There have been several legislative changes this year that have provided changes that will affect the finances of clients. The Secure Act 2.0, a proposed expansion of the original Secure Act, promises significant shifts in retirement planning, tax strategies, and estate management. In this article, we will delve into the key provisions of the Secure Act 2.0 and examine how these changes can impact the financial planning industry.

Expanded Access to Retirement Plans

One of the pivotal changes under Secure Act 2.0 is the broadening of access to retirement plans. This legislation seeks to increase retirement savings opportunities for more individuals, including part-time workers and those in small businesses. Financial planners must now be well-versed in the intricacies of these expanded plans, enabling them to offer tailored advice to a broader demographic.

Previously, many part-time workers and employees of small businesses were excluded from employer-sponsored retirement plans. The Secure Act 2.0 aims to rectify this by making it easier for these individuals to participate in retirement savings programs. Financial planners must educate clients about these opportunities and help them make informed decisions about their retirement futures.

Gradual Increase of Required Minimum Distributions (RMDs)

Secure Act 2.0 proposes an increase in the age at which individuals must begin taking Required Minimum Distributions (RMDs) from their retirement accounts, from 72 to 73. This shift has profound implications for retirement planning strategies, allowing individuals to maximize their tax-deferred growth further. Financial planners must adjust their approaches to account for this extended window, optimizing clients’ portfolios for prolonged growth.

This extension of the RMD age recognizes the trend of people working later in their lives and the desire for extended tax-deferral opportunities. Financial planners will need to consider the implications of this change on their clients’ overall financial plans, factoring in potential adjustments to income streams and investment strategies.

Introduction of Auto-Enrollment in Retirement Plans

The Secure Act 2.0 also emphasizes the importance of automatic enrollment in retirement plans. This provision is a game-changer for the financial planning industry since planners must help clients understand automatic enrollment, including contribution rates, investment options, and participation benefits.

Automatic enrollment can be a powerful tool in encouraging individuals to save for retirement, but it also requires careful consideration of individual circumstances and preferences. Financial planners must guide their clients in understanding how automatic enrollment aligns with their overall financial goals and help them adjust their retirement savings strategies.

Enhancements to QLAC Rules

The proposed changes to the Qualifying Longevity Annuity Contract (QLAC) rules provide new opportunities for individuals to secure a reliable income stream in retirement. Financial planners should familiarize themselves with these modifications, enabling them to guide clients toward sound investment decisions that align with their long-term financial goals.

QLACs offer a unique opportunity for retirees to ensure a steady income stream throughout their retirement years. Planners will need to assess whether a QLAC is a suitable option for their clients and, if so, help them navigate the selection process to ensure it complements their overall retirement strategy.

Expansion of the Saver’s Credit

Secure Act 2.0 seeks to expand the Saver’s Credit, which provides tax incentives for low- and middle-income individuals to save for retirement. This change will undoubtedly impact how financial planners advise clients on tax-efficient strategies, potentially opening new avenues for retirement planning for a broader audience.

Expanding the Saver’s Credit is a significant step towards making retirement savings more accessible for a broader range of individuals. Financial planners must incorporate this change into their tax planning strategies, helping clients take full advantage of the tax benefits and encouraging a culture of long-term financial security.

Implications for Estate Planning

The Secure Act 2.0 introduces provisions that could affect estate planning strategies. Changes to inherited IRAs and eliminating the ‘stretch’ IRA could necessitate a reevaluation of estate plans. Financial planners must be equipped to offer guidance on how clients can navigate these alterations, ensuring a smooth transition of assets to heirs.

The alterations to inherited IRA rules may profoundly impact how individuals plan to transfer their wealth to future generations. Financial planners must work closely with their clients to understand the implications of these changes and help them make any necessary adjustments to their estate plans, ensuring that their legacy is preserved according to their wishes.

Conclusion

The Secure Act 2.0 represents a significant retirement planning and tax strategy shift. For financial planners, the importance of staying informed about legislative changes and adapting strategies to serve their clients best. By understanding the implications of these provisions, financial planners can offer tailored advice that aligns with their clients’ evolving economic needs and goals. With Secure Act 2.0, the financial planning industry is transitioning to a new era of opportunity and growth.

Reference

The United States Senate Committee on Finance: The United States Senate Committee on Finance. United States Senate Committee On Finance. (n.d.). https://www.finance.senate.gov/download/retirement-section-by-section-

• What is a T-CRUT?
• Why did you decide to form a T-CRUT? 
• How can clients form a T-CRUT?
• What are the advantages and disadvantages of forming T-CRUT?
• Why should a client consider forming a T-CRUT? 
• What are the requirements that need to be met before the T-CRUT can be formed and avoid trouble with regulators? 
• What are some of the taxes or tax deductions both the owner and beneficiary have regarding the assets that are placed in a T-CRUT? 

References:

• IRS T-CRUT special provisions
• The recommended Verrill Law Office
• Top religious foundations:
  • ELCA Foundation – Evangelical Lutheran Church in America
  • Presbyterian Church in America Foundation
• Giving Twice, by Kathleen M. Rehl  on Sep 22, 2021, at HumbleDollar
• I’m “Giving It Twice,” Helping My Son & Leaving a Lasting Legacy By Kathleen Rehl
  November 17, 2021, by Kathleen M. Rehl, Ph.D., CFP®, CeFT® at Agebuzz.com
• Philanthropic Planning credentials
  • Certified Fund Raising Executive (CFRE)
  • Certified Specialist in Planned Giving (CSPG) by American Institute for Philanthropic Studies
  • The Chartered Advisor in Philanthropy® (CAP®) by The American College of Financial Services
• Additional resources:
  • Charitable Giving Resource Center
  • PG Calc
  • Charitable Solutions, LLC

Guest: 

Kathleen M. Rehl, Ph.D., CFP®, CeFT® wrote the award-winning book, Moving Forward on Your Own: A Financial Guidebook for Widows after the death of her late husband. More than 75,000 copies of this book are in circulation. She owned Rehl Financial Advisors for almost 18 years before retiring to a six-year encore career empowering widows and their advisors through her speaking, writing, and doing research about widows. Her work has been featured in articles published by the New York Times, Wall Street Journal, Kiplinger’s, CNBC, USA Today, and many others. She happily “reFired” on her 73rd birthday in 2020. Kathleen and her new husband, Charlie, concentrate on family, fun, focused-purpose, friends, and fitness. She enjoys writing legacy poetry and stories plus assisting nonprofits. Her website is at https://KathleenRehl.com.

