ACT FAST: New PPP Changes Explained: Lots of Free Money.

everyone meet kevin here the small

business administration just came out

with brand new guidelines

for ppp loans for self-employed

individuals which is really exciting

especially if you

are a 1099 filer or you are just

straight-up self-employed schedule c

a lot of folks who had zero or a

negative

net income have been excluded from the

sba's

forgiveness program the paycheck

protection program which is basically a

way for you to get

totally free money forgivable which

that's the kind of their way of saying

we're going to give you a loan and then

as long as you follow the rules of the

program

you can get that loan forgiven in other

words it's kind of like they give you

free money

the real power in it though and this is

why you really want to pay attention to

this

is look if you're self-employed which

self-employed means maybe you're a

hairdresser who's a 1099 contractor a

realtor uber driver

lyft driver you got a small business

maybe you don't have

any employees it could just be you maybe

you do have employees it doesn't matter

you do some kind of small business where

you

file either a schedule c or you maybe

get a 1099

where you're self-employed you're not

getting a w2

then you really want to consider getting

the ppp or maybe you do get a w-2 but

it's from your own s-corporation then

you also want to consider getting a ppp

loan

basically the ppp loan is going to

look at your numbers your income and

your expenses

and try to come up with a figure that

they can give you

totally for free now there are two

rounds of this program the first round

is ppp round one

and you didn't need to have any kind of

decline in income

to get ppp round one you just had to

sign a statement saying that the first

ppp loan is necessary for you to

continue business operations basically

if you have high uncertainty that for

some reason your business might

collapse or you're barely getting by you

need the money

or you have a fear that in the future

you're not going to be able to get by

then you can apply and get a ppp loan

the round two

is reserved for businesses that have had

a decline in

revenue of at least 25 so for example

if let's say in uh you know let's say

2019

quarter one you had a hundred thousand

dollars of business gross income

and then in quarter one of 2020 when

march came around the pandemic things

started shutting down and slowing down

towards the end of feb in march 2020

your income fell and you only had 70 000

of income

you might be eligible for round two of

the ppp

now this video isn't designed to go

through the exact eligibility for round

one verse round two

we've got plenty of videos not only on

the channel about that but there are

plenty of other resources for this

this video is going to be dedicated to

some of the big changes

specifically for those of you who have

had negative

income and you've been already denied in

the past or

you've just been discouraged from

applying because you haven't had

positive net income and you're like ah

doesn't look like i can get this program

so why bother

listening to the ppp well a lot has just

changed and this video could get you a

lot of free money

and in addition to free money and i

don't get anything out of this i just

want to provide the value here

in addition to free money i remember the

cool thing about the ppp is this

if you get a let's say 20 000

ppp loan and ordinarily you pay around

25

in taxes so when you get your income you

pay around 25

in taxes the cool thing about the ppp

loan is let's say you get a 20

000 ppp loan and then you spend that 20

000

on business expenses which are a

write-off for your business

you are going to be eligible for taking

the tax deduction for those expenses

even though you're technically getting

free money which

bottom line in the example of you

getting twenty thousand dollars

plus you pay usually twenty five percent

of taxes would mean you would get a

roughly five thousand dollar additional

tax

savings on top of that so it's kind of

literally like the government going yo

here's 20 grand

plus a 5 000 tax credit it's like really

juicy so look into this if you haven't

yet like you could for example go to

medkevin.com

v e e m veem uh that redirects you to

uh you know a pretty easy ppp portal i

don't even get a thank you for referring

you to that i didn't set anything up

with that company

it's just the one that i had helped

people apply through in the past and it

was pretty useful i actually think a

different company is running it right

now i think it's blue vine or whatever

so you can google them directly but

anyway what i want to do right now is

show you the changes

and so the sba released some new

guidance today and it's going to be

useful for us to just go through some of

this guidance

so take a look here this is where the

thing the rubber really

hits the road this interim rule

fi or a final rule allows individuals

who file a tax return schedule c

self-employment to calculate their

maximum loan amount

using gross income

folks gross income there is huge it

means

you could actually apply for the ppp

using your gross income not your net

income so if you wrote off all your car

expenses for uber as a realtor you wrote

off all your signs and this that or

whatever do you a negative income

boom gross income huge changes they're

also letting people

now apply who have had non-financial

fraud felony convictions

and removes the eligibility restriction

that prevents business owners who are

delinquent

or in default of their student loans or

federal student loans

from getting a ppp loan which is great

all right so

this is going to be effective pretty

soon it's supposed to be immediately

uh it it it's supposed to be effective

as of a few days ago but they just came

out with these rules

uh and the deadline to actually start

the ppp program

is coming up uh i believe the deadline

is march 31st

so you really have a limited amount of

time to do this and i don't want to come

across as like salesy here like

act now before it's too late but act now

before it's too late

so anyway here's their definition of

gross income so gross income defined

is applicable to sole proprietors and

independent contractors

and it's going to be any kind of income

that you get that is not more than a

hundred thousand dollars that's the hard

cut off

for payroll no no individual can get

paid more than a hundred thousand

dollars

and use more than a hundred thousand

dollars towards their ppp loan

calculation

so if you get paid 80 000 you're fine

okay great use that

okay great so you have two options you

could use your gross income or you could

use your

net income and every person's scenario

might vary on where they might be able

to get more money

obviously the expectation is people are

going to get vastly larger loans

if they use the gross income calculation

we'll see though so uh let's go through

some of uh the additional information

here here they just provide reasons as

to why they're doing this

they feel more underserved communities

are going to benefit from this

uh and what's gonna be useful here at at

the same time

is what i'm gonna do is i'm gonna pull

up a schedule c of a tax return

and you can find this pretty easily

easily excuse me you just type in

schedule c

uh tax return we'll just put in like the

2020 for example

and that way we can make it nice and

easy so we'll pull up a schedule c here

we'll bring that up on on on our form

or our display here and what you can see

is level or line seven here is actually

