce, ok?

What is the PPP loan? It is a loan of up to 10 million dollars, but it depends on your payroll. It has a fixed annual interest rate of 1%. The payment term is 2 years. Again, these payments can be forgiven, we’ll discuss it right now. And response time is more than 2 weeks.

This response time, at the end of it all, do you know who it depends on? On the financial institution that sends you the money, ok? I have heard of other people receiving the payment within a week. But I’m going to tell you: it was surely an institution, a fintech like Kabbage, which has many of its processes automated; or it was a community bank, a community lender that focuses on helping clients that they already have, ok? And the person or company that applied for the loan had everything, everything, everything, everything, everything, well organized. Organized people and companies receive this money faster than those unorganized ones and those who have more complications, ok?

Who can apply? Indeed, if you have a business or are an independent contractor and have less than 500 employees. And you were in operation on or before February 15, 2020. The requirements? Now again. Although the Business Administration, they make the policy, they have the basic criteria of how it is calculated, they say… They have a guide, and they give it to the bank, and they say to the bank: you have to follow this guide. But the bank can say: ok, I’ll follow this guide, but I will also ask for more things if I want, because it’s the money from my bank and I have to ensure that this loan really goes to a company with payroll or to a contractor that generated income, ok? 

So the point here is: Many banks have other requirements, including requiring that you have an account opened before February 15 to verify the existence of the business. Some banks do require a pre-existing credit relationship as well: a credit card, a loan, a line of credit, whatever. But that depends on the bank, ok?

Yes, you have to do the homework. People ask me: but what does Wells Fargo requests? If you don’t know what your bank needs, you are already behind. You have to call or visit the website. 

They already… For the vast majority of banks, this is round 2 of the PPP, right? As far as I know: of the 400 billion dollars they have today, only 9 billion dollars have been given, so there is money left, ok?

What if the money runs out in two weeks? I have relationships with people in the Congress, etc., and chances are that when Congress returns in May, after a recess, they will approve more funds. But anyway, those who are going to receive the funds in round 3, do you know who that’s going to be? Those who apply today. If you don’t apply today, the plane left you, but you have to make sure you qualify, ok? 

Now we’ll talk a little, and here Mariette can help me in a moment, but let me explain: this loan can also be forgiven, right? A total of 8 weeks, a total of 8 weeks, is then forgiven in the following categories: 

Payroll payments, minimum 75%. That this money went to… 75% of these funds covered, in 8 weeks, 75% went to payroll payments. Another 25% covered mortgage expenses, rent, utilities, or added wages paid to employees, such as tips, ok?

You have until June 30 to restore the number of employees and wages changed in the period. So if you had to furlough or unfortunately fire people, you have until June 30 to have them return to you, and then you can start to justify, at least 8 weeks, that you are using the money in this way: 75% on payroll and another 25% effectively for rent or mortgage. Mariette, anything to add?

Mariette Martínez

Oh yes! I want to stop here because this point has not been talked about enough, and it is needed to talk about, and I know why, honestly, Kenny knows, I have attended many webinars, many panels, as an expert, as an accountant. This point is so important, and you are hearing it here. So please, if you weren’t listening, listen now, ok?

If you qualify, if you apply and if you receive the money, congratulations, great! But look: that money is loaned to you for you to use it specifically for what you are seeing here right now, ok? Really: 75% must be used to pay your employees. The idea is that you keep paying your employees, to catch them back, because they are probably unemployed, or you can attract those employees. Because you say: I cannot pay employees and right now, yes. If you earn that money, it’s to pay employees. 

The other 25% is to pay the additional expenses, ok?

If you do not have the other expenses… Many sole proprietors working from home, and really they do not have the other expenses, they do not pay rent, they do not have mortgage interests, many times they just have the payroll… But you already, you are going to qualify for 75% of this amount because you have payroll. 

Now very important. The payroll may be the payroll that you are paying your employees in payroll, and the other payroll is really you as the sole proprietor. If you have earnings in the 8 weeks after you receive your money, if you have earnings, you have money coming in, you can forgive part of that money. But if you sit on your sofa and you don’t go to work, you don’t have money to forgive, do you understand?