Host: 

Chia-Li Chien, Ph.D., CFP®, PMP®, CPBC, is an Assistant Professor and Director of the Financial Planning Program of California Lutheran University. Before her academic role, she held several senior management positions in Fortune 500 companies, including Diageo, ABB, CIGNA, and RSA Insurance Group. Dr. Chien is a frequent speaker about succession planning at national conferences and has published three books, including her most recent publication, “Enhancing Retirement Success Rates in the United States.” She publishes research on succession topics in a variety of academic and practitioner research journals. Dr. Chien serves on the boards of various national financial service associations. She holds a doctorate in financial planning and is a Certified Financial Planner (CFP®) as well as Project Management Professional (PMP®). Chia-Li Chien is pronounced Jolly Jan.

We are not quite finished with 2021 yet!  What steps could you take for your year-end investment before we cross over to 2022? In this session, we will discuss the following topics:

• Tax Code Refresher
• Retirement Accounts
• Health Savings Accounts
• Tax Loss Harvesting
• Asset Location Optimization
• Charitable Donations

Guest:

Jeremy D Witbeck, MBA, CFA, CFP® is a Partner with Polaris Wealth Advisory Group, LLC. Before joining Polaris Greystone, Jeremy worked as a Portfolio Manager at a Registered Investment Adviser in the greater Los Angeles area where he built customized portfolios for high net worth clients and developed client relations. Jeremy has an extensive background in the financial service industry and holds the Chartered Financial Analyst (CFA®) charter and Certified Financial Planner (CFP®) designation.

Host:

Chia-Li Chien, Ph.D., CFP®, PMP®, CPBC, is an Assistant Professor and Director of the Financial Planning Program of California Lutheran University. Before her academic role, she held several senior management positions in Fortune 500 companies, including Diageo, ABB, CIGNA, and RSA Insurance Group. Dr. Chien is a frequent speaker about succession planning at national conferences and has published three books, including her most recent publication, “Enhancing Retirement Success Rates in the United States.” She publishes research on succession topics in a variety of academic and practitioner research journals. Dr. Chien serves on the boards of various national financial service associations. She holds a doctorate in financial planning and is a Certified Financial Planner (CFP®) as well as Project Management Professional (PMP®). Chia-Li Chien is pronounced Jolly Jan.

There are a lot of priorities from the Biden-Harris Administration Immediate Priorities, American Rescue Plan, and the American Jobs Plan, just to name a few. Attorney Carcone will help us to break down what changes are expected in the next few years.

Guest:

Colleen Carcone J.D., CFP®, is a professor at California Lutheran University, as well as an Income Tax and Estate Planner, and author. Colleen is a tax attorney with more than twenty years of experience who has escaped practicing law and now works in-house for a financial services company partnering with high-net-worth individuals. Colleen has been teaching estate planning and income tax planning for various programs for twelve years. An estate planning expert, Colleen co-authored Principles of Estate Planning, the third edition of which was published in 2018 and has been quoted in many articles. Colleen has served as a Director of Wealth Planning Strategies for TIAA for more than 14 years, where she has been serving the firm’s high-net-worth families with specialized advice and sophisticated financial, income tax, and estate planning strategies.

Host:

Hossein Salehi, Ph.D., CFP® is an assistant professor in Financial Planning at California Lutheran University. He has a doctorate in personal financial planning and is a Certified Financial Planner (CFP®). He also has an M.Sc. in Personal Financial Planning from Texas Tech University, an M.A. in Economics from Texas Tech University, and an M.Sc. in Financial Management from Tehran University.

Hratch J Karakachian, CPA, ESQ, is a senior adjunct faculty member at California Lutheran University School of Management.  He has been teaching in the MBA in Financial Planning Program since 2013.  He has taught Principles of Estate Planning, Income Tax and Strategy, Managerial Accounting, and Foundations of Accounting and Finance courses.

Hratch earned a Bachelor of Science in Accounting and Bachelor of Science in Business Administration with an emphasis in real property development management as well as a Master of Business Taxation degree all from the University of Southern California.  He subsequently earned a Juris Doctor from the University of West Los Angeles.  He is a licensed Certified Public Accountant and an Attorney at Law by the State of California.

Hratch began his accounting career in the tax division of Arthur Andersen in Los Angeles.  He quickly rose through to ranks to the level of Tax Manager.  He moved on to Deloitte Tax also in Los Angeles where we was promoted to Senior Manager.  Following a ten year career in the Big Four accounting firm environment, Hratch joined a large local firm.  Since 2008, he has been a private practitioner providing a broad range of tax planning, compliance, and advisory services to owner-operated enterprises and their owners as well as families.  Since 2012, he has been providing legal services with an emphasis on taxation, estate planning, real estate, and business advisory services.

We could all agree that 2020 is an outlier year compared to the historical cycle. The new normal shapes our life going forward.  In this session, we will discuss the following questions:

• Tax Code Refresher
• Retirement Accounts
• Health Savings Accounts
• Tax Loss Harvesting
• Asset Location Optimization
• Charitable Donations

Register now, you will receive a confirmation email containing information about joining the meeting. This is a webinar you won’t want to miss!

About Jeremy D Witbeck, MBA, CFA, CFP®

Jeremy D Witbeck, MBA, CFA, CFP® is a Partner with Polaris Greystone Financial Group, LLC. Before joining Polaris Greystone, Jeremy worked as a Portfolio Manager at a Registered Investment Adviser in the greater Los Angeles area where he built customized portfolios for high net worth clients and developed client relations.

Jeremy has an extensive background in the financial service industry and holds the Chartered Financial Analyst (CFA®) charter and Certified Financial Planner (CFP®) designation.

 What is Section 1202?

The Qualified Small Business Stock (“QSBS”) gains exclusion is known as Internal Revenue Code Section 1202. Section 1202 allows a portion or 100% eligible capital gains from QSBS to be excluded from federal income tax. The exclusion applies only to QSBS held for more than five years, and the percentage of eligible gain excluded by Section 1202 depends on when the shareholder acquired the QSB stock. If a taxpayer acquired QSBS after September 27, 2010, he or she might exclude the 100% eligible gain on the sale of the QSBS.

What is a Qualified Small Business?

In 2018, the Tax Cuts and Jobs Act (TCJA) added section 199A of the Code for the benefit on the Qualified Business Income from a Qualified Trade or Business. For section 199A purposes, Qualified Businesses under section 1202 are also Qualified Trade or Businesses under Section 199A. According to the definition of Qualified Trade or Business, most businesses involving services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services are not Qualified Business for Section 1202. A business such as banking, insurance, investing, also does not qualify (Lee, 2019; IRS, 2020).

While the tax benefits for Section 1202 are very generous, a QSBS must meet all of the following tests:

• It must be original issuance stocks in a C corporation (that is, not S corporation stock).
• It must have been originally issued after August 10, 1993.
• As of the date the stock was issued, the corporation was a domestic C corporation with total gross assets of $50 million or less (a) at all times after August 9, 1993, and before the stock was issued, and (b) immediately after the stock was issued.
• You must have acquired the stock at its original issue (either directly or through an underwriter), either in exchange for money or other property (other than stock) or as pay for services (other than as an underwriter) to the corporation.
• During substantially all the time you held the stock: The corporation was a C corporation; At least 80% of the value of the corporation’s assets were used in the active conduct of one or more qualified businesses; and the corporation wasn’t a foreign corporation (IRS, 2020).