gross income

so you could google this form calculate

this yourself you might already have it

in your uh in your actual tax return

especially if somebody prepared your

taxes for you okay so schedule c

is basically gross and what it says here

if a schedule c

filer has no employees the borrower

that's you because remember you're

taking a loan that you're going to get

forgiven so yeah it's a loan but it's a

free loan

right uh okay so and there are no

payments on it

during your initial draw period i think

you have six months no payments

and you could get forgiveness within

those first six months you just have to

follow the rules and the video purpose

of this video is just to intrigue you

enough and show like

you should do this you should look into

this more like apply and then call the

company you applied with like at the

very least apply

with the new rules and it might take a

few days for the lenders to actually

catch up with all these new rules

but at least apply under the new rules

and then when you apply under the new

rules

call the company and go yo you know i

just want to make sure like am i going

to be able to get this forgiven what do

i have to do to make sure i get it

forgiven

and let them tell you you know don't

take it from me just apply like the

worst that you could do is

apply or not apply is the worst thing

you can do but remember you can always

take advantage of the fact that you can

always apply

and then not take it if you didn't want

to right all right so anyway

if a schedule c filer has employees uh

the uh so

if you do not have employees you could

use line seven

uh or your net income it's totally your

choice

now they're going to be some

modifications and we'll calculate that

in a moment

if you do have employees you'll

calculate your compensation as a

share of payroll costs based either on

net profits they say or gross income

minus expenses

on line 14 19 and 26 so basically

if you do have employees you'll have to

go back to that schedule c

and minus off 14 19 and 26

which you'll see are things like

employee benefit programs

uh we've got where's 19 19 is over here

pension programs

and uh wages here number 26. so if you

have employees the calculation gets

a little bit more tricky but it's not

too difficult here

so okay those see those represent

employee payroll costs

and they're kind of trying to prevent

you from being able to double dip it's

not a big deal when you go through the

math

that'll totally make sense now in

context of determining a borrower's

eligible

expenses the interim rule refers to

these as proprietor expenses because

remember

when you do a ppp loan you're getting

money not only for paycheck

money so to pay your payroll but you're

also getting money

for business related expenses now you

can actually be

on unemployment and apply for the ppp

you just can't be receiving unemployment

pay at the same time you're using the

ppp loans

to pay your wages so you would have to

go off unemployment

take the ppp money and then go back on

unemployment

okay just to clarify that you don't want

to double dip on that one

now the proprietor expense calculation

limits a schedule c

filer that included employee payroll

costs in determining the ppp

loan amount from taking the full loan

amount as an as owner compensation

so basically if if you have employees

they don't want you to be able to just

take all of the money that you get from

the ppp

and just pay yourself with it like they

want to see that it's actually

supporting the business if you have

employees

okay the easiest thing to do here is

jump on over oh wait i want to talk

about this section because this is

actually important and we're going to

jump on over to a calculation we'll do

like an example here

so there's going to be this provision

that basically says i'm just going to

summarize this bottom portion here

if you ask or if you report

more than 150 000 in gross

income on your schedule c so if your

self-employment

schedule c gross income is more than

150k

you might actually be open to a little

bit more

investigation in terms of are you

actually

in need of this ppp money so as soon as

you make more than 150k in gross income

and you decide to use the gross income

provision they're gonna look at your

application a little harder

this is just designed to discourage

people from like you know people who are

like making 500k

from applying for this and and saying

they need this

that's kind of what they're trying to do

even though technically like old school

pp round one

that's what happened and if you were

asking for less than two million dollars

the federal or the sba was like no

problem if you're asking for less than

two million dollars

we'll give it to you whatever you say

you need it here you go we'll give it to

you

that was the old school rule with this

new school rule because they're

switching to this gross income

calculation they're saying

okay okay we'll let you use gross income

but if you're going to use gross income

and your incomes over 150 we're going to

look at your application a little bit

tighter

to make sure that you're not just trying

to pull our leg here so that's what

they're clarifying here so we'll

summarize that a little bit

okay so here are the steps for actually

calculating this so

step one from your 2019 or 2020 irs form

1040

schedule c you may elect to use either

line 31 net profit so your net

or schedule or your line seven gross

income

now this is really cool because you have

the choice of using 2019 or 2020

whichever year you use to calculate your

payroll it's very important that

you keep in mind they're going to ask

you for your filed

uh 2020 tax return and if you haven't

filed your 2020 tax return yet

you have to do a draft of your 2020 tax

return so that way there you're at least

showing them like this is what i intend

to file with so they want a 2020 tax

return

even if you haven't filed yet if you're

going to use your 2020 payroll as a

calculation

otherwise you could use your 2019

payroll as a calculation so this is

another flexibility thing here is you

get to use your 2019 or 2020 payroll

which is really cool now there are some

eligibility requirements like i think

the ppp and double check this

but i think for ppp you had to have a

business in operation before february

15th

2020 to actually be eligible for the

first ppp loan

and probably the second one as well but

double check that so anyway let's do a

calculation here okay

let's say your gross income was eighty

thousand dollars

in other words you went over to this

uh this form over here this irs 1040

schedule c and uh you know what we'll go

ahead and just drop this really quick

into

uh the notes software so we could look

at it together here let's just drop it

into the current document cool

so that'll look a little funny because

i'll give you a copy of this but yeah

the the 1040 is going to be right here

so you get to see that as kind of an

example

all right so let's say the gross income

right here is uh 80 thousand dollars

okay perfect so we got 80 thousand

dollars listed here and

uh all right good so uh if the amount is

over 100k reduce the amount to 100k all

right well it's not so we don't have to

reduce it to 100k if it was we would

reduce it to 100k fine

if both your net profit and gross income

are zero or less you are not eligible

yeah obviously like if you didn't have

gross income

dude like yeah you're not gonna get this

okay now

calculate the average monthly net profit

or gross income amount

by dividing the amount by 12. okay no

problem so divided by 12.

