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We're going to discuss the second PPP(Payroll Protection Program) loans. We're also going to talk about the recent President Biden taking over the presidency; what does it mean for all of us?
Today, President Biden became the 46th US president. He's taking over at a time when the COVID is creating havoc and vaccine distributions are in total disarray.
He has already announced a $1.3 trillion COVID stimulus plan. Whether Congress will pass it or not is a big question.
Because we know that $3.2 trillion was pumped into the economy last year, if you recall, $2.3 trillion was in the Cures Act. About $900 billion was in the recent COVID stimulus passed on December 28 by the outgoing President Trump.
So this will be a big stimulus package. If it ever to be passed, the chances of getting it passed? I don't think it's going to pass so big. But maybe it may be a trillion dollars.
What is the inflationary impact of that money being pumped into the economy already; we can see that impact not now. Maybe a year later.
But we should also welcome President Biden.
President Trump has not created a security environment where we feel secure, and COVID is making such a blunder in the economy. People are fearful, scared to go out, confused.
If President Biden throws those things out, then there will be a more systematic plan.
He signed a couple of executive orders mandating wearing masks in federal buildings. He did other things like rejoining the Paris Climate accord and other things, which President Trump has taken away. So we do welcome him as a president. And we look forward to a bright four years for the US economy and taxes. What were tax proposals?
We know that we fear those tax proposals, but he needs 60 votes in the Senate. And right now, they have 50 plus votes, and Vice President Kamala Harris can give one. He still needs nine more votes of Republicans. How will President Biden push his tax policy? That will be a question. Well, we'll talk about that as things come by. But right now, let's focus on what is promised us for this year. And we know Janet Yellen was going to be there soon as the treasury secretary, and she has said that she is going to promise he wants to go big on COVID relief packages.
The stock market has already been riding higher on expectations about binding policies.
It has gone up to 13%. There is a 30 13% gain in s&p 500. Since the election, this is the best for any president for so many years. You've never seen a rise in the stock market so much after the election of freshmen Biden.
In another update today, we have the tax season.
IRS has announced that the date of February 12 will be the starting date for this tax season where they will start accepting individual tax returns, and we'll begin issuing refunds.
So it's a two weeks delay from last year. We know it started on January 29. Now it's February 12.
Of course, we can understand the delay in this because of COVID relief bill.
They changed many things relating to taxes, economic impact payments, and things relating to child tax credit and other things, changes that will come up with PayPal loan forgiveness, and other things that we will talk about right now, in the dollar segment of the show.
My firm has offices in Fremont, Sunnyvale, and Pleasanton. We have a team of great experienced CPAs, and EAs, and experienced tax and accounting professionals who understand US tax rules and Indian tax regulations.
Our firm has been very instrumental in providing PPP loan support in the first round and we are doing it again in the second round for all of our clients.
We have provided a lot of support in PPP loan forgiveness, which is a different ballgame for many clients. People do understand that people loan forgiveness is difficult. It's not easy because there are so many options out there.
We have a caller here. Let me take this call. Good evening.
This is Sanjiv Gupta, CPA.
Caller Question About Used Car
I wondered about purchasing a used car and then using it on one of those apps where people rent out your car. I'm wondering if I did this with this count? Could I deduct the cost of that car?
Yes. If you're doing any business, deriving any income (let's say you are renting). If you have an income, you can deduct the expenses relating to that income. But remember, you have to understand this should be consuming activity. It cannot be a one-time activity; you should continue renting it out. And it should be a business type of activity, not just a hobby type of activity. Just make sure you correctly do that. And if you do that, if provide proper service, have a system set up, like have a bank account in the do a DBA filing, doing businesses filing, get the city permit, open a bank account, put some money into the bank for that business. And advertise a website for that one. If you do all those things, it shows business-type activity; you can deduct the expenses related to that activity.
Okay. Even though this is more like an independent contractor, I guess.
Still, you can do it. This is a good activity, as long as you do a continuous and regular activity, you can do it, not a problem.
Is there a limit on the deduction?
Yes. For example, suppose you're using an asset, like a car, of course, anything related to car-like repairs, maintenance, insurance, and all those things, and other expenses rating setup of those websites and, and other business types of extra expenses.
In that case, you can deduct those as long as they are reasonable. You can put like if you have income $1,000 you can go. You cannot just put like $10,000 or expenses. That is not reasonable means maybe around 30 to 40% of the income you can derive from that.
Thank you. It's one of those questions which gets your mind started.
We are in 2020 tax season.
People have questions about foreign income disclosure, rental properties, stock gains, whether they can claim the AIP unemployment taxes and underpayment taxes. A lot of questions come from tax reasons.
Another Question -
I have a question regarding prop 19.
Ha Good, very good.
Yeah, would a prop 19 trigger a property tax transfer? If the property is or is it in living trust?
It will depend upon if the Living Trust is revocable or irrevocable.
It is a revocable trust. But once a property owner dies, doesn't the Living Trust turn into an irrevocable trust?
You have to have specific clauses in the agreement that will make sure that this happens. So you have to talk to an estate planning attorney estate attorney to make sure those things are done.
So all of the listeners who are listening to me right now talk to your estate planning attorney to make sure that you make these provisions if you want to take advantage of lower property taxes. Otherwise, this will be a significant, big impact on transferring wealth to the kids and the beneficiary.