The Benefits of Section 1202

Although Section 1202 requires the QSBS to be C corporation’s stocks, companies currently operating other types such as partnerships might benefit from Section 1202 by converting under state law, being a C corporation, or transferring their assets to a newly organized corporation. The eligible gain is calculated on the date the assets contributed to the C corporation. Besides, Section 1202 permits taxpayers to hold QSBS through any partnership, S corporation, RIC, or common trust fund.

It is worth noting that the gross assets test is based on an adjusted basis rather than the fair market value of the assets. That cost-basis rule is more favorable to the business owners or investors who contribute high appreciated but low adjusted basis assets to a C corporation. However, if a taxpayer contributes property (other than money or stock) to a qualified small business corporation in exchange for stock in the corporation, the stock’s basis will be no less than the fair market value of the contributed property. As a result, taxpayers have the opportunity to increase tenfold the amount of gain subject to partial or complete exclusion by contributing appreciated property (Lee, 2019). 

Furthermore, Internal Revenue Code Section 1045 allows a taxpayer to roll over the gain on a QSBS disposition into another QSBS of a different issuer. The QSBS must be held for more than six months prior to disposition, and the rollover must occur within 60 days. That might provide a planning opportunity for those investors who wish to delay the capital gain from Section 1202.

To learn more about the Financial Planning Program at California Lutheran University contact Graduate Admission at clugrad@CalLutheran.edu or visit us at https://www.callutheran.edu/fp​.

About the Speaker:

Hratch J Karakachian, CPA, ESQ, is a senior adjunct faculty member in California Lutheran University School of Management.  He has been teaching in the MBA in Financial Planning Program since 2013.  He has taught Principles of Estate Planning, Income Tax and Strategy, Managerial Accounting and Foundations of Accounting and Finance courses.

About the Host:

Dr. Chia-Li Chien is a succession program director at Value Growth Institute, a succession consulting practice dedicated to helping business owners increase the equity value of their firms. Before her private consulting practice, she held several senior management positions in Fortune 500 companies. Dr. Chien is a director of the financial planning program in the School of Management at California Lutheran University. Dr. Chien is a frequent speaker about succession and retirement planning at national conferences and has published three books, including her most recent publication, “Enhancing Retirement Success Rates in the United States.” Dr. Chien serves on the boards of various national financial service associations. She holds a doctorate in financial planning and is a Certified Financial Planner (CFP®) as well as Project Management Professional (PMP®). 

About the Author:

Jade Zhang is a graduate student at California Lutheran University expecting to graduate in July 2020. She is studying for a Master of Science in Financial Planning. 

References:

IRS. (2020). 2019 Instructions for Schedule D (Rev. January 2020): Exclusion of Gain on Qualified Small Business (QSB) Stock. Retrieved from https://www.irs.gov/instructions/i1040sd.

Lee, Paul. (2019 ). QSBS: The Quest for Quantum Exclusions. 8th Annual Institute on Tax, Estate Planning and The world Economy. Retrieved from https://drive.google.com/file/d/1-EDhRK6w5RRUdSoLAq7qHQZFBZQfVdRc/view

Ever since Kathryn Courain was 6 years old she has loved horseriding. Growing up in Santa Barbara County, north of Los Angeles, she spent her childhood surrounding herself with horses. From a young age, she was taught the importance of discipline, structure, and initiated a competitive drive within herself. 

Courain earned her undergraduate degree in business with a concentration in finance at San Luis Obispo University. Her degree allowed her to grow and learn what she was passionate about in the business world. 

At 12 years old her parents set up a checking account for her to spend on her horses. Using this account she would budget for horse boarding, training, feed, shoeing, and shows. Before she became a teenager Courain understood how to manage money. When working with her horses Courain learned how to negotiate, think ahead, be intuitive, and goal-orientated. All of these skills she has translated into business. Horseriding was not just a hobby, but it was something that allowed her to learn the vital skills of managing along the way. 

When Courain left university she thought she was going to be an accountant with a CPA. “I realized early on that I loved accounting, but I was also fascinated by business law, real estate finance, and essentially any course that challenged me and kept my mind active,” Courain said. When at university her dad made her read a book. She learned from the book that she should be passionate and love career. 

Courain knew that she loved finance but she was unsure of what she could do with that as she had no idea about financial planning. In 1992 she got a job at a finance company. She described it as being “aggressive marketing” that left her feeling shocked at the unethical behavior of not helping others. 

Not long after Courain went in search of finding a new job. She found one as a junior financial planner in the Santa Ynez Valley on a private horse ranch. It was a perfect fit that she spent 26 years working at. “It was an amazing experience, wonderful opportunity, and I got to do not only something that I love but I get to help clients and help them pursue their goals and dreams,” Courain said. 

The owner of the firm become an important mentor, “he always made me dig for the answers,” which Courain values as it allowed her develop her critical thinking, analytic, and intuitive skills to know where to go to find the information 

In February of 2016, Courain transferred to a new firm Avalan Wealth Management, a boutique wealth management firm. “It specializes in working with business owners and entrepreneurs but also successful families, with my background with helping with generational planning.” She joined partners with Rich Schuette, together their two practices blended well together. Now, four years later they have added an additional four full-time staff members and two advisors. 

The pandemic has created new challenges and opportunities for Avalan’s clients. Clients are dealing with issues such as staffing, government assistance, moving forward, and small business owners are shutting down. 

“Every client is unique in this industry. Each client comes to us with a different problem and our job is to find multiple solutions and help the client work through and feel comfortable with the solution they think is best and that they also agree,” Courain said. 

The advisors that work at Avalan specialize in different areas Courain said. As wealth managers, they want to add value to all areas of the client’s life, “We want to make sure that in every area of your life we are helping you.” As a firm, they want to build relationships with those that they can bring value to, not just investments. Their virtual family office is similar to Elizabeth Campana in the previous webinar. To market their business they rely on clients being their biggest sale source, not social media, nor traditional advertising. 

Courain is a big believer in paying it forward. She spends free time volunteering and donating money to various charities of her choice researching where the money goes within. Working with wealthy families she has seen the benefits of donating and the impact it can have on others. She also spends time helping younger, junior financial advisors with their skills, etc, describing it as “a rewarding profession” with so many different directions that can be followed within the industry. 

Picking a niche to work in can be difficult. But, Courain believes it should be something that you’re passionate about and something you’re good at. For example, if you love cars working in a car dealership may be a good idea because you have a strong ability to understand the terminology and what is happening.  