so let's grab a little calculator here

and the calculator

is going to be let's just pull that up

really quick so

we're just going to take 80 000 divided

by 12

and then the rule says multiply that by

two and a half

times 2.5 okay 16666

keep that in mind for just a second here

and let's go to the next page here

so it says multiply that by

uh two and a half this amount cannot

exceed twenty thousand eight hundred

thirty three well it doesn't because we

just calculated

at eighty thousand dollars we would be

eligible for about sixteen thousand

six hundred sixty six seven uh for

our first ppp loan if you had an income

decline

in your next tax filing or for your ppp

round two you would be able to get even

more money

especially if you're in the restaurant

class and i think retail and or

certain travel sectors might be part of

that as well check into that it might

just be restaurants but anyway

you would be able to multiply that times

four instead of times two and a half

which is cool you'd get a little bit

more of a benefit in your second

ppp loan which is super exciting yeah

but verify that again the difference

between the second round and the first

round this video is not dedicated

towards that

it's just dedicated to really telling

you about the new changes here

okay cool so it looks like from our

first round of ppp let's say our net

income was zero because we wrote

everything off but our gross income was

80k

hey we should be eligible for 16 666

bucks

this is dope like that's freaking

awesome because remember we're gonna get

that tax benefit on top of that as well

for the 25 tax benefit or bracket that's

another four thousand bucks that's like

getting 20 grand

uh actually closer to like almost 21 000

but anyway

add any amount of the eidl

loan that you took to this amount so

let's say you took an eidl

loan of 20 grand well you'd be able to

add that

and you do not include the advance

because you do not have to repay the

advance

so in this case you could get a

forgivable loan of up to

36 thousand dollars if you had an eidl

loan as well

but let's pretend you didn't have an eid

alone which again is different from the

grant

okay cool then you have to provide your

documentation you provide your 2019 2020

tax returns you provide your schedule c

you provide your 1099 misc if you got a

1099 to verify that you actually

made money you are going to be required

to provide documentation for other

things that you want to spend this money

on

some of it has to go to payroll

generally the rule is

either 60 or 80 percent has to go to

payroll

uh and it depends it actually might be

said 25

so so check that they keep changing the

rules old school was

75 would have to go towards payroll and

25

would have to go towards expenses like

uh business supplies

uh mortgage interest business rents not

home interest right have to be business

mortgages

or business loans or things like that

necessary to operate your business

but they changed the rule and gave you

the option to say well we want to do 60

payroll 40 for uh you know expenses for

the business

i think they gave flexibility on which

way you want to go with that

this is why generally i just say look

when in doubt just apply

see how much you can get and then get on

the phone with these people or ask the

person your rep

once you get assigned to a rep hey look

this is what i plan to spend it on am i

good that's the way i would handle this

like don't don't

take this video for gold use it as sort

of a a springboard to get started and

get

curious on what this program is about

okay cool

so then if oh and by the way to be able

to

have things be eligible for a ppp

loan you actually have to show that on

your tax return like you can't say

that in 2019 you operated your business

and you wrote off

a thousand dollars a month of

electricity but then you didn't actually

write it off on your tax return as

electricity it's like why didn't you

write it off in 2019

they're using the fact that in the past

if you've written something off it's

probably a legitimate business expense

is the way they're looking at it here

all right so if you have an employee

things get a little bit trickier but

it's okay add your election either

one uh go ahead and enter the net profit

or the gross

income so if you take net profit the

calculations easier you take the net

times two and a half boom you're good

if you take gross it gets a little

trickier so you have to

put your gross income in so let's say in

this case your gross income was eighty

thousand dollars

on line seven but you had employee costs

so you had an employee and we're gonna

now subtract

out that employee cost and the way they