So Kenny said before: if you are not going to work for any reason, go get unemployment, because this is for the people who are going to continue receiving money, income. In those 8 weeks, friends, you will be able to forgive that money if you qualify. It is a fantastic thing if you understand this point. 

Kenny Salas

Perfect, very good. Thank you very much, Mariette. Now, I’m going to teach you the formula, but the truth is that we see much more detail. You will see this formula three more times in this presentation because we are going to show you case by case. But roughly, how much money can you get, right?

It’s the average monthly cost of payroll, ok? You multiply it by 2.5. Where does 2.5 come from? The government, because they are thinking: look, we are going to close the economy and things for approximately two and a half months. So what I want you to do is pay your employees while we are closed because you have the recourse to pay their wages, right? For two and a half months, and it’s effectively that maximum loan.

Now the art of it all is how the calculation is done. The 2.5, you all know how to multiply by 2.5. So the question here is, how do you calculate the average cost of payments, right? So let’s continue here. And I want to recap once again that, indeed, we are going to see three cases that it seems that all of you, the vast majority, 90% of you, apply.

The first case is a sole proprietor, sole proprietor, independent contractor, or one-person LLC that has no employees, ok? We’re going to start first, excuse me, with those who don’t have employees, and then later, we’re going to grab the same group with those who have W-2 employees. 

Again, I repeat, I have received many questions about this: I have employees and pay them with 1099. Sorry, but those are not employees, they are contractors. So we are not going to confuse or say that they are employees because they are not employees, they are contractors for your company, ok? And the last case is C / S Corp with W-2 employees. Ok? Let’s go. Let’s see Mariette …

Mariette Martínez

Ok. Terrific. I am thrilled here. Do you hear me or not?

Kenny Salas

Yes, we can hear you. And here we have a question… I’ll answer it. José Sánchez, thank you for your question, and we will answer it at the end of the presentation, related to forgiveness, because here he puts something, but I want him to ask it live.

Mariette Martínez

Ah, very good!

Kenny Salas

But I do want to make sure we have enough time to cover all these slides.

Mariette Martínez

Perfect. Now, very important. This, what you see right now, you must, at least 25 to 30% of you, must be pleased with what you are seeing because if you are a sole proprietor or if you are an independent contractor, without employees and anything, just by yourself, you will be able to qualify. That’s excellent news, ok?

Kenny Salas

And to clarify, Mariette, because a person, Victor, asked: well if I’m a… I have a Schedule C, right? And I pay my contractors using 1099… Technically, Victor can do the calculation himself, right?

Mariette Martínez

That’s right. Exactly. And just so you know, that’s precisely why you can’t calculate contractors, because contractors, they can apply by themselves. They can apply to their own PPP. If you were using the money that you pay to your PPP and you are using your own earnings, you are doing what we call double-dipping. I don’t know how to say it in Spanish, but you are really winning the government twice, ok? That’s the idea why you can’t use contractors, so everyone knows, ok?

Number one: what you’re going to do is you’re going to find the 1040 Schedule C form. The good thing is that we are going to show it to you right now, ok? You’re going to go line 31, ok? And you’re going to see that amount, and you need to grab that amount up to $100,000. If your earnings… Line 31 is your earnings. It is not your income; it is your earnings. If your profit is more than 100,000 dollars, that’s great because you’re doing very well, right? But you will only qualify up to 100,000 dollars. 

So, the first one Kenny is showing, net profit, first square, is really your $100,000. Then you are going to divide it into 12, and you are going to multiply it by 2.5. That’s all, that’s all! It’s very easy math if you see it that way. And this is your maximum loan. I am not saying that you are going to win this loan. This is your maximum loan, ok? Kenny, you had a point here.

Kenny Salas

Aha, the truth is fundamental.

Mariette Martínez

Ok, let’s go to the next one.

