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Taxes are annoying. They cost your business a lot of money to pay. And then you have to spend a lot of time gathering all the proper documentation. And don’t forget to keep it organized. That’s where I have a couple of tricks that I recommend for my clients that I would like to share with you. Use a Receipt Manager A receipt management system will allow you to collect and organize your receipts digitally. You won’t have to worry about losing the receipts or not being able to access them when you need them. There are two types of receipt management softwares that I recommend depending on your situation and business needs. While both of these apps have a recurring membership structure, with your financial security at stake, it’s better to get something good that you have to pay for. Dext Dext’s primary focus is the ability to snap pictures of your financial documents and receipts while allowing you to split and itemize those receipts. It also has more features that are available at higher tiers of memberships. HubDoc Hubdoc does most of the same things as Dext but can’t itemize receipts. It is less expensive and has a different approach to organization. Whichever of these two you choose, I recommend starting with a free trial and seeing which one is the right fit for your business. Track Mileage Digitally Tracking and calculating mileage can be tricky. But you don’t have to do it manually. And with a good software you won’t have to stress about it at all. TripLog TripLog has a few key features which make tracking mileage easier. The most important feature is their compliance with tax codes. After that, they offer tools that can track your trips automatically, and help you classify your trips easily. And they offer good packages for either large businesses or individuals. In Conclusion There are plenty of other softwares that can help you avoid wasting time with tracking and organizing your documents for tax season. And using them will not only help you feel less stressed when it comes time to visit your tax preparer. They will make your daily management of your business easier too. Don’t miss out on using tech to set your business up for success. View full article

I’m not going to sugarcoat things. Times are hard. And they aren’t going to get any easier. One of the problems that makes hard times worse is fear. Fear of the future Fear of financial issues Fear of a collapsed economy We could spend all day writing out lists of the things we are afraid of, but we don’t have time to be that thorough. There are however a few key fears when it comes to your business finances that I believe need to be faced and addressed. Losing Savings When your money reserves start to dip, it’s easy to feel the pressure. Pressure turns into stress which turns into sleepless nights and uncomfortable discussions about money. Inflation is probably the biggest drain you will face in your finances. But that doesn’t mean your situation is hopeless. You can slow or stop the losses by eliminating redundant purchases and waste. Unused subscriptions for things such as streaming services are one of the largest sources of wasted money (and they’re easy to find and fix). Losing Work As business owners, spending money is less scary when you have enough work coming in to pay the bills. When work slows down, what you need is a strategy to boost your sales. Sometimes you need to start or increase your marketing. Other times you may need to seek help from a business coach to help you find where your business is not reaching its potential. Slow downs are unavoidable, but there are ways to handle them. Losing Investments The stock market is not fun to watch. Your money is riding a roller coaster, but you still feel your heart drop when the market turns down. The good news is that investing is a long-term game. If you miss the best days on the market, you will miss out on a lot of money. That’s not to say that every strategy works for every person. And you should seek out a financial advisor to help you make the best decisions. But just because the market is down today, doesn’t mean that the market will be down forever. Living Boldly Once you have recognized and faced your fears, you can start to address the solutions. Most companies that fail to grow or even survive, fail because they can’t or won’t face their fears. You can’t solve a problem you aren’t willing to look at. Sometimes you need help to get through the challenge of facing your fears, but in the end it will be worth it. If you don’t know how to address your financial fears in your business, I would be happy to speak with you and give you some direction. View full article

I don’t have a crystal ball. And I can’t predict the future. But there are some things I do know about what is coming in 2023 based on the current direction of our economy. And none of it looks pretty. Continued Inflation Inflation has been at an all time high for the past year and it’s not going to suddenly go down. Thanks to government spending and the printing of money to pay for that spending, inflation has spiked. And normal inflation which comes from increasing costs of goods and services is still a factor. All that to say, inflation is going to continue to impact the economy and business finances well into 2023. Less Disposable Income With inflation and increased cost of living comes a decrease in disposable income. A factor we are beginning to see, even now, is the reduction of unnecessary spending in low income households. While it starts by affecting low income households, it will begin to affect middle class households very soon. Many local businesses depend on people being willing and able to spend money on non-essential items. More IRS Involvement Last year saw the largest increase to the IRS in decades. The number of agents that have been added is a sign of increased focus on small businesses and increased audits. Expect to pay more in taxes or to be stuck dealing with surprise audits as the government attempts to crack down on errors in filing and those who evade payment. Preparation is Essential Local businesses fail first. When the economy suffers, the mom and pop style stores will bear the brunt of the problems as they don’t have the resources to spread out the losses. Survival requires preparation. You have to start making decisions now if you don’t want to get caught off guard by increased financial hardships.That’s where a review of your current financial situation can be extremely helpful. If you want to be prepared, I would be happy to sit down with you and discuss some solutions. Just set up a no-obligation appointment to get started! View full article