do that is they're basically gonna take

14 19 and 26 we looked at those earlier

they want you to subtract those out uh

and and that's going to tell you

okay cool so that's the amount of money

we have so let's say we subtract out

10 000 okay so now we're at

dollars in total here that's less than a

hundred thousand so that works cool we

got seventy thousand

then they want you to add to that

what you actually paid to your employees

so let's say ten thousand dollars was

for

employee expenses employee wages

health insurance and whatever else but

only two thousand dollars of that was

for health insurance whatever else and

the other eight thousand dollars was for

an employee

well then they say add back in the eight

thousand dollars they're really just

trying to get rid of the other expenses

because what they're trying to do is

they're just trying to multiply the

actual

payroll you have by two and a half

they're not trying to multiply all of

the other expenses you have by two and a

half so

that means okay cool we would have about

seventy eight thousand dollars of gross

employee wages in this case say we

actually paid somebody eight grand a

year maybe they were really part-time or

something like that

and then they want you to add back in

specific

contribution items which they do allow

you to add into the multiplier which are

things like

group health life disability vision

dental insurance

and retirement contributions and state

and local tax benefits

you can add that in then you know let's

say i don't know let's let's say that's

a thousand bucks okay just to make

things simple here

thousand bucks now you have a total of

seventy nine thousand dollars and this

makes so much more sense if you just

take out your schedule c and do it uh

following these things and i'll link

this uh this document

so you're at seventy nine thousand

dollars let's say then you calculate by

dividing by twelve okay seventy nine

thousand dollars

divided by twelve times two point five

got it okay

so you could do that math simple so

uh then the things you're allowed to pay

with the money to be eligible for this

to be a full write-off

employee payroll cost mortgage interest

payments but you have to actually have

these have to be business payments

business rent payments they have to be

in the name of the business you have to

have claimed them for

a deduction in prior years interest

payments on business debt

uh refinancing the sba eidl loan

covered operations expenses and that

definition

keeps expanding so you want to look into

that and they'll provide you details for

this

covered property damage from like riots

and things like that covered supplier

costs

and so on i mean this this thing goes on

and on so if you're curious

go to this form i'll link it down below

but anyway

then they talk about the second draw

loans how uh you could actually get

a multiplier uh

that's that's larger than two and a half

oh it looks like it's actually

a time of distribution 3.5 it's actually

3.5

not four so i made a mistake on that so

if you are

n a i c s code

72 you would actually get a multiplier

of three and a half times

for your second loan so if i write that

down into google

that's accommodation and food services

that's what my suspicion was earlier

i was just wrong in the multiplier it's

not times four it's times three and a

half

so that's the benefit they're giving to

like accommodations

and restaurants uh and yeah that's

that's

pretty much it there is talk about c

corporations and s corporations

but in that case you would be getting a

w-2 anyway so you you would be using

that for your payroll and if you have

multiple businesses you can apply for

multiple businesses as well

there are more details in this form but

hopefully this gets you excited enough

to consider

applying for the ppp i highly encourage

that you do

uh it's it's free money i don't see why

you wouldn't use it as long as you

follow the rules

yeah i mean look is it is it a push a

button easy no it's going to take you 20

minutes to get all your papers together

it's going to take you 15 minutes to do

the application

maybe it'll take you another 30 minutes

to ask questions and feel comfortable

with it

but then you're good and then maybe the

forgiveness takes you 20 minutes in the

future so you're literally talking about

less than two hours of work here

to in this potential example be getting

like a benefit of over twenty thousand

dollars like

why would you not do that so anyway i'm

going to

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thank you so very much for watching and

folks we'll see in the next one

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you