Kenny Salas

But now… below you also say that sometimes the sole proprietors, I, that is, Kenny Salas, I do construction, right? I receive my 1099 MISC, and I really have no expenses, they pay me everything. In fact, when I file my taxes, I fill out a Schedule C-EZ… 

Mariette Martínez

That’s right.

Kenny Salas

Something very similar. So if I have no expenses, that is, do I still use line 31? Because I don’t see it. And what should I use?

Mariette Martínez

It’s a great question. Look, first, if you are an independent contractor and are not reporting expenses, why? Because you want to lower your earnings for your legal costs, right? Number one: don’t do that. But, for example, if you say: no, I just want to go and give my 1099s, if I don’t want to prepare anything, when you go to the bank, the bank wants to verify that you really are an independent contractor. 

So, possibly they will ask you for 1099 to see your income, but they will still ask you to prepare a Schedule C-EZ, as Kenny said, which really is just a line that says, “that was my income, I don’t have expenses, here is the total. “That is how it looks.

Kenny Salas

And they ask you for the forms.

Mariette Martínez

That’s right. Here’s Schedule C. And I’m so happy that Camino Financial puts that in, because the second question… First is that of the employees. And second is: so where, where do I look for Schedule C? Here we are showing you a Schedule C. You just go to Google and put “IRS 1040 Schedule C”, prepare it and on line 31… That is your net profit, net profit, and that is the number that the bank wants, to start there, to start this calculation.

Kenny Salas

Ok, very good. And a clarification. I have seen questions regarding Camino Financial loans. Camino Financial does not offer PPP loans. We are not taking PPP applications right now.

This business workshop is specifically to help you, that is the truth, we want our community to prosper and to be able to take advantage of this without actually offering capital. So I just want you to know that. We really aren’t earning as much for doing this presentation other than the satisfaction of supporting you guys, ok? 

Again, if you have any questions specifically about Camino Financial, I suggest that you call us or go to our website, send us a message there, at CaminoFinancial.com. We will answer any specific questions about, well, any case you have.

Mariette Martínez

That’s right. And the only thing I want to add is, too many of you ask me: Oh wow! But how do I fill Schedule C? There are two things you can do. Number 1: you need to learn, ok? Some people are teaching it for free on YouTube. I have a course on how to prepare Schedule C, and I’m going to offer Camino to share it, ok? Very cheap! And I’ll teach you exactly how to prepare your accounting and how to fill out out Schedule C.

If not, call your accountant, that is the job of your accountant, to prepare your Schedule C. So call your accountant because the accountants are very busy right now, as well as tax preparers, because that is their job, to prepare your Schedule C, ok? 

Ok, we continue with the contractors sole proprietors who have employees. 

Kenny Salas

Yes, sorry, I went a little ahead. With employees, perfect.

Mariette Martínez

Yeah, with employees. That is very important because I saw many questions already, and possibly we are going to answer it, you can be a single owner or sole proprietor, an independent contractor, and you can have employees because you are growing your business, that is, you have employees, which means you have payroll, right?

If you have payroll, you have employees, not contractors. You are not hiring more contractors, you are a sole proprietor with employees, you qualify for more money. Number 1: That is important. You qualify for more money. 

Now, what you need to know is what we are teaching you here. You start with your net profit, which we will show you right now, and then you will include the following three lines, ok? Kenny, do you want to go through those three lines?

Kenny Salas

Sure. Oh, review these lines?

Mariette Martínez

Yes, just so you can explain them better.

Kenny Salas

Ah, ok! Then look. The first, line 31, represents the earnings that you have as an owner. These are the profits, right? Now what we are going to add is what you pay the employees, right? That includes any contributions you make to employee health insurance. Well, if you offer that benefit, great! That’s in line 14.

On line 19, any contribution you have to employee retirement plans. Brilliant. What I think applies to the vast majority, if you have employees, it’s line 26, which is effectively wages, the salary that you pay them. This can also include any amount payable to them for vacations and paid absences, right? So, effectively it is the salary, and that is in line 26.