Last year I had the privilege of`appearing on @carmcapriotto podcast, Remarkable Results. We had a fantastic time talking about how to take care of your business finances and a few things you need to know to have a successful business. Here are a few of the points we discussed. Know Your Break Even Point The first thing you need to know about your business’ finances is what your break even point is. What is the point where your income and your expenses balance out? In other words, at what point do you actually start to make money? To know this number you have to know your expenses. What are your fixed expenses (the expenses that stay the same every month like rent and to some extent utilities)? What are your variable expenses (like labor, parts, and equipment)? And what debts do you have to pay? Once you put together your list of expenses, you can then begin to calculate how much money you need to make just to hit the $0 mark. And from there you can start to build a plan to make money beyond that. Know How to Make Your Income You also need to know how your income is broken down. For most mechanics shops that I have worked with, parts and labor are each about 50% of the income. But if you look more closely, certain services and parts are more profitable or make up a larger percentage of your sales. Knowing those details will help you decide how to grow beyond the break even point. And if you have a business coach who is helping you, you can use their advice combined with your knowledge of where you income comes from to make strategic decisions for the direction and goals of your business Know Your Accounts The last tip that I shared on the show is to know your accounts. You need to know where your business is as you go and not only when you are looking back through your purchases. It helps to have a bookkeeper who can help you keep on track and flag any issues they see as they come up. You also need to have the right model for your financial planning. Although I am not a financial advisor and cannot tell you which model to take, I have seen my clients succeed with a profits first model. With the right model for your business, you can improve your strategic decisions and not only focus on paying the next bill. Additionally, you need to have your accounts in order. It helps to have accounts set aside for distinct purposes. I have seen successful companies have separate accounts for purchasing, payroll, taxes, and other types of expenses. Success Takes Work These points are only the tip of the iceberg. You need a lot of other things in place to build a financially stable business. It takes a lot of work but it is worth it. We talked about these points in a little greater detail on the podcast so make sure you check it out here. And if you have any questions about how you can build a financially stable business (especially in the automotive service industry), please let me know. I would love to see how we could help!

When it comes to finding the right person to help your business maintain your finances and bookkeeping, trust and comfort are at the top of our client’s priorities. The clients that chose to work with us asked us a bunch of questions before we began working together. And while I can’t tell you the exact questions they asked, I can tell you the kind of questions they asked and the key principles that convinced them we were the right fit. Look For Value The first topic our clients covered in their questions was about value. While price was a consideration, they were more focused on the value they would be getting for their money. If you are only concerned about how much it will cost, you may end up missing out on the best value for your money. You need to find a bookkeeper who offers a good rate for good services. But don’t just consider the number or breadth of services included in the cost, consider how using the services will help you achieve your goals. Sometimes the services a company offers can help you accomplish more and be more efficient in your work. Whatever you decide to do, make sure that the value you receive is actually valuable to your bottom line. Look For Accuracy Accuracy matters. Even if someone is good at balancing a checkbook, they might not be good at handling the reconciliation processes. And worse yet, not all bookkeepers are capable of helping your business stay in good standing with federal and local legal requirements. You need to find someone who is attentive to even the smallest details and is willing to put in the extra effort to ensure that everything is correct. Look for someone who is knowledgeable about the legal requirements placed on your business for both financial reporting and tax planning. Having someone on your team to manage those aspects will set you miles ahead of where you could be by yourself. Look for Growth Your books are a treasure trove of information. And in the right hands, your books can be used to plan for consistent and significant growth. An average bookkeeper can keep track of all your financials and make sure everything’s up to date. An excellent bookkeeper can help you use the accurate information in your books to identify areas for improvement and growth. Running a business today is harder than ever. And trying to keep up with inflation and cost increases is getting more and more challenging. Having a bookkeeper who is looking to save you money where possible, and grow your money in other areas is an invaluable asset. Our Solutions At Three Rivers Bookkeeping, our entire goal is to help business owners grow their business through accurate bookkeeping that enables them to work on the parts of their business that matter to the bottom line and have the confidence that their business is moving in a positive direction. If you are looking for a bookkeeper, I would be happy to talk with you about your needs and the solutions we offer. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]