“I really want to let people know that you should really like what you’re doing. Mondays are my favorite day of the week,” Courain said. I love this advice as it can be applied to any industry. I am also a strong believer that you should do something that you love and enjoy as a profession even if it means taking extra time to discover it. 

“If you love to help people and if you love to problem solve, this is an unbelievable career path with so many amazing opportunities,” Courain said at the end of her webinar. 

To learn more about careers in financial planning and being a financial advisor, contact the Financial Planning program here at California Lutheran University. Please visit http://bit.ly/clumbafp.

About the Speaker:

Kathryn Courain has close to three decades of experience assisting high-net-worth clients with their total wealth management needs, including perpetual trust planning, private foundation and charitable planning, commercial financing and tax planning.  She specializes in managing legal and tax advisor relationships in order to provide clients with a comprehensive vision of their overall financial goals.

Since each client has unique investment and planning objectives, Kathryn employs different strategies and solutions to meet specific needs.  She provides the necessary unbiased advice and financial analysis necessary that helps guide clients through the wealth management process to ensure goals are met.

Kathryn grew up in Santa Barbara County and was an avid equestrian for more than 30 years.  She has a passion for supporting charities, especially animal welfare charities, and is the current Board Treasurer of C.A.R.E.4Paws.

About the Host:

Dr. Chia-Li Chien is a succession program director at Value Growth Institute, a succession consulting practice dedicated to helping business owners increase the equity value of their firms. Before her private consulting practice, she held several senior management positions in Fortune 500 companies. Dr. Chien is a director of the financial planning program in the School of Management at California Lutheran University. Dr. Chien is a frequent speaker about succession and retirement planning at national conferences and has published three books, including her most recent publication, “Enhancing Retirement Success Rates in the United States.” Dr. Chien serves on the boards of various national financial service associations. She holds a doctorate in financial planning and is a Certified Financial Planner (CFP®) as well as Project Management Professional (PMP®).

About the Author:

Rosie Baker is an undergraduate student at California Lutheran University expecting to graduate in May 2021. She is studying Communication with an emphasis in PR and Advertising and has a minor in Creative Writing. She is currently writing a book, Windows and Mirrors, which is due to be published this summer with New Degree Press.

• Key planning ideas you can bring to your clients, that take advantage of today’s depressed stock prices and low-interest rates.
• Roth Conversions, GRATS, Intra Family Loans, Sales to Grantor Trusts and Charitable Lead Trusts (CLTs).
• Examples you can use with your clients on why these planning opportunities may be especially powerful today.

Speakers:  Anne Gifford-Ewing, JD, and Jeff Ruderman, CFP®

Anne Gifford Ewing is a Senior Trust and Estate Specialist with Capital Group Private Client Services, focusing on trust, estate, tax, and personal planning matters. Prior to joining our firm in 2019, Anne spent more than a decade in private legal practice at Gifford, Dearing & Abernathy, LLP in Los Angeles, during which time she was recognized as Certified Specialist in Estate Planning, Trust & Probate Law by the California Board of Legal Specialization of the State Bar of California. She received her JD from University of California Hastings College of the Law, and both her MA and BA from Stanford University. Before law school, Anne completed Capital Group’s multi-year management training program. Anne is the 2018-2019 President of the Los Angeles Estate Planning Council, and a past board member of the Fiduciary Roundtable of San Gabriel Valley. Anne has been a frequent speaker at various bar associations and professional organization meetings. She is based in our downtown Los Angeles office.

Jeff Ruderman is a Wealth Strategist for Capital Group Private Client Services. He joined Capital Group in 2011 as a senior client relationship specialist, prior to joining Capital Group he spent over five years as an assistant vice president, senior private client associate with Bernstein Global Wealth Management. As a member of the Wealth Advisory Group, Jeff provides advice on various wealth planning topics, specializing in the areas of wealth transfer, charitable planning, and working with private business owners. Jeff earned a BA with Honors in International Finance and Marketing from the University of Miami and also studied International Business at the Hogeschool Voor Economische Studies in Amsterdam. He holds a professional designation in personal financial planning from the University of Georgia and is a CFP®. He is based in our Los Angeles office.

When: May 7, 2020, 01:00 PM Pacific Time (US and Canada)

Related slides: Capital Group Planning in a Pandemic.

First, we’ll discuss the Treasury Department and the Internal Revenue Service (IRS) announced special Federal income tax return filing and payment relief in response to the ongoing Coronavirus Disease 2019 (COVID-19) emergency. Then Dr. Chien will talk about the small business stimulus package.

Small businesses in business sectors not deemed critical during the Coronavirus health and economic crisis are suffering heavily from forced closures. As Congress and the White House consider bailout measures, in states that have declared a disaster, disaster loan assistance is already available through the Small Business Administration. Loans will require repayment with interest and in some cases collateral. The SBA uses a simple three-step process to apply for the loans. Some business owners and nonprofits prefer not to take loans, but in desperate times it is important to keep your business open and cash flow. Funds are limited, so don’t delay.

About our speakers:

Attorney Karakachian is a senior adjunct faculty member at California Lutheran University School of Management.  He has been teaching in the MBA in Financial Planning Program since 2013.  He has taught Principles of Estate Planning, Income Tax, and Strategy, Managerial Accounting and Foundations of Accounting and Finance courses.

Hratch began his accounting career in the tax division of Arthur Andersen in Los Angeles.  He quickly rose through to ranks to the level of Tax Manager.  He moved on to Deloitte Tax also in Los Angeles where we were promoted to Senior Manager.  Following a ten year career in the Big Four accounting firm environment, Hratch joined a large local firm.  Since 2008, he has been a private practitioner providing a broad range of tax planning, compliance, and advisory services to owner-operated enterprises and their owners as well as families.  Since 2012, he has been providing legal services with an emphasis on taxation, estate planning, real estate, and business advisory services.

Chia-Li Chien, Ph.D., CFP®, PMP® has a doctorate in financial and retirement planning. She is a succession program director at Value Growth Institute, a succession consulting practice dedicated to helping business owners increase the equity value of their firms. Dr. Chien is the director of the financial planning program at California Lutheran University.

When: Mar 31, 2020 01:00 PM Pacific Time (US and Canada)

Presentation Slides

Translation of the webinar:

Josiah Gonzales:

Welcome to the Next Gen Mentoring Forum. The Next Gen Mentoring Forum is designed to empower, educate, and illuminate individuals who are interested in the financial planning industry. At each one, an expert will discuss a topic in the field of financial planning for the purpose of inspiring critical thought and discussion. In today’s session, Dr. Chien is hosting today’s session, plus interviewing attorney Hratch Karakachian. .

Josiah Gonzeles:

My name is Josiah Gonzales graduate program specialist in the School of Management. I’m your host today. I’m a proud CLU alum of the MPP program. 