If you add those four numbers in your Schedule C, which is here, and… Zaz! Boom! That is the amount. In fact, we should change the order here. That’s the amount… Look: 14, 19, 26, 31. With those figures… Boom! Now you have these calculations. Explain this to us. 

Mariette Martínez

Exactly. And I wanted Kenny to explain it because, as he said, I wanted to hear that, and I say it. Honestly, many sole proprietors are going to have net profit and wages. Nothing else, right? But it is important to know that there are other things you can include if you are paying for it. The contributions Kenny mentioned and the benefits too. Well, if you are doing that, that is great, and you must include them because that is included in the calculation.

The last thing that is included is the local or state employer taxes. So, you are going to add all those, and then the same calculation, friends. You divide it by 12 and multiply it by 2.5, and this is the maximum loan that you are going to have, probably, from the PPP loan.

Kenny Salas

Perfect. Now a question that Jesus asked, that he has not received his 1099 from the company… he has asked for them many times and has not received an answer, so…

Mariette Martínez

Ok, that’s a great question. And Jesus… or Joseph? Joseph or Jesus?

Kenny Salas

Jesus.

Mariette Martínez

Jesus, I want to speak directly to you, because right now I am speaking to hundreds of people who have asked me the same thing.

It doesn’t matter if you receive a 1099 or five 1099s. You report the money you received to your bank. It doesn’t matter if you received a form like this or not. You must be depositing that money in your bank in a business account, and you can go and grab your bank statements, and you can show how much your income was.

That has nothing to do with receiving a 1099, and many believe they can’t report their income because you don’t receive 1099. I don’t know where you heard that, but that’s not correct, because 1099 is a requirement of your client, but your client may never send you a 1099.

You shouldn’t be waiting for that. You can report with your own books, and that’s why the community is excellent, and it’s crucial, more than anything. That is why everyone is calling their accountants because they say: Oh, I want you to make my books for me, of course, because you have never had books, do you understand?

Kenny Salas

Now those incomes that are in your bank, indeed, I have made taxes with you, right? Although an accountant generally requests access to your bank accounts specifically to do these calculations.

Mariette Martínez

Exactly.

Kenny Salas

And these transactions… When you have a 1099 it makes your life easy, right? But, with that, I have said, when you have bank transactions, an accountant uses this money, these transactions, to effectively create your Form 1040 and Schedule C, that is, to clarify.

Mariette Martínez

Yeah.

Kenny Salas

Ok, then again. If you need help preparing that 1040, work with an accountant. There it is Jesus. You have to speak to an accountant. He is going to work with you, effectively, to prepare this form. And because, you know? Here it is very clear: if you do not have the 1040 form, you will not be able to apply because it is required, it is a document that is required, right?

Also, for all of you who have W-2 employees, you should also have a 941 form, ok? Now the vast majority, 80% of all people who have payroll, work with a common payroll company: ADP Paychecks. There are many, right? They, easily, have a portal where you can download them by course, by quarters, and you are simply going to download all the four quarters that you are going to use to make this calculation, right?

So it’s easy, really. If you use an accountant to do the payroll, first, I recommend that you do not do it because it is costly (laughs). And second… it’s super expensive, they charge you a lot, and the ADP Paycheck charges you, I don’t know, $50 or $100 to do it.

Mariette Martínez

But Kenny, I want to say something with what you said. If you don’t have your payroll, ok? And you’re going to payroll whatever, as you said, possibly you don’t have your books, either. So, you may still need to recreate your accounting because don’t forget: you are going to start with your net earnings first, then you are going to include qualified wages. In other words, if you do not have your payroll, possibly you do not have your books, and you are going to need to recreate your books. So, talk to your accountant, or as I say, tell Camino or me, and I will send you a course, I’ll even discount it because I feel so sad for you who don’t have books, really.