And it was a critical question on proposition 19, which has changed the property tax assessment scenario. And I don't know how many people who voted for this proposition 19 to pass will impact it. Maybe they do not understand the impact of Proposition 19 on those assets on the properties.
How can you get a continuation on that prop 19 question? You kind of briefly said that, make sure you guys take advantage of it by February 15.
Just elaborate a little bit on that, um, I missed that part.
I mean, so I don't want to go into details otherwise, it will take the whole show for that proposition 19. But what I'm saying is that there will be a few days remaining till February 15 to provide a provision to create a trust.
If you do the action today. If you do it after February 15, you will not be able to pass on the property tax pass on the lower tax base property tax base to your kid because they will be assessed at the higher value fair market value when they need those assets from you.
If they don't live in that home, and they put it on a rental basis earlier, this was not there with a proposition 19 this is going to happen.
But that's why I'm saying it's only a few days remaining to talk to your state planning attorney. Make sure you take advantage of a lower tax base, and the February 15 deadline by this new law will take into effect.
Okay. So, yeah, so two things about that. What action Do we need to take? And do you have an estate planning attorney that you recommend?
Definitely, I can talk to you again. You can call me after this after my show. You can contact me on my number 510-825-7563.
So coming to our discussion on PPP loans, this is also an important topic that I want to share with all the listeners who have businesses because this is the time to apply for the loan.
If you are a business owner and have employees, you had a payroll in 2019, or you have a higher payroll 2020 please and please go ahead and apply. It is very important.
The only qualifying standard is there is a reduction in gross income, and by the way, the SBA has come out with a lot of definitions of gross income and reduction.
What about documentation?
Bank statements and financial statement attestations are required.
There are new forms, new upgraded 3508.
This is a time to apply for PPP loan forgiveness with the new form 3508 s. Remember, if you recall, that 3508 s form was meant for borrowers having loans less than 50,000. It did not even increase from 50,000 to $250,000.
It's a straightforward form with only a few pieces of information required.
The most critical information that is required on that form is the number of employees at a time of getting the PPP loan, and a number of employees at the time of forgiveness when you're applying forgiveness. That's a significant line.
They have a lot of information on the instruction that they want you to retain regarding reducing employees or salaries and wages.
They want you to make sure that you keep documents and the SBA can ask for this document is essential not only to file for forgiveness but also to keep a proper record for that forgiveness. Connecting with a CPA or tax professional who knows about this to be the loan system is essential. Be aware of this whole equation; it's not that it's just going ahead and applying for PPP and getting those loans. It's also important how you use it and how you apply for forgiveness.
What about the PPP loan for people who NEVER applied in the first round? Can they apply now?
Yes, they can, under the first job of the second round of PPP, apply and get this loan. It's equal to 2.5 times the payroll value for the year, based on 2019 or 2020.
What about the people who don't have employees? What about them?
Can they get it?
That's the million-dollar question. People keep asking me, can I get this loan?
Yes, of course, you can get it if you're a 1099 sole proprietor. You can still get the loan based on your 2019 Schedule C profit. Let's say your profit was 80,000 divided by 12 and multiply by 2.5 times to give you that loan amount.
If your LLC, you don't need to run payroll single-member multi member LLC is based on key one from the others.
I am very confused. I came to the US in 2007. I started working at a gas station, and then I started my own business taxi business. But this pandemic, when I applied for unemployment, they are giving me $175. I don't get it. I'm 54 now, you know, and how do I maintain my retirement? What should I do? I don't understand what I do or not.
I'm looking for unemployment, they want to give me, but I refused it because $175 is nothing for me. If you know, go higher than how I pay tax what I do, you know?
See, if you're asking how to increase that amount, right for unemployment. Well, the government has extended the pandemic unemployment assistance for self-employed people like you.
You can get un-employment.
Federal unemployment assistance is providing an extra $400 per week. Now with Biden coming into the picture, he has promised us $1.9 trillion.
He's looking at unemployment and sending stimulus payment checks.
So when you're talking about PPP loans, second loans, and like when people are playing now, this is a time when people should apply and should not wait for more.
This money is going to go out very soon.
They have already done an audit of about 20% of the loan amount, PPP sanction limit has gone in two days. Basically, they started last week for small business owners like minority-owned and low-income community-owned businesses. They started last year, last week, and this already said 20% is gone. And people have not even started the process. So there will be a lot of demand for this kind of alone. If you have a restaurant or if you own a restaurant or own a hotel, hotel owners can go for the killing; they can go up to 3.5 times the payroll amount. And like I said in the case of LLCs
So we have to look into this and see if you qualify. A lot of people call us and ask I don't have employees.
Can I still qualify?
I ask them why they have an LLC?
By the way, many CPAs are not doing any updates.
Employee retention credit is another I'll say is like a money-making machine if you look at the ERC. It is better than PPP loans, but we can talk about that a little later.
If your business has made a lot of profit and is looking for ways to substantially reduce your tax liabilities by taking the full benefits available under TCGA and the cares act, then set up a consultation appointment before the 2020 tax year runs out. Call Sanjiv Gupta CPA today at 510-825-7563. That's 510-825-7563 or visit Sanjivcpa.com.