Category Archives: Investment Management

As always, if you have additional questions, please contact your advisor or schedule a consultation.

General Loan Q&A

Provided by Mueller Prost. Written by MaryPat Davitz
*This content was published April 7, 2020 and is continually evolving. Please reference Mueller Prost’s original site for the latest source of any updated information.

Q: If I have 3 companies with separate EIN, can I apply for a SBA loan for each company? How will SBA treat this considering the “affiliates” as defined by SBA?

A: Yes, you can apply for and EIDL or PPP loan for each separate company with separate EIN. Each applicant should have payroll tax filings to support gross wages used to calculate the monthly payroll costs for PPP and other information may be requested for EIDL. The SBA will consider affiliate relationships to ensure that each entity that applies meets the SBA requirements as a small business as appropriate giving consideration to the requirements of the CARES Act.

Q: Can an S-Corp apply with only one shareholder/owner apply?

A: An S-Corp with only one shareholder may apply for either, or both the EIDL and the PPP loan.

Q: Understanding “double dipping” concerns by the government, how will this align with the FFCRA, which allows dollar for dollar tax credits for those who take COVID related sick leave, up to 12 weeks? Technically that pay is “forgiven” with the tax credits. Now we have a PPP loan forgiven.

A: Wages paid or expected to be paid under the FFCRA should be excluded from the calculation of payroll costs. PPP loan funds should not be used to pay wages that will be considered for the tax credit available under the FFCRA.

Q: If I get the PPP loan, can you also take advantage of the 6.2% payroll tax deferral program?

A: You cannot utilize the payroll tax deferral program for wages paid using PPP funds. You can utilize other programs as long as you do not “double dip”. So, wages that qualify for other programs cannot also be paid from PPP loan funds if you are receiving a benefit under those other programs.

Q: To confirm, the SBA loans need to go through the government website directly, and the PPP loan needs to go through a banking partner?

A: Correct. The EIDL is a direct loan with the SBA and you must apply through their website. The PPP loan is funded by banks and guaranteed by the SBA, so applications must be processed by banks.

Q: Can an employer apply for both EIDL and PPP loans?

A: Yes, a business entity, including sole proprietors, independent contractors and some not-for-profit organizations can apply for both EIDL and PPP.

EIDL Loans

Q: If you qualify for a loan for $10k, will it be 100% forgivable?

A: The $10,000 advance on the EIDL is 100% forgivable. However, there is no guidance currently available as to requirements or timing for forgiveness.

Q: Does there have to be a COVID-19 disaster declaration in your state before you can apply for EIDL?

A: The EIDL is available on a nationwide basis now. You do not have to have a separate declaration by the State to apply.

Q: Is EIDL is personally guaranteed?

A: EIDL amounts under $200,000 do not require a personal guarantee.

Q Should we apply for the EIDL now, or wait till we actually have losses? (i.e. commercial real estate would anticipate a losing rents due to tenants unable to pay.) So should we apply now or wait a month or two when tenants unable to pay?

A: Apply now. The SBA will request additional documentation including explanation and demonstration of need when you are contacted.

Q: Can a 501C (6) get EIDL?

A: 501C(6) are now eligible for the EIDL only.

PPP Loans

Q: Are there going to be P&I or interest only payments on PPP loan up until the point it is forgiven?

A: Principal and interest payments are deferred for six months after disbursement of loan proceeds under PPP. Loan amounts not forgiven will have a maximum amortization of 2 years and a maximum interest rate of 1%.

Q: Can anyone confirm at this time what constitutes forgivable?

A: There is current guidance related to the amount of the PPP loan that is forgivable. However, there is no guidance available related to how or when forgiveness will occur, or what documentation will be required to demonstrate compliance. Basically, the funds must be used to cover payroll costs and not more than 25% of the funds can be used to cover certain other allowable costs like rent, mortgage payments or utilities. We recommend that you carefully document the use of the funds and continue to monitor guidance related to forgiveness as it becomes available.

Q: Can you verify, the company paid health insurance benefit and the 401k match benefit should be individually calculated and added to each employee’s medicare wages?

A: Yes, to calculate payroll costs for the PPP, you should add the company paid portion of health insurance (including dental and vision) and the company contribution to 401k plans. The compensation component of total payroll costs is capped at $100,000 per individual employee. So, you should back out the excess wages or other qualified compensation for anyone included in the calculation with payroll costs over that cap amount.

Q: If “average monthly payroll” is based off 2019, but some have resigned at the end of the year, do you include their salary in the calculation? Likewise, what if you added employees in January or February of 2020?