One of the biggest and most consistent challenges that my clients face is payroll. All bookkeeping is repetitive, but payroll seems to come up more frequently and present more challenges, especially for smaller companies. One of the first things that I recommend to all my clients when I start helping them with their books is to take payroll off of their plates. Here are four reasons why. Withholding Taxes Is Tricky If you are an employer and you aren’t using independent contractors, then you are required to collect withholding taxes on behalf of your employees. Calculating the correct amount to withhold and including the right amounts that include taxable fringe benefits is easy to mess up. Having your bookkeeper manage your payroll and manage those withholdings is far easier and less messy for you and your business. Misclassifying Employees Another area that affects taxes is how you classify your employees. If you fail to classify your employees correctly, you could end up on the hook for a tax bill for failing to collect and pay the appropriate taxes. Expensive mistakes like these are easy to avoid if you are using a bookkeeper to manage your payroll. Bookkeepers know exactly how to classify your employees so that your business is collecting and withholding taxes appropriately. Mistakes in Hours and Data Entry Far too often the mistakes made in payroll get overlooked. When you have 20 people to pay, you have to spend time reviewing their hours, and a small error can go unnoticed. Especially if you are busy trying to run your business. These little mistakes add up over time and can cause big errors. And if you try to fix them, you will lose hours checking over your data. A bookkeeper that double-checks every entry and is careful in calculating hours using bookkeeping software is better equipped to avoid most errors and fix any errors that slip through. Time Wasted While you may think of the time you spend taking care of payroll as just the time it takes, handling payroll yourself costs you more than you may realize. Not only are you spending time managing your payroll, you are also not spending time doing what you really need to do- running your business. How many clients did you not help because you were looking for an error in your numbers? How much more money could you have made using those same hours in another area of your business? Time is your most valuable resource as a business owner. Don’t waste it by trying to save money instead of making money. Doing payroll yourself might seem like a great way to save money, but more often than not it ends up costing more in the long run in terms of time and money. It’s always easier and better to have a service or a bookkeeper help you manage your payroll. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]

As a bookkeeper, I have unfortunately seen companies fail. They don’t tend to fail overnight. In fact, most of the companies that fail do so for multiple reasons. But before they fail, there are several signs of problems. Three of the most common signs that I have seen are easy to catch and fix, if you know what they are. Inconsistent Sales Sales are what make your business a business and not a charity. But if your sales aren’t consistent, your business will begin to suffer. Most people who choose to be employees choose that path because they can have a safety net. They don’t have to bring in work. They just show up to do the jobs. Inconsistent sales make employees feel less secure in their work. Not to mention the problems that inconsistent sales creates for your bottom line. One of the best things you can do if you need to improve your sales is get a business coach. Even I have a business coach. A business coach can help you understand what you need to do to grow and improve your business. And if you need a business coach, I have a great recommendation for you. Unhappy Employees Another common problem that I see from small businesses that aren’t doing well is unhappy employees. Low morale can come from any one of dozens of factors. But no matter what the root cause, unhappy employees will end up costing your business in the long run. Unhappy employees don’t typically put their best effort into their work. They are also less likely to be looking out for your interests, which can cause increased waste and costly corrections. Sometimes the issues with unhappy employees can be solved by finding better pay structures. Other times you may need to sit down with your employees and figure out what part of the management system is making it harder for them to do and enjoy their jobs. But when you fix morale problems, your team will function better and you can begin to rely on them to have your needs in focus. Unorganized and Incorrect Books As a bookkeeper, it’s rather obvious that I would find the health of a business easily diagnosed via a company’s books. But a couple of the areas that make it easier for even an amateur to identify as issues are incomplete books and disorganization within the books. If your books aren’t organized properly, your business may be wasting money. It’s easy to miss double charges, mistakes in purchases, and other costly errors when you can’t quickly assess and verify income and expenses. Getting a bookkeeper on your team can make a huge difference. A bookkeeper can pay for themselves by helping you avoid wasting money and time. And the stress you will avoid by relying on a bookkeeper will absolutely be worth bringing a bookkeeper onto your team. As a virtual bookkeeper, I don’t have to be an employee to be part of your team. And if you are interested in what that might look like, I would be happy to speak with you about it. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]