Dr Chia-Li Chien, is an assistant professor and director of the financial planning program at California Lutheran University. She maintains an active planning practice specializing in success, succession program management at the Value Growth Institute. She’s authored three books, most recent peer reviewed research book is by Palgrave Macmillan. Springer Nature titled “Enhancing Retirement Success Rates in the United States, Leveraging Reverse Mortgages, Delaying Social Security and Exploring Continuous Work”

Next Gen Mentoring Forum is sponsored by California Lutheran’s University School of Management financial planning program. We offer MBA in financial planning that help financial advisors, pursue leadership position or grow their financial planning practice by deploying advanced financial planning; effective client communication & counseling; to streamline practice management as well as leverage FinTech.

Chia-Li Chien:

Thank you Josiah for the introduction. And I am very honored today to have the session today with the attorney Karakachian. He is a senior adjunct faculty member at the California Lutheran University School of Management. He has been teaching for the MBA Financial Planning Program since 2015. 

Besides his long career in the big four accounting firms, his practice helps businesses in tax, real estate, as well as all sorts of business counsel so welcome attorney Karakachian. We have a lot of material to cover so bear with us and if our speed is going a little bit faster than normal because we have a jam packed tutorial today.

We are going to go through the individual and business’s filing deadlines. First, I will be asking a whole bunch of questions hopefully through those questions, we’ll be able to get through some of the questions that you have.

Then we will switch gears to talk about the stimulus for the families, every single family in the states qualifies for some sort of stimulus so we’re going to go through that. Then we’re going to spend a bulk of our time looking at the stimulus for the business, especially for those of us who own businesses out there. What are some of those benefits that we could take advantage of today. And then after that, I’m going to go through some kind of practical next step of looking at it so if you are interested to do some of the things, especially in a stimulus for the business portion area, what you should do, and then we’ll wrap up in information.

The materials that you’re looking at on the screen today will be available in our financial planning blog website, and we will provide that information towards the end of today’s webinar. All right with that I’m going to start asking Hratch the questions. So when is the actual due date, now that we are in the current environment. Can you talk a little bit about the federal income tax returns in terms of personal as well as the business entities?

Hratch Karakachian:

Certainly, thank you for inviting me and for that kind introduction. Welcome everyone. Before I answer this question I just want to make a point. I’ve been receiving a tremendous amount of emails in the last several days, fraudulent emails, from individuals asking me to click on links and open links It seems to me that it’s given this current environment those emails have been exasperated, I just wanted to suggest and tip everybody to be very very careful in, in reviewing your emails. I got three this morning and I got several overnight, asking me to open documents from individuals that I know whose emails have been hacked, so keep that in the back of your mind as you’re reviewing emails, and as we’re communicating more and more online with clients who contact. 

Thank you for that. And let’s go to the due dates of the federal income tax returns. Almost all of the returns have been extended to July 15. Those returns that were due on April 15 have been extended. These include forms 1040 the 1040 series. The 1041, which is a fiduciary income tax return, and form 1120 series. And originally form 709 the gift tax return was not extended but one or two days after the IRS issued a notice of this extension, they added the gift tax return form 709 to that grouping as well.

So the returns that were due on April 15 have been extended to July 15. In addition to the extension of time. This the IRS has extended the time to pay. So individuals have payments due that were due on April 15, either with the return or the 2020 first installment payment for the calendar year, taxpayer that aim has also been extended by.

Chia-Li Chien:

So does that include the estimated tax for the payment? 

Hratch Karakachian:

The estimated tax for the first installment payment due April 15 has definitely been extended to July 15. There’s some confusion as to the second installment payment due on June 15. And the third installment payment due on September 15. The original Senate Bill had an extension of those payments, until October 15. And I read on a couple of bulletins, I just checked the IRS website there was no commentary about the 2020 installment payments, except for the first one except for the one due April 16. I read on another website on a blog tax preparers blog, that those payments have been extended so I’m not sure.

Chia-Li Chien:

So, I guess some for everyone here is that, as the things are moving very very fast, and the agencies are scrambling through interpreting the new law, a lot of these are moving targets. So as soon as we get information will be sure to share with you and then be on the lookout for updated information. The best way to find this information, probably is from the IRS website but the last time I checked, I think their website has a whole lot of updates, as of yet. Okay, so thank you very much for the extension in terms of the personal for the business entity returns and we know traditionally the corporate type of return. That’s also being established because you mentioned about 1120 series, that’s also been extended but how about C Corporation? Has that also been extended?

Hratch Karakachian:

Yes the C Corp was extended but what was not extended was the partnership tax returns form, 1065, and also form, 1120 S those were due on March 15. And because March 15 was on a weekend this year, the due date was pushed to Monday March 16. Those returns have not been extended. So, for individuals who haven’t filed these returns. They’re delinquent, there’s opportunities to try to get late filing penalties waived due to reasonable cause but that has to be done on a case by case basis.

Chia-Li Chien:

Thank you for clarifying that because I was also curious about in terms of those returns I was due on March 14. Okay, great. So this year. Unfortunately for the personal tax return purposes, I owe taxes and I filed my tax return, a little bit too early, I guess, and I paid, but I heard that somewhere, if you owe taxes and you file your return, late. How about when do I actually pay them?

Hratch Karakachian:

Let me make one, one comment regarding filing late. Because the due date was extended from April 15th until July 15. If the returns are filed on or before July 15, they will not be considered late, and according to the IRS no interest penalties for late filing or late payment penalties will be assessed but if somebody has filed their return. If somebody filed their return today for example and they owe tax, they don’t have to pay that tax until July 15, so long as the letter is postmarked on or before July 15 they will not be subjected to any interest or penalty.

Chia-Li Chien:

So that means that if someone is planning to file their tax, let’s say July 15. That means that you also have to postmark tax payment on July 15 as well.

Hratch Karakachian:

Correct. If they pay by cheque there’s ways to pay electronically. And so long as the payment is scheduled to be transmitted to the IRS on or before July 15, those payments should be considered on time. 

Chia-Li Chien:

Okay. Good. Let’s talk about the IRA. So we know that the IRA contribution or qualified plan contributes to lots of small businesses out there that they do contribute to their employees plan. Talk about the due date for that now that the tax return extension is pushed out to July 15. So let’s talk about the qualified plan in general, plus the IRA.

Hratch Karakachian:

Yeah, those are what the IRS came up in their frequently asked questions, which is an excellent resource on the IRS website, and that due date has been pushed to July 15 as well. 

Chia-Li Chien:

Okay, so, well, be on the lookout because if your clients still want to take advantage of any kind of tax advantaged savings potentially, could potentially reduce their tax liability, and then up to July 15 is still a good time to contribute and make sure that you’ve designated that is for 2019. Now for 2020. 

A side question here is that some families may not be fortunate enough to have a job or have a pay. Today, they may just go right and truly have a qualified plan or IRA and take money out. Can you talk a little bit about, are the penalties now being waived if the penalties waived, are there any tax liabilities if someone were to take the money out due to an emergency. 