A: The intention of the PPP loan is to retain your workforce by covering payroll costs for the 8 weeks following disbursement of the funds. Current guidance suggests that estimating average monthly payroll costs by using information from the prior year or the same period from the prior year or the most recent 12 months may be appropriate depending on specific circumstances and depending on the nature of your business. Your bank will ask you to provide supporting documentation to support the monthly payroll cost and may also ask for 941 forms to verify that information. Payroll costs include total medicare taxable compensation plus employer paid portion of insurance and 401k contributions.

Q: How are the number of employees calculated? Is it full-time equivalents or every employee, whether full-time or part-time, counts as 1?

A: The PPP loan application requires applicants to certify that documentation supporting the number of full-time equivalent employees as the payroll costs used to calculate the average monthly payroll underlying the amount of the loan requested. The number of employees reported on the application should represent the number of FTE employees used to compute the average monthly payroll costs.

Q: Banks are asking for documentation showing a total of all health insurance premiums paid for group health plan. What are companies providing that are self-insured?

A: The PPP allows you to include the employer portion of health insurance in payroll costs covered by the program. If you have a self-insured health plan in place, you may use actual historical information representing the employer paid portion of medical claims and premiums paid for stop loss coverage under the plan. You may estimate an average cost per FTE and use that amount to add to the calculation. Note that you will need to provide documentation supporting these costs if you include them in the calculation of average monthly payroll costs.

Q: Can you include temporary labor expenses when calculating your monthly average payroll costs?

A: In determining the number of FTE and wages for the calculation of payroll costs, all employees reported as such and included in wages for reporting payroll taxes on federal Form 941, other than those with primary residence outside the U.S. should be included. Independent contractors or outsourced/temporary workers who are not classified as employees for payroll tax purposes should be excluded.

Q: Can you include worker’s comp in the calculation of compensation on the PPP?

A: Yes. The calculation of payroll costs begins with gross wages. Current guidance indicates that gross wages includes: salary, wage, commissions or similar compensation; cash tips or equivalent; vacation, parental, family, medical or sick leave; dismissal or separation allowance; payment of any retirement benefit; payment of state or local taxes assessed on employee compensation subject to a cap of $100,000 per individual.

Q: Can guaranteed payments to LLC members be included in wages up to the $100,000?

A: Yes, guaranteed payments are the equivalent of compensation for certain types of organizations and can be included for the purpose of calculating average monthly payroll cost for the PPP.

Q: Are union payments for benefits and other fees included in payroll expenses for PPP?

A: The amount of union fringes that constitute health insurance and retirement benefits can be included in the calculation of payroll costs. Other fringe benefits, fees or costs for union employees may not be included.

For more details on the PPP, click here.

SP – 1099

Q: If a sole proprietor’s taxes have not been filed yet for 2019, can 2019 payroll numbers be used?

A: Yes. The payroll tax forms for 2019 should have been filed and available to support and verify wages paid in 2019 for calculation of payroll costs for the PPP loan.

Q: I’m a 1099 person that has no payroll. Do I do PPP or EIDL??? I can’t make any money and will not be able to pay bills.

A: The PPP loan amount is determined by payroll costs. If you are an independent contractor, your payroll costs may not have been paid to you in the form of a salary or wages. However you may still be eligible for the PPP loan based on 1099 payments you received. You may also be eligible for EIDL if you have lost revenue and can demonstrate need. You can apply for both programs.

Q: How can the EIDL help independent contractors?

A: The EIDL is available to independent contractors. This loan provides funds to cover working capital in the event of financial need. You may apply for this loan based on actual or expected losses and you may be required to provide information such as a financial forecast.

For more details on SBA Loans, visit Mueller Prost’s CARES Act landing page.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.

By clicking on any of the links above, you acknowledge that they are solely for your convenience and we are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them. The opinions expressed by featured authors are their own and may not accurately reflect those of Larson Financial Group. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

As the Coronavirus spreads, so too do does the fear of what is to come. By now, many of us are seeing real life impacts from the Coronavirus. This may be in the form of having travel plans altered, or maybe you know someone whose school has been closed. President Trump even announced a travel ban to Europe and the NBA has suspended its season.

The stock market has been hit particularly hard over the past month as well. As of the close of the market on Wednesday, the US Market is now down over 15% from the start of the year¹ and down nearly 20% from its peak in February.

In times like this, it is not uncommon to feel additional stress and anxiety. No one enjoys seeing declines to their portfolio’s value. Studies have provided evidence that our tolerance for risk is challenged in times like these². As stress increases, we may be tempted to make financial decisions out of fear. At LFG, we believe that a strong antidote to fear is preparation.