One of the most common questions I get is “Why do I need a bookkeeper?” It’s usually accompanied by a “I can do it myself or have a friend help me for less.” I recently had a client I helped that demonstrates exactly what I do and how it helps. I won’t include their name, or any identifying information, but I want to share with you how the work I do impacts their business. What a Disaster Looks Like I don’t call errors a disaster lightly. A disaster means major problems. When I got my first glance at this set of books, I was shocked that they were still in business. There were a ton of weird transactions that didn’t make any sense. The books had got to the point where they were affecting the taxes. The file was too broken to repair, so I had to start a new file. But the problems with the books hadn’t stayed on paper. The owner didn’t know anything about his income, his sales tax collection, or the state of his bills. And he couldn’t track his expenses in parts or labour. Overall, revenues were trending down drastically. The Problem and How to Solve It Bad bookkeeping affects your whole business. It keeps you from tracking and controlling your expenses. You won’t be able to make adjustments to be more effective if you can’t measure your costs. In this case, not knowing the state of his business, kept this owner from being able to budget and keep his costs under control. And his taxes would end up costing him more due to fines and fees. After I had reviewed his books, I started him on a new file to ensure that none of the problems from the old file were present. I also brought his books into the cloud where they would be easier to access and consistently backed up. I taught him how to send the information to me so we could organize his books properly and categorize his expenses accurately. I also instituted monthly reviews to keep him aware of the state of his books and to help him make better decisions for his business. Success Takes Consistency Because we implemented the right systems and set him up for success. We were able to get him back on track. As of this year, he is on his way to hit his highest revenue ever. He is organized and can analyze what is happening in his company so he can make better decisions and adjustments to keep on track. And he’s able to grow his business and look at expanding. The difference between success and failure was the organization of his books. I’m not saying that every case will be like this client’s. Every set of books brings unique challenges. But fixing your books is a key step to understanding and growing your business. If you want to know how a bookkeeper can help your business turn difficult times into opportunities, I would love to speak with you about your circumstances. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]

Whether you like Tom Brady or not, you have to admit he is the Greatest Of All Time. I’m not a football person, but when I hear or read about his accomplishments, I’m amazed. If your shop isn’t the greatest, do you know why? What is your vision for your auto repair shop? One lesson I’ve learned is that you have to see where you want to be in the future. See where you want your shop to be in 3 years or 5 years. When you see this picture of your shop the way you want it to be, what does that look like? Does it bring a smile to your face or fill you full of satisfaction? Another term you may be familiar with is a Unique Selling Proposition or USP. This is what sets your shop apart from your competition. This is the reason why people do business with you when they have other choices. Perhaps your techs are THE very best in town or your pricing is fair and more affordable than the rest. It could be that your customer service is amazing, and you treat you customers like clients. You place them at such a high value that they feel like family. This is my goal in my bookkeeping business. To be THE very best at what I do. To serve my clients as part of their team and not just another vendor. If you couldn’t answer that question about if you shop isn’t the greatest, I can help with that. I have a report that shows you what your competition is doing, so you may adjust and be better than they are. It would be like having a video tape of your next opponent’s practice. You would be able to defeat them because you knew what they were going to do next. This was what the Tampa defense did to Kansas City in this year’s Superbowl. Made Mahomes one frustrated guy and no TD’s! That hasn’t happened often. Andy Reid wasn’t thrilled either. I had a friend who knows football help me with that football stuff by the way. This is part of who I am. I do the research, so I know my clients and I have the experience to expect what they need. I’d love to talk to you about how I can help you become the GOAT of repair shops in your area. Let’s find out how I may be able to be that teammate. The one that helps you become the winner you see when you look at your shop in the future. The best to you and the success of your shop. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]