Kenny Salas

Ah ok. And another thing to clarify here for Jesus, who has another good question. So: here you were a little confused that if only the max depends on 75% of this calculation. No, 75% is not in this equation, ok? The 75 that we talked about …

Mariette Martínez

It is when they forgive…

Kenny Salas

It’s to forgive the loan. Indeed, to forgive it, so you don’t repay it. But they are two different things. In other words, payroll is used to calculate the maximum amount you can receive, and this is a formula to calculate how much you can forgive. 

So, if you receive $100,000 and you have payroll expenses of $100,000, that’s it! I mean, those 100,000… And if you have payroll expenses in 8 weeks of $100,000, you must satisfy 75% at least.

Now, if you only have $60,000 payroll expenses, that’s where you’re going to have a problem. I mean, $60,000, so that’s where you don’t meet the minimum requirement for forgiveness, ok? But if they don’t forgive you, don’t worry. I mean, we are talking about an annual rate of 1%, and you have two years to pay it, so…

Mariette Martínez

It is still a very good loan, right?

Kenny Salas

Exactly. That is a very, very good loan. Likewise, if you have more questions about forgiveness, we can discuss it a little bit more.

So, here it was already clear how to do the calculations, and in fact we are going to review some examples. One second, sorry. I don’t know if you have any questions…

Here’s a question: Can I apply if I have a 1099-K?

Mariette Martínez

Yeah, so, a 1099-K is a form that you are going to receive because you are using merchant services. When your clients pay you, they are paying you with a credit card or PayPal or Square, and a 1099-K just means that you do one of those merchant services. But I’m not saying that’s all your income, that’s just a 1099-K that one of those companies sent you. Possibly Uber, or one of those. But that does not mean that it is all your income.

Kenny Salas

Perfect, so… Now that’s the calculation for, and here are the lines again, and in fact this is the form 941 that you can download to whatever your accountant or any payroll system considers. ADP Paycheck is the most popular. 

Now the corporations: S and C Corp with employees.

Mariette Martínez

Perfect.

Kenny Salas

And again, those without employees don’t qualify. That means: if you have an S Corp and you just get money out of it, and you don’t process it by payroll, there… In fact, that’s the worst-case scenario, I believe. Here you don’t get… Zero. Minimum as a sole proprietor independent contractor, at least the profits that you have as an owner because you can use them. 

Literally, if you have an S Corp or a C Corp and you are not paying anybody, not yourself, zero, zero, and I’m really sorry, but I don’t think you should be wasting your time here.

Mariette Martínez

That’s right. And we are going to see the calculation, but for you to understand each other because this is the third question. The first is the idea that you are a contractor employee. The second question I have received a lot is how to prepare Schedule C. And the third is: why can’t I qualify? 

The idea is, and hopefully, you know that and if not, please talk to your accountant because that should be a talk that you should have had. If you have become a corporate, that is, you are a sole proprietor, and you decide to make a corporation, S or C, you are already an employee of that company, and you need to put yourself on the payroll. If someone has not explained that to you, sorry, but now, I am telling it to you. 

You have been on the payroll and paying yourself a salary because the S Corporation has many tax benefits for being S Corporation. So again, the IRS and the Treasury Department all agree. Look, if you were earning all that benefit of being an S or a C and you were not within the rules that you should be on the payroll, you are not going to qualify for this, and you see, that’s right. There is no other explanation because that is the rule.

You must be paying your payroll, and of course, if you have employees, you must be paying your employees payroll. And that is the reason. And again, there is no other explanation, because that is the rule, that is the tax call.

Here we explain again to you by line. You are going to go and grab all your payroll costs. Nothing else but payroll here, ok? Here you see that line 12 is your compensation as an officer. Line 13 is the wages you pay to all your employees, and as Kenny said, if you are paying pension or other benefit programs, great! You can also adjust and include those expenses as part of your calculation.

If you are an S Corporation, it is almost the same thing. The only thing that we did here, which I love is that there are different lines in the form, and here we’ll show you the different lines per form, ok? If you go to Google and type 1120, that’s for C Corporation. If you type 1120-S, that’s for S Corporation, that’s what we are showing you.

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