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Archive: 2020

PPP Update – SBA Issues New Simplified Forgiveness Application for Small Loans

Posted October 15, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate

On October 8, 2020, the Small Business Administration “(SBA”) provided a simpler forgiveness application for PPP loans of $50,000 or less. The key simplification is that the borrower can ignore reductions in either employee headcounts or of salaries or wages!

If you are eligible to use the simpler PPP loan forgiveness form, you probably want to do so. The new 3508S application form is easy to complete. The form asks for identifying information including your business name, contact information, tax identification number, the loan number and amount.

Instead of having to show your forgiveness amount calculation as you do on the 3508EZ application form, you need to certify the following seven things:

 

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PPP Update - Summary of August 24th Interim Final Rules (“IFRs”)

Posted September 7, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
After more than a month of silence, on the part of the SBA, they issued new FAQs on August 4, which provided some additional guidance and clarification, most of which was not borrower friendly! More recently, on August 24, the SBA issued new IFR’s, which provided additional guidance and clarification, as both borrowers and lenders prepare for the loan forgiveness process. While the IFR’s provided additional needed clarification, new guidance, as same pertains to certain related party transactions, are patently unreasonable and make little sense, whatsoever. Below are the highlights from the new IFRs. Following the highlights is a deeper dive into specific issues addressed, relative to owner compensation, limitations on forgiveness for related-party rental payments and attributable to shared and sublease rental arrangements. The highlights of the IFRs are as follows: Limits on the amount of owner-employee compensation that can count towards forgiveness only apply to shareholders who own 5% or more of an S or C Corporation. No clarity was provided for partners in a partnership. Thus, arguably, a partner owning any percentage may be subject to the owner-employee compensation limitations! As a reminder, these owner-employee compensation limits are as follows: For the 8 weeks period, the lesser of: (1) $15,385 or (2) 15.385% of 2019 compensation; and for the 24 week period, the lesser of: (1) $20,833 or (2) 20.833% of 2019 compensation. For non-owner employees, the limits are, for the 8 week period, $15,385 and, for the 24 week period, $46,154. Additionally, for owner-employees, forgiveness for retirement plan contributions for such owners are now limited to 20.833% of the 2019 retirement plan contribution amount, for those contributions made during the applicable covered period.

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HOW TO TOGGLE LARGE RETIREMENT BENEFITS TO YOUR HEIRS

Posted September 4, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News
Here is the scenario.  Herbert, age 80, has $3,000,000 in his retirement plan. He has around $7,000,000 in other assets.  His wife, Wilma, died recently. Herbert and Wilma have two sons, one a high-risk doctor; the other a real estate developer who has personally guaranteed several projects. Herbert has four grandchildren, two from each son. Herbert is aware that under current law, there is no Estate Tax issue for him because of the approximate $11,600,000 Exemption plus the unused Exemption from his wife. He knows that on January 1, 2026, the Estate Tax Exemption will be cut in half.  He is also aware that if the Democrats get back in control in 2021, this reduction is likely to be accelerated to 2021 or lowered even more. The flat 40 percent Estate Tax rate could increase. Herbert also knows that IRA distributions, etc. are subject to Income Tax as well. To make things even more complicated, beneficiaries of qualified retirement plans, IRAs, etc., with few exceptions, must receive their monies by December 31 of the tenth year after the death of the participant or IRA owner.

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PPP Update – New SBA FAQs

Posted August 16, 2020 in Mitchell F. Green, Robert M. Kramer, Asset Protection, Corporate and Taxation, Estate Planning and Probate, News

After more than a month of silence, on the part of the SBA, they issued new FAQs on August 4, which provided some additional guidance and clarification, most of which was not borrower friendly! Below are the highlights from the new FAQs. Following the highlights is a deeper dive into specific issues addressed, relative to forgiveness for health insurance and retirement benefits and owner compensation, whether owners of a C Corporation, S Corporation, Partnership, as well as for those self-employed. The highlights are as follows:1.  Scanned Copies, E-Signatures and E-Consents allowed to be used. This is intended to simplify the documentation requirement part of the forgiveness application, especially in light of the ongoing pandemic. 2.  Interest is only owed on portion of loan that is not forgiven, and payments are not required to be made until SBA remits the forgiveness amount to the lender. It is expected that banks will have 90 days to review forgiveness application and, thereafter, the SBA will have 120 days to determine forgiveness and submit the proceeds subject to forgiveness to the bank. 3.  Forgiveness not permitted for healthcare and retirement benefits accelerated from periods outside of the Covered Period. 4.  Owner compensation limitation ($20,833, based on a 24-week forgiveness period) applies cumulatively across all businesses. This is a significant limitation as, previously, borrowers who were owners of various businesses were of the belief that the owner compensation limitation applied on a per business/entity basis!

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