Hratch Karakachian:

This new Tax Act that passed has eliminated, or suspended the need for required minimum distributions from IRAs and qualified plans for 2020. Okay, so that’s one point to know.

Chia-Li Chien:

So there’s no basically no 10% penalty?

Hratch Karakachian:

Well there’s, there’s no, there’s no requirement for minimum distributions for those who are over 72 this year. 

Chia-Li Chien:

So under the new rules that even if someone who is younger than 72, who needs access to a qualified plan for emergency purposes. I think that there’s also a wave of the 10% penalty on it.

Hratch Karakachian:

Yes, there is a provision included in the Tax Act that just passed that individuals can withdraw, up to $100,000 without incurring the 10% early withdrawal penalty, and there’s a provision that if that amount is contributed back into the retirement plan over a three year period. There is,  even though the amount is going to be substantially higher than the maximum contribution amounts, individuals will not be prevented from putting those funds back into their retirement accounts. 

Chia-Li Chien:

Okay, but the bottom line is that if they do take money out there’s no 10% penalty but they still have to pay current taxes. So there’s no way around it just to keep in mind that you only waive the 10% but you still have to pay current taxes, just make sure that you can solve problems with your advisors and planners out there with CPA, before you actually take the money out. 

So Terry has a question regarding the loan increased funding 50,000 to 100,000 I think that’s what Hratch just mentioned. Technically speaking it’s not a loan.

Hratch Karakachian:

Exactly. It’s not a loan, but it’s a distribution, where the 10% penalty is being waived because of the COVID 19 pandemic. It could be put back in. Or, theoretically, it could be considered a loan, so long as it’s put back in. There’s no restrictions in doing that, the 401k plans generally have loan provisions, but each, each 401k plan’s specific regulations or specific documents have to be reviewed to determine how much and that can be borrowed from the plan.

Chia-Li Chien:

So, from a loan perspective it’s really up to you and employer to interpret however, the plan design was, and then take it from there. So the bottom line is that if you need the money even though this is something that most advisors will not recommend you to do, but in a desperate time if you need it, we know for sure that the 10% penalty is waived, and you still have time to put it back within three years period of time, although you still have to pay current tax liabilities, but at least who would kind of help you if you’re in the emergency fund. Let’s talk about health savings accounts or medical savings accounts, are those contributions being extended as well?

Hratch Karakachian:

Yes, those have been expensed extended to July 15 so individuals who have not had a chance to contribute to those accounts can do that, up until and including July 15.

Chia-Li Chien:

How much do you recall how much if someone needs to or wanted to contribute to the health savings account, this has to be a high deductible health care plan. Would you have that number handy?

Hratch Karakachian:

I believe for individuals it’s $3,550 and for families, it’s around $7,100 with a catch up of $1,000 if an individual is over age 55. 

Chia-Li Chien: 

Alright, let’s talk about the stimulus for families then we have been hearing from the news, each individual will be getting 1200 dollars in taxes if you have a child, child will get about $500. Can you talk a little bit about who qualifies? We know that not everybody is qualified, there are certain AGI thresholds. So can you walk us through that.

Hratch Karakachian:

There are two requirements, there’s the AGI threshold requirement. And there’s also the tax return filing requirement. Originally, this tax return filing requirement was a little bit obscure but the IRS clarified that yesterday. So the AGI requirement is this every individual is entitled to $1,200 dollars and dependent children are entitled to $500. Obviously the parents will get back those funds so these are the AGI limitations for single individuals whose AGI is $75,000 or less, we’ll be getting the full amount, the full $1,200 dollars. And they’re going to be losing, for a married filing joint, it’s going to be a hundred and 50,000 or less. And for a head of household, it’s $112,500. 

Now for the upper limit for single individuals it’s $99,000. For married filing jointly it’s $198,000. And for Head of Household it’s $136,000.

And what these upper limits mean is that individuals who are filing in those categories and these are filing return requirements for the single, married filing joint than head of household. Individuals single individuals who make more than $99,000 will get nothing married filing joint, who make more than 198 will get nothing, and so on.

In between those numbers between $75,000 and $99,000. There’s going to be a haircut, or a reduction in the stimulus payment. And it’s $5 per $1000 reduction.

So, $5 reduction for every thousand dollars, above $75,000 so individuals who’re going to make $76,000 we’ll get a reduction of corresponding reduction in the stimulus.

Chia-Li Chien:

So really the reality here is we’re trying to help the middle class for, for the purpose of the stimulus. We had a question here from Ellie: can international students receive such stimulus?

Hratch Karakachian:

Yeah. Hold that thought for just one second. Let me address the second point here, the tax return filing requirement. So, how is the government going to know these AGI amounts for all of the taxpayers in the United States? 

In theory, all taxpayers in the United States, who have a social security number will qualify for the stimulus. The tax return filing requirement the government said they’re going to look at the 2019 tax returns. And to see what the AGI amount is on those returns and if individuals haven’t filed a 2019 return because the returns the due date has been extended. They’re going to look at 2018 tax returns.

So the question is, well, what happens if individuals haven’t filed 2018 or 2019 tax returns either because they were late or they’re behind in their filings or, like, a lot of individuals, their income is not high enough to warrant the filing of a return, and the IRS clarified that yesterday afternoon saying that they’re urging everybody to go and file a tax return. Online, even a simple tax return with the pertinent information. Even though, in theory, individuals whose income is not high enough may not be required to file a return but the IRS is asking everybody to file returns, so that they can use that information on that fraud return to provide them with a stimulus track.

Chia-Li Chien:

So this sounds like more of a more effective than a census report! Really, in fact they will get good data that actually isn’t in the US. So I guess the question from Ellie about international students, the question here would be if the international students actually work? That It  has some sort of enhanced some sort of accounts bank account a course of interest, potentially, they could file the tax return, if they have a valid social security number and they would qualify. Is that the case?

Hratch Karakachian:

If they found the return for 2018. I believe that the IRS will look at that information and use that information to issue a stimulus check.

Chia-Li Chien:

Okay. All right, so hopefully that clears up the questions regarding what means stimulus for the family. So thank you Hratch for that. 

I’m going to kind of switch gears to look at the business entity and I know that you probably still have questions, we wanted to make sure that we covered all the information so we’ll take questions toward the end of the session.

I’m going to take you through three different areas. I’m going to look at emergency payroll protection plan loans or then we’re going to go through the disaster resistant loans, and we’re going to talk a little bit about the business taxes changes.

So what I mean by that is that the emergency loan, to be honest, in the SBA world has been around for quite some times, but the new information that you hear from the press is this one. This is the Care Act, which is basically the COVID 19 Relief and Economic Security Act. This is that 350 billion dollars here from the news that to cover every small business, small business is defined as less than 500 employees, and the firm could include sole proprietorship and 1099 contractors that as long as you have Schedule C. That’s how I see how the rule works. And this also applies to people who have affiliates, for example some affiliates provide food services, accommodation, franchisees as an example. They are all qualified.