Whew! We’re moving on from the PPP loan blog series to dispensing knowledge about the Employee Retention Credit. Hello IRS! With all of the changes and tax time approaching ~2 months away, I hope you’re ready to go. If you haven’t already filed, here is some information that’s about two weeks old, so grab a cup of coffee as we dive into a summary of this credit. This credit is designed to make it easier for businesses that chose to keep employees on their payroll through all the challenges that COVID-19 brought and is still brining. For those of you who kept your employees, thank you and stick with me as I open some data. The name of this is the Taxpayer Certainty and Disaster Tax Relief Act of 2020, and was enacted December 27, 2020. This made changes to the CARES Act and directly related to this was modifying and extending the Employee Retention Credit (ERC), for six months through June 30, 2021. Several of the changes apply only to 2021, while others apply to both 2020 and 2021. Here’s what this new Act reads as an employer, you can a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. The limits of qualified wages are $10,000 per employee per calendar quarter in 2021. This means the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021. Depending on the size of your team, this could be a substantial credit. You as an employer can access the ERC for Q1 and Q2 of ’21 prior to filing your employment tax returns by reducing employment tax deposits. If you are an employer with 500 or less full-time employees in 2019, you may request an advance payment (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits. In 2021, if you are an employer with greater than 500 employees, you are not eligible for the advance. Here are a couple of eligibility rules. As of 1/1/21 employers are eligible if you operate a trade business during 1/1/21 – 6/30/21 (Q1 & Q2 of 2021) and either of these apply. A full or partial suspension of the operation of their trade or business during this period because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or A decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019 (to be eligible based on a decline in gross receipts in 2020 the gross receipts were required to be less than 50%). If you started your business in 2020 then you can use the corresponding quarter in 2020 to measure your decline. For Q1 and Q2 of ’21 you can measure the decline in gross receipts using the quarter that came immediately before the current quarter (Q4 of ‘20 to measure Q1 of ’21). Effective 1/1/21 the definition of qualified wages was changed to read: For an employer that averaged more than 500 full-time employees in 2019, qualified wages are generally those wages paid to employees that are not providing services because operations were fully or partially suspended or due to the decline in gross receipts. For an employer that averaged 500 or fewer full-time employees in 2019, qualified wages are generally those wages paid to all employees during a period that operations were fully or partially suspended or during the quarter that the employer had a decline in gross receipts regardless of whether the employees are providing services. Lastly, here is a paragraph for employers who received PPP loans from 3/27/20 and forward. You may claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan. You may check out this link for more information COVID-19-Related Employee Retention Credits: How to Claim the Employee Retention Credit FAQs or contact me and we can talk through this. The next blog will be about what to do after you receive your PPP loan. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected]