Your financial plan and portfolio strategy have been carefully crafted by your financial advisor in order to be prepared and equipped to endure times like these. And that strategy is informed by facts and observations in capital markets that are worth repeating:

• Markets have recovered from every disruption in the past. The 5-year average annualized return after a 20% market decline is 11.76%³.

• This is not the first time we have seen a market drawdown close to an infectious disease outbreak⁴. In most cases, we see a recovery within 12 months.

• Downturns are not uncommon over time. On average, we see market corrections of 15% or more once every four years; 20% and greater corrections occur about once every six years⁵.

• Volatility is part of investing. It is this risk for which we expect to be compensated. We cannot reasonably expect a higher return on stocks (vs. a safer investment like cash) without embracing the reality that stocks have more risk.
• The capital markets are efficient. As the markets get new information, prices adjust accordingly. In this current case, markets are pricing in the impact of short-term disrupted supply chains and lost production associated with the Coronavirus. As that short-term disruption is resolved, prices should also adjust accordingly.

Although it may feel like things are different this time, it is important to remember that the markets have withstood similar circumstances in the past. Valuations of stocks are based upon decades of expected cash flows, not just what we see in the coming months as we deal with the fallout of the Coronavirus.

Many of us vividly remember the Global Financial Crisis from the late 2000s. An investor in an 80% stock/20 bond portfolio⁶ starting out in 2008 would have lost over 40% of their value by March 2009. By April of 2011, they would have already recovered, and had a positive return.

Obviously, no one has a crystal ball and this message is not meant to imply the market has reached the bottom. But we do believe now presents an opportune time to strategically reposition assets in the market.

Our team is working diligently to keep your portfolio in line with your strategic, long-term allocation by selling the asset classes that become overweight and buying what is underweight. We also are harvesting taxable losses in this process to help lessen your tax burden when you file in 2021.

Are you concerned Coronavirus could impact your long-term financial strategy?

¹ The US Market as represented by the S&P 500. https://www.wsj.com/market-data/quotes/index/US/S&P%20US/SPX?mod=md_home_overview_quote

² https://www.pnas.org/content/pnas/111/9/3608.full.pdf?with-ds=yes

³ https://www.mydimensional.com/us-equity-returns-following-past-downturns
Eugene Fama and Ken French are members of the Board of Directors of the general partner of, and provide consulting services to, Dimensional Fund Advisors LP. Short-term performance results should be considered in connection with longer-term performance results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.

⁴ Source: Epidemics and Stock Market Performance; First Trust Portfolios L.P. Data from Bloomberg, as of 2/24/20. Month end numbers were used for the table on the right. *12-month data is not available for the June 2019 measles. This graphic is for Informational purposes only and is an authorized reprint from First Trust Portfolios L.P. Larson Financial Group (“LFG”) and Larson Financial Securities (“LFS”) are separate from and unaffiliated with First Trust Portfolios L.P. Material is believed current and accurate but is not guaranteed. Investments are subject to various market, political, currency, economic, and business risks, and may not always be profitable; further, neither LFG nor LFS guarantee financial or investment results.

⁵ https://www.capitalgroup.com/advisor/insights/articles/how-stay-calm-when-markets-stumble.html?cid=sm_og_fb_sf_cap_ci_6292026

⁶ Figures based upon performance of VASGX (Vanguard LifeStrategy Growth Fund). Figures represented do not reflect any advisor fees, expenses, or sales charges. Returns are based on price only and do not include dividends.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. Consult your financial advisor regarding your specific needs. Past performance is no guarantee of future results.

Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs. 

As we enter our careers, we’re bombarded with messages about the importance of retirement savings. And it’s true: retirement is a very important event in your life, and you need to be prepared. There’s another expense that may be worth saving for, however: your children’s education.

Assisting in your child’s education expenses is a decision you (and your spouse or partner) should discuss. It’s crucial to decide a strategy before committing to college savings. Once you do commit, you may want to consider a 529 plan.

Many doctors may overlook a 529 plan because they don’t want money tied down for one specific purpose. A 529 plan is similar to an HSA in that, the money you invest is there for education expenses only. Any withdrawals for other purposes will be taxed as income with an extra 10% penalty tacked on.

An important factor to consider in a 529 plan are the tax advantages. Many stats offer tax benefits for contributions to a 529 plan, including deducting contributions from state income tax or matching grants. In addition, the earnings in a 529 plan grow tax-free.

The most important factor to consider in saving for children’s education is not to prioritize those savings over your own goals. Saving for your own retirement or other long-term goals should take precedence; education savings can be considered extra. It would make sense that a doctor who is well-situated financially would be in a better position to assist his or her child with education expenses.

Are you ready to review choices you have for education savings?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.

Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.