And so the idea here is that you can borrow up to $10 million if your business has been in existence before February 15, 2020. And you kept your employees for eight weeks. So you this is a key important part, you have to keep them for an eight weeks period of time. And you will be able to qualify for 2.5 times, all of your 2019 average monthly payroll. Okay, so as it’s calculated based on the 2019 your payroll on an average monthly times 2.5 times.

The good news here is that there is typically a collateral, or personal guarantee when you borrow money from the SBA loan. In this case, if it’s a peril protection. There is no collateral, and no personal guarantee, and most importantly, there is a conversion that potentially you will become forgiven, or grant.

So let me go through what it actually means in terms of grant conversion, enable to get grant conversion, or given, the law. The general rule is that you have to be assuming you are operating your business as usual for an eight weeks period of time. And as well as after the fact that you have after the fact that you actually receive the loan.

Chia-Li Chien:

Okay, sorry about that I thought there was a question. Alright so speaking of the grant portion of it. The general rule is that you are operating your business as usual, they’re going to look at how you spend your utilities, how you spend your rent, your interest payment, and they’re going to see that you actually are still operating your business as usual. That every dollar you spend to operate your business on the payroll and every dollars will be forgiven. And when we say payroll, we’re talking about salaries, medical, pay lease, etc. So that’s your payroll. 

Now, if you keep your employees, but you start to reduce headcount or even reduce their salary, then that dollar amount will be reduced in terms of forgiving portion of it. Employees that make more than $100,000 will not qualify for this type of forgiven, grand portion. And if you reduce their salary that says more than 25%. Definitely the dollar amount forgiven will be drastically reduced.

Now for some of you who let go employees already. If you aren’t going to get this particular payroll paycheck program, protection plan. If you bring them back. And that will actually qualify for more tax credits, through the process. Now this is as long as we can interpret it to this point as the agency is still writing those policies so stay tuned. There’s a whole lot of things that we don’t know yet. Now, I mentioned about small business administration, they already have this type of loan in place. This is not new. They pay will or paycheck protection plan is new, because of the most recent stimulus package.

There is a terminology called EIDL Economic Injury Disaster Law, and in a moment I’m going to take you through where you can find that information to help your business or your clients. So economic injury disaster loans. Typically, this disaster loan is for up to $2 million. This has to be in an area that has been too clear of the state, either in a state of emergency or declared as a disaster. So in a moment I’m going to show you how to find out if your particular state or county has been clear for that particular disaster, then you can qualify, up to $2 million dollars loan.

The catch here is that you also have to be a small business, and this is typically for working capital. This is not just repeatable working capital. This one. You have up to $2 million. And there is a difference here if you compare them to here, you will see that this one you do need to have collateral. According to the SBA website, it does say that you need to have collateral and personal guarantee. However, for the COVID-19 situation it varies by state to state so you do need to check on your state to see if that actually is a requirement. We know that if you borrow more than $25,000, you are going to get some collateral. So that’s what we have known so far.

The interest is either 3.75% or 2.575% if you are not for profit, and the term can stretch it out to up to 30 years. However, the caveat here is that you cannot use this loan to pay off your existing loan or refinance your existing law, you have to maintain a certain insurance, upper estimation agreement vironment for for the loan.

Alright so, let’s say we have questions here about from. Okay, so I guess that was the question, answer already the first hundred thousand dollars will be repaid. I guess I wasn’t following on the chat, so I’m gonna skip that question a little bit. All right.

All right, so for the EIDL working capital. Keep in mind that I’ll show you the screen of where to get those information you really need to look at state by state. Now, another thing to look at is unemployment insurance and I’m going to come back to unemployment insurance in just a little bit but I wanted to talk about an EIDL Advance.

There’s something called the EIDLAdvance, that’s new for this particular price of rehab. And this has something to do with that. If you get the request through the SBA, up to three working days, you can receive up to $10,000, and that will potentially be forgiven, right away. Here is the caveat. The government is not that stupid. They know you need money. You have to pick and choose, you cannot get the payroll and the EIDL at the same time, you have to pick one or the other. So, if you do have a workforce do have a payroll situation that what I will recommend you to look into is that payroll protection or paycheck protection plan, as well as we’re looking into the higher working capital. So, if those are the businesses that you’re in that has a sizable workforce and do need money. You do want to take advantage of these.

Now, the stimulus covers this payroll portion of it. According to the policy where the Senate and the Congress bill. They should cover everyone. I don’t know if it’s going to cover everyone, so I’m going to encourage people to if you do think you need it. Stand in line quickly. We don’t know how fast these things are gonna turn out and typically with an SBA loan, you have to go through a bank. In this case, the SBA has to streamline the process, everything has to go through the SBA you’ll be assigned with a local bank, to work, to get the loan through. So, you need to get prepared, we’re going to talk about unemployment insurance for a moment.

For those businesses that already incur layoff, furlow, or combination of these two. And plus you’re going to take some sort of EIDL either payroll protection, or I’m alone, working capital loan.

You wanted to make sure that the unemployment, it might potentially come back to bite you, because if there’s a percentage of that the existing business still have to pay back to the estate in terms of individual unemployment, the federal stimulus package do allow up to four months instead of a 13 weeks, and the one week wait period has been waived, and the, it has been expanded right now, as long as it’s tied to the COVID-19, you will be able to qualify expanded on employment coverage.

Now, the, the way that it works now for the individual unemployment, is the way that I understood how it works is that you will potentially get an increase of your weekly benefits and that weekly benefits solely depending on the state that you’re in, and that is not your full page percentage of your full pay, and that depending on the state that you are live in plus another $600 per week from the federal government.

How to qualify for this? In a typical unemployment situation you have to be available and continue to look for work, because of the COVID-19. Some of the state may waive that requirement so check with your state if unemployment is something that you have to file.

Once you go back to work all of these benefits will be cut off. So that’s the thing to make sure that you know that there’s an unemployment portion of it. Now I did mention that I wanted to give you a perspective of this law. I am not a person that likes to borrow money, but we are in a desperate situation, but I want to put things into perspective.

By the end of last year, 2019, the SBA typical SBA loan, and as you can see on the screen is around the five to seven percentage range depending on how much you borrow from SBA. That means that the loan we just went through, if it is a working capital on EIDL law, we’re looking at about 3.75%. If you are a for profit organization, 2.75% if you’re not for profit. If you need money, compared to what you see on the screen there. This is actually not a bad deal. If you do need money this is not a bad deal to consider and don’t wait because I don’t know if the amount that has been proposed now will be actually available, because everyone is somewhat nervous and trying to get this place so let me show you a couple of screenshots that I’ve got.