We ended Part 3 of this blog series with “Second Draw PPP Loan Application and Documentation Requirements”. As this second draw is being distributed, the rules are changing. I encourage you to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. You may also contact me if you would prefer to have a conversation with someone outside the government. My contact information is at the bottom of this post. Beginning Part 4, we start with expanding on this rule from the New PPP Regulations: For Second Draw PPP Loans of $150,000 or Less, Revenue Reduction Documentation is Not Required to be Submitted at the Time the Borrow Submits an Application for a Loan: This section is self-explanatory, but just a bit of clarification for you. When you apply for a loan in an amount that is less than $150,000, you may disregard the required documentation mentioned in the previous blog. There is a three-letter word that causes a pause here “BUT” “Must be submitted on or before the date the borrower applies for loan forgiveness, as required under the Economic Aid Act.” A second piece is that IF you as a borrower do not apply for loan forgiveness, you must provide this documentation to the SBA when they request it from you. So, be prepared. How to Request an Increase for a PPP First Draw Loan if the Borrower Returned All or Part of a Loan, or Did Not Accept the Full Amount Previously Approved: Here are the categories of borrowers that may reapply or request an increase in the amount of the PPP loan: If a borrower returned all of a PPP loan, the borrower may reapply for a PPP loan in an amount the borrower is eligible for under current PPP rules. If a borrower returned part of a PPP loan, the borrower may reapply for an amount equal to the difference between the amount retained and the amount previously approved. If a borrower did not accept the full amount of a PPP loan for which it was approved, the borrower may request an increase in the amount of the PPP loan up to the amount previously approved. You may use the SBA’s E-Tran Servicing website to request an increase in the PPP loan amount electronically. After the request, you are required to provide the lender with supporting documents for the increase. As of this writing, the SBA’s process for collecting information from borrowers was under development. This may be available when you apply for an increase in the loan amount as described above. Clarification on Borrowers that are Ineligible to Receive a Second Draw PPP Loan: Here is some language from the Economic Aid Act that describes borrowers who are NOT eligible to receive a Second Draw PPP loan. Read carefully please? A business concern or entity primarily engaged in political activities or lobbying activities, including any entity that is organized for research or for engaging in advocacy in areas such as public policy or political strategy, or that describes itself as a think tank in any public documents; Certain entities organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong, or with other specified ties to the People’s Republic of China or the Special Administrative Region of Hong Kong; Any person required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (22 U.S.C. 612); A person or entity that receives a grant for shuttered venue operators under section 324 of the Economic Aid Act; A publicly traded company, defined as an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f). Pay attention to the punctuation here. At the end of each bullet, there is a semicolon “;”. This means that if the first bullet does not apply to your situation, the next one or the next one, or the next one, OR the NEXT one may. We’re getting close to the end, but this section has some additional clarification of borrowers that will not qualify for the second draw PPP loan. Check out these are examples: You are engaged in any activity that is illegal under Federal, state, or local law; You are a household employer (individuals who employ household employees such as nannies or housekeepers); An owner of 20 percent or more of the equity of the applicant is presently incarcerated or, for any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of, pleaded guilty or nolo contendere to, or commenced any form of parole or probation (including probation before judgment) for, a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year; You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government; Your business or organization was not in operation on February 15, 2020; • You or your business received or will receive a grant under the Shuttered Venue Operator Grant program under section 324 of the Economic Aid Act; The President, the Vice President, the head of an Executive Department, or a Member of Congress, or the spouse of such person as determined under applicable common law, directly or indirectly holds a controlling interest in your business; Your business is an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); Your business has permanently closed.” Again, same observation regarding the semicolons at the end of each bullet. Thanks for sticking with me and welcome to the end of this blog series. Whew, that IS a TON of reading. Again, I am keeping current of the changes as they happen, so if you want to talk, let’s schedule a time to meet soon. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected] View full article

We ended Part 2 of this blog series with “Calculation of Average Monthly Payroll Costs for NAICS Code 72 Entities That Qualify as Seasonal Employers or as New Entities:” This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. Beginning Part 3, we start with expanding on this rule from the New PPP Regulations: “Bankruptcy Prevents Borrowers from Receiving a Second Draw PPP Loan:” The Interim Final Rules (IFR) state that if your business is in bankruptcy, you will not be approved for a PPP loan. Congress gave the SBA to defer that decision to bankruptcy judges but did not choose to exercise that option. Again, don’t shoot the messenger please? I was shocked by this decision myself. I encourage you to look at the language from the IFR but will not insert them here. Here’s a quote from the IFR to give you a taste. “If the applicant or the owner of the applicant is the debtor in a bankruptcy proceeding, either at the time it submits the application or at any time before the loan is disbursed, the applicant is ineligible to receive a PPP loan.” There is more that discusses the timing of when you file for bankruptcy and that’s where the hairs start getting split. If you find yourself in this possible gray area, check out the IFR. There is a new way to account for a 25% reduction in revenue that will qualify you for a second PPP loan. Here’s the language: “A borrower that was in operation in all four quarters of 2019 is deemed to have experienced the required revenue reduction if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline.” Here’s the idea. If your shop had a reduction of annual receipts (when comparing 2019 to 2020) while in operation in 100% of 2019 and 2020, then you meet the criteria. Another wrinkle is that you must have already qualified before taking the revenue reduction into account. The IFR does make this simpler than it was before. If you want to find out the reasons the SBA created a variable method of figuring their reduction in revenue, check out the IFR or we can have a conversation. I’m here for you. Lastly, you can still qualify for the second draw when you have a reduction of 25% in revenue by proving that you had the reduction in one quarter of 2020 when compared to the same quarter in 2019. For example, if you had the revenue reduction in the 1st quarter of 2020 when compared to the 1st quarter in 2019, you qualify. Here’s the second and last topic for this blog. My eyes are starting to cross so hang in there. Second Draw PPP Loan Application and Documentation Requirements: If you are wanting to make application, you should do that as soon as the application is available. It may be available now, so check it out. The IFR did specify the documentation requirements, so here we go. The documentation standard is essentially the same as the first draw PPP loan. If you meet these requirements, no additional proof of payroll costs is required. These requirements come straight from the IFR: If the applicant: (i)used calendar year 2019 figures to determine its First Draw PPP Loan amount, (ii) used calendar year 2019 figures to determine its Second Draw PPP Loan amount (instead of calendar year 2020), and (iii) the lender for the applicant’s Second Draw PPP Loan is the same as the lender that made the applicant’s First Draw PPP Loan. When you meet the standards from above “Additional documentation is not required because the lender already has the relevant documentation supporting the borrower’s payroll costs.” Even if you do meet the standards from above, the IFR allows lenders that latitude to request additional documents if the lender “concludes that it would be useful in conducting the lender’s good-faith review of the borrower’s loan amount calculation.” Here some plain language. The bank can ask for more documents to review your calculation of the loan amount. When you are asking for a second round PPP loan that is greater than $150,000 you have to submit documents that are “adequate to establish that the applicant experienced a revenue reduction of 25% or greater in 2020 relative to 2019.” An example of the documents is: Relevant tax forms, including annual tax forms, or Quarterly financial statements or bank statements if relevant tax forms are not available. Hello Ms. Bookkeeper, do you have a handle on this stuff? I’m confident I do, so if you want to talk, let’s schedule a time to meet soon. In part 4 of the series, we’ll start with: For Second Draw PPP Loans of $150,000 or Less, Revenue Reduction Documentation is Not Required to be Submitted at the Time the Borrow Submits an Application for a Loan: See you back here for Part 4. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected] View full article

