2020_ADN_V5_No3_web
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
Got<br />
Questions?<br />
We have answers!<br />
Accounting expert Pat Shannon answers questions<br />
on everything from PPP loans to tax forms to<br />
revenue numbers.<br />
In the hazy maze of this financial<br />
quagmire thanks to Covid-19, many<br />
business owners are left with questions.<br />
The Small Business Administration (sba)<br />
is offering help, but unless you’re an<br />
expert in the field of economics, there<br />
are opportunities for confusion and<br />
frustration. Thankfully, Pat Shannon fits<br />
the bill for the aforementioned qualifications.<br />
Shannon is a car wash owner,<br />
the President of the Heartland Carwash<br />
Association and an expert in small business<br />
accounting, payroll, personal and<br />
business tax preparation. The following<br />
are answers to questions posted to<br />
carwashforum.com.<br />
Why doesn’t an S-corp qualify for<br />
the PPP loan?<br />
PAT SHANNON: Being an S-Corp does<br />
not disqualify you from receiving a PPP<br />
Loan and if you do not receive a PPP<br />
loan you should explore the employee<br />
retention credit. If your business is taxed<br />
as an S corporation, your owner draws<br />
are known as shareholder distributions.<br />
It’s important to realize that these distributions<br />
are non-taxable, which means<br />
there are some pretty strict requirements<br />
in place to prevent owners from taking<br />
advantage. As an owner of an S-Corp,<br />
you are required to pay yourself a reasonable<br />
salary through payroll, meaning that<br />
you are remitting payroll taxes on that<br />
amount. You are allowed to take distributions<br />
in addition to this salary, but it’s<br />
best practice to have a combination of<br />
the two rather than distributions alone.<br />
We purchased our business about<br />
two years ago from the owner on a<br />
land contract and we have about a<br />
year left to pay it off. We updated<br />
our equipment and rehabbed the<br />
building using a home equity loan.<br />
Our LLC is a partnership between<br />
my dad and me. I have noticed<br />
that sole proprietors and LLCs<br />
are specifically mentioned in the<br />
stimulus package. From what I have<br />
gathered so far it seems like we<br />
may be able to get some assistance<br />
based on the numbers that we<br />
show as profit. Is this true?<br />
The help you can receive depends on the<br />
program that you are applying for. For<br />
EIDL loans (applied for directly on the<br />
Small Business Administration <strong>web</strong>site)<br />
they are revenue based. For PPP loans to<br />
sole proprietors and LLCs that file taxes<br />
on Schedule C they are profit based. You<br />
stated you were a partnership, so your<br />
1065 and K-1s would drive your eligibility.<br />
The 1065 would document formal<br />
payroll and the K-1s would document<br />
owner draws or distributions. The last<br />
day to apply for a PPP loan is August<br />
8th, so see your banker right away.<br />
Here we are with all of the overhead<br />
of a small business without the<br />
payroll. Are there any benefits<br />
available for those who have been<br />
affected by COVID-19? Utilities,<br />
mortgage payments and equipment<br />
loans are the same as any other<br />
business with payroll…so, what is<br />
available and how do we apply?<br />
The time to take cookies is when cookies<br />
are being passed around. That was the<br />
advice that I gave Heartland Carwash<br />
Association members back on April<br />
4, <strong>2020</strong>, when I laid out all the programs<br />
available to help business owners. Now,<br />
four months later, many of the programs<br />
are closed or out of money. You have until<br />
Aug 8, 202,0 to get a PPP loan, get to<br />
your banker ASAP for details. Otherwise<br />
the Employee Retention Credit<br />
and the Employer Tax Deferral<br />
programs will still be available to you.<br />
I recently got this email: “You are<br />
receiving this message as a notification<br />
that your Economic Injury<br />
Disaster Loan (EIDL) application<br />
is currently being processed in<br />
the order it was received. You<br />
will receive an email notification<br />
when there is a change to your<br />
application status” and then I found<br />
$1000 in my account. It doesn’t say<br />
anything about it being an advance.<br />
Should I assume that’s what it is?<br />
Yes, EIDL Advances were deposited<br />
without notice or explanation. Be happy<br />
that you got the advance, as that program<br />
quickly ran out of funds and has not<br />
been refunded leaving the SBA owing<br />
advances to many businesses and no<br />
additional funds look to be forthcoming.<br />
The Paycheck Protection Plan<br />
loan includes the self employed,<br />
so long as you have paid taxes as<br />
a self employed business owner.<br />
Therefore, you should be good for<br />
2.5 times the monthly “payroll” as I<br />
understand this so far. Is this true?<br />
Yes, depending on the tax form being<br />
filed and a few other details.<br />
SBA’s plan for use of funds provided<br />
through public laws<br />
The Small Business Administration’s<br />
plan for use of funds provided through<br />
public laws: Coronavirus Aid, Relief,<br />
and Economic Security Act (CARES<br />
Act), the Paycheck Protection Program<br />
and Health Care Enhancement Act,<br />
and Coronavirus Preparedness and<br />
Response Supplemental Appropriations<br />
Act, <strong>2020</strong>.<br />
allowing 20 and 25-year interest rates at<br />
2.214% and 2.269%, respectively.<br />
“These are very encouraging terms<br />
and very supportive of our nation’s goal<br />
to bounce-back from COVID-19,” said<br />
William Manger, SBA Chief of Staff and<br />
Associate Administrator for the Office of<br />
Capital Access. “CDCs” are the driving<br />
force behind the 504 Loan Program.<br />
The longer terms and low interest rates<br />
support and encourage entrepreneurs<br />
to step outside of the box and look at<br />
real investments. We are pleased that the<br />
504 Loan Program continues to show<br />
double-digit year-over-year growth,<br />
especially in these extraordinary times.”<br />
Small businesses looking for information<br />
on how to expand their business’s<br />
real estate or improve their working<br />
capital should visit: https://www.sba.<br />
gov/brand/assets/sba/sba-lenders/504-<br />
Loan-Fact-Sheet-Borrower-Version.pdf<br />
The 504 Loan Program is an SBA<br />
business loan program authorized under<br />
Title V of the Small Business Investment<br />
Act of 1958, 15 U.S.C. 695 et seq. The<br />
core mission of the 504 Loan Program is<br />
to provide long-term financing to small<br />
businesses for the purchase or improvement<br />
of land, buildings, and major<br />
equipment, to facilitate the creation or<br />
retention of jobs and to support local<br />
economic development. Under the<br />
504 Loan Program, loans are made in<br />
conjunction with private sector lenders<br />
to small businesses by CDCs, which are<br />
certified and regulated by the SBA to<br />
promote economic development within<br />
their community.<br />
For questions about the 504 Loan<br />
Program, please contact:<br />
Linda Reilly, Chief, 504 Loan Program<br />
202-205-9949Linda.reilly@sba.gov<br />
VOL. 5, NO.3 • FALL <strong>2020</strong> | AUTO DETAILING NEWS | 11