Hi, Natalie here. We ended Part 1 of this blog with the SBA’s definition of gross receipts which is consistent with SBA’s size regulation 13C.F.R. 121.104. This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. Beginning Part 2, we start with expanding on this rule from the New PPP Regulations: “Any Forgiveness Amount” of a First Draw PPP Loan is Excluded from a Borrower’s Gross Receipts.” Simply stated, you can breathe a sigh of relief. Forgiveness amounts from your first draw PPP loan are not included a gross income when adding up what your gross receipts were. Think of this as a tax deduction taken right off the top of your gross receipts. Yes, I went there, taxes. As I write this, I’m preparing my client’s books for the tax pros who will be busy from February through April 15th. But, I digress, back to the SBA interim rules If you want to dive into the SBA rule on forgiveness amounts, check out section 7A(i) of the Small Business Act. The takeaway from this section is that PPP forgiveness amounts are expressly excluded (they don’t count) from being taxed as income. This also makes sure you are not disqualified from receiving the second draw PPP loan because of forgiveness during the first draw PPP loan. Restated, you have a better opportunity to qualify for the second round of PPP loans. The next line in the interim rules reads: “Borrowers May Use any 365 Day Period Beginning on January 1, 2019 to Calculate Their Average Monthly Payroll Costs:” The following is general in nature and not related to your specific situation, so stick with me, please? The maximum amount any individual borrower my receive from the second draw PPP loan is the smaller amount of two and one half (2.5) months of the borrower’s average monthly payroll costs during that 365-calendar day period not to exceed $2 million. You have two options for calculating the time period. “The 1-year period before the date on which the loan is made.” “Calendar year 2019.” You have some flexibility here as you can choose any 365-day period starting on 1/1/19. It may be an exact calendar year or may be any period of 365 days between 1/1/19 and today. An example based on the federal government fiscal year is starting on 10/1/19 and ending 9/30/20. Here’s quote from the Interim Financial Rules if you’d like to read the ‘official’ language: “Subsection (f) of the IFR uses “calendar year 2020” to refer to “the twelve-month period prior to when the loan is made.” Calculating payroll costs based on calendar year 2020 rather than the twelve months preceding the date the loan is made will simplify the calculations and documentation requirements for borrowers because payroll records are more commonly created and retained on a calendar-year basis. Allowing borrowers to calculate payroll costs based on calendar year 2020 is also not expected to result in a significant difference in payroll costs compared to the twelve months preceding the date the loan is made because all Second Draw PPP Loans will be made in the first quarter of 2021.” To wrap up this blog, we’re going to dive into another section of the Interim Financial Rules: “Calculation of Average Monthly Payroll Costs for NAICS Code 72 Entities That Qualify as Seasonal Employers or as New Entities:” If you are a seasonal employer or new entity that is not a NAICS Code 72 business this is for you, but wait. A NAICS Code 72 business is defined as “businesses in the accommodation and food services sector”. Here’s where it gets a bit deep and potentially confusing. A NAICS Code 72 business may also be considered as seasonal employer or a new entity. I know, what appears to be typical government legalese and double speak. Hang in there as I do my best to translate this for you. The Interim Final Rules clarify this by stating that when your NAICS Code 72 business fits into one of these separate categories… Here’s where the seasonal employer/new entity and NAICS Code 72 business are joined. These businesses MAY calculate their payroll costs used to determine their loan amount… …based upon the formula that applies to the entity, OR the standard formula used to calculate payroll costs for every other type of borrower… while still being allowed to use the 3.5 times multiplier that is applied to NAICS Code 72 entities under the new Act. Wading through government regulations can be challenging and this blog series will continue with Part 3. We’ll start with: “Bankruptcy Prevents Borrowers from Receiving a Second Draw PPP Loan:” I may be able to shed some additional light on these new rules, so contact me if you want to talk this over or do my best to answer specific questions about these new rules. See you back here for Part 3. Natalie Paris https://threeriversbookkeeping.com/ 907-331-0208 [email protected] View full article

Hi, Natalie here. There is wealth of information to clear up confusion about the new regulations regarding PPP loans. There will probably be changes, so this is summary is based on the best information currently available. Before you take action, I encourage you to check for updated rules and make sure you are fully informed before signing any paperwork. As with any government program, there are a lot of details that need to be understood. So this may be spread out over two-to-three blogs, as my goal is to deliver this information in bite-sized chunks. For additional information, I suggest you contact your local Small Business Association (SBA). Here’s a headline of the first section from an article in Forbes magazine: “Second Draw PPP Loan Eligibility Requires that Borrower will have spent the “Full Amount” of the First Loan Before Receiving the Disbursement of the Second Loan” The title for this Act is a mouthful of legalese, but the short title is the “Economic Aid Act”. This Act states that “a Second Draw PPP Loan may only be made to an eligible borrower that (1) has received a First Draw PPP Loan, and (2) has used, or will use, the full amount of the First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan is disbursed to the borrower. Let’s break this down into simpler language. You have to be eligible You have received the first PPP loan You will spend 100% of the first loan before collecting any of the funds from the second PPP loan Here is some clarification from the Interim Final Rules: The borrower must have spent the full amount of its First Draw PPP Loan on eligible expenses under the PPP rules to be eligible for a Second Draw PPP Loan; and “The full amount” of the borrower’s First Draw PPP Loan includes the amount of any increase on such First Draw PPP Loan made pursuant to the Economic Aid Act. This next topic is what the definition of “Gross Receipts” is. “Gross Receipts” Defined for Purposes of Determining Whether There Has Been a 25% Drop in Revenues to Qualify for Second Draw Unfortunately, the Economic Aid Act does not include a general definition of “gross receipts” for purposes of determining a borrower’s revenue reduction. Here is what is included in gross receipts: ““All revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.” Here is what is not included in gross receipts: “Taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); Proceeds from transactions between a concern and its domestic or foreign affiliates; and Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.” One additional statement regarding what may not be excluded from gross receipts has to do with contractor costs and other items under the category of “all other items”. These items include: reimbursements for purchases a contractor makes at a customer's request investment income employee-based costs such as payroll taxes Lastly for part 1, this definition of gross receipts is consistent with SBA’s size regulation 13C.F.R. 121.104. This is another great reason to check out the SBA’s website www.sba.gov or go to your local SBA office for additional information. I may be able to shed some additional light on these new rules, so contact me if you want to talk this over. View full article

You're absolutely right about that. I'll keep posting new information from the accounting community as it becomes available. We're all rallying together to make it as easy to understand as possible.

This is all very well said. Even with how tough this year has been, if I look at what was accomplished this year it shows many steps in the right direction. Helping shops financially survive and make it to 2021 has been one of the greatest and most humbling experiences of this year.

The new 5,500+ page Covid Relief Bill is massive, and it will take many weeks to digest everything included in the legislation. Here's what we know about business relief and PPP funds: There is now streamlined forgiveness for PPP loans under $150K. This is a significant development for many so check with your lender about how they want that now to be handled. There is also now an additional $284B in PPP funding for impacted businesses to access. More on this in days to come...