The first thing that you need to do is to go to your State’s website to see what is defined as an essential business because their rule might be a little bit different. This is probably addressing for those businesses as non essential that you need to have to work from home, or close your offices. So, check your state website first on the screen there. That’s a California State website, talking about what they mean by critical infrastructure.

Then, this is the screen that you can go to check on the SBA website for disaster loan systems, and the URL information will be included after the session today. This will help you to pull down the state that you’re in, and then the specific county to see if there’s a specific rule that will be an exception, or additional requirements that are needed for your particular area.

So here is the example for the California State basically everything I went through is in that particular policy, it tells you that a timeframe what is effective, when is the loan going to expire, what is the adjacent state in the county that actually goes in the loan percentage, and the loan is up to 30 years by the way, you can stretch it as long as to 30 years, but these are the information that you can actually find out more about your particular fate.

Now, the payroll and the paycheck protection program in the SBA website has very little information there yet, they are still scrambling through trying to interpret what the bill was. And so stay tuned, you’re going to get more information coming in the SBA website.

SBA has been moving in a rapid mode, trying to help people streamline the process and get everybody through the money that they need to maintain their business. So this is the website that they established, probably late last week. And this is their streamlined process, everything that you need to go through this particular website. So I really encourage you to do that, to at least find out what it is.

Now in the SP world, they do have a very simple three step process in terms of disaster loans, whether or not it’s a paper paycheck paid on paycheck with payroll loan that could potentially become a brand, or just the final one, you have to go through the SBA the three step process fairly simple you go online and I can tell you some of my clients has been kicked out of the website because there’s so many people trying to get through. And I encourage people that do need money. Please, go get that quickly. We do not know if there’s going to be plenty for everyone because the government is basically using some data that filed back in the 2018 and 2019, based on those payroll numbers based on those numbers to determine how much they need to allocate for the disaster loan. So if you do need money. Please go to their website and follow the process accordingly.

When you do the SBA loan, whether or not it’s EIDL or peril protection, chances are that if they need a personal guarantee you are collateral, you are required to file a personal financial statement. This is different from your business financial statement, this is basically letting them know your assets, your liabilities, your credit score, things like that. It really still will depend on your credit scores, to allow them to issue the amount of law that you have made. So be prepared for during that if you don’t know how to fill out these returns, this is a good time to reach out to your CPAs, your tax person, or your financial advisors, help them to get help get some help to fill out the form so you can appropriately get the necessary loan that you need to operate your business.

Now, how much should you borrow? If it’s a payroll protection program that we just talked about, you have up to two point times of your average 2019 monthly payroll. And if it’s working capital really depending on what your working capital is. And again, payroll is up to $10 million, and the idle working capital is up to $2 million. And so you really need to look at that closely with your advisors or your tax person, because this is Joe Lowe the idle long is doing that, that will incur in your business, you need to be careful about whether or not you need a six months, three months or a year working capital, you need to be having that discussion with your attorneys or with your CPAs, with your financial advisor, making sure that you are doing the right thing. We don’t want to just blindly go in and have a debt, and I’m able to pay back because the EIDL loan is not forgiven for the most part. Now, there are some tax changes, this is tax changes and I’m going to go through some of them, and I may or may not have all the information but hopefully that Hratch can provide a little bit more insight as I go through

In terms of employee retention business credit: if your business is partially or fully suspended, because of the COVID-19, and your sales have dropped more than 50% compared to the same quarter of 2019. Then you can, and you are probably going to be qualifying up to $10,000 employees. This type of business retained employee retention tax credits is all for the wages. Between March 13, and the end of this year. Okay, so that’s the employee retention tax credits.

Self Employed individuals, I know I am a LLC partnership organization and I am a self employed as well, and that being said, I may have to pay self employment taxes, employers portion employees portion of it. The program here is to the amount that you will own in 2020 50% of them would defer until the end of 2021. 50% of the other 50% would defer till the end of 2022 to pay that portion. So that is something that you really need to discuss with your tax or CPA. To find out how much is that, and then how much of that that you can actually, the length of the idea here is to increase the liquidity for your business to operate.

The other thing is that potentially that some of us are going to incur that operating losses, and if we don’t continue to have business coming in we still have to keep the business in operation. You potentially will have large operating losses. So, any net operating losses incurred in 2018 2019, as long as 2020, you can carry back for a five years period of time. For some of you that have corporate AMT, Alternative Minimum Tax, that you expect that you will have corporate or alternative minimum tax credits back at the end of 2021. You can potentially claim the refund today. And again, we don’t have much detail of it, other than, kind of a framework concept for that we’re still waiting for some more interpretation around the property and chief business interest expenses to option. Now this is only for 2019 and 2020. This will allow businesses to increase their deduction of business interest expenses. They used to be capped at 30% and are now increased to 50%. So, Hratch this was the question that I had when I was reading through the changes here. I was not aware of, is this a C Corporation  type of limitation will this apply to any business entities?

Hratch Karakachian:

It applies to any business entity but for entities that have revenues below $25 million, do not have to abide by this provision; it’s for big businesses.

Chia-Li Chien:

So this is typically for tech businesses. 

Hratch Karakachian: 

Yes that middle market and larger enterprises. 

Chia-Li Chien:

Okay. Thank you for clarifying that again for the hospitality industry by the way if you’re in the hospitality industry. If you continue to have business improvements such as capital investments, you can get immediate write off. Apparently, I don’t have a top dollar amount for that so I guess that’s still up in the air in terms of if there’s a maximum without but if you’re in the hospitality industry there’s an immediate vial of the type of improvement that you make into your properties and your business. 

There’s also temporarily waiving the exercise tax. If you’re using alcohol for producing hand sanitizer in 2020. So that is something that is also just a temporary waived for that information.

Hratch Karakachian: 

The hospitality it’s leasehold improvements made to the internal inside the, the store or the restaurant, can be written off. Previously the rule was that they had to be appreciated over 39 years but now this does not apply to elevators or capital improvement type items or expansion of the space, only renovation of the inside of the space, whether it’s retail or restaurant. 

Chia-Li Chien:

Okay, so as a retail or restaurant that could be using this from a renovation perspective that they qualified for that immediate write off. Okay. Very good, thank you. 

Hratch Karakachian:

Which is the100% bonus depreciation rule that most of you haven’t heard about.

Chia-Li Chien:

It is called the technical term for 100% bonus depreciation. All right, that’s good. Thank you. 

Alright, so, um, we’re going to open up for questions, real quick, but I do want to kind of let everybody know that yes we are in crisis but please don’t waste a crisis. Now that you potentially have a little bit of downtime, use downtime to plan strategically, especially in your business model. Now we know that your business model may work today. It was working yesterday but it may not work in the future so this is a great time to really strategically look at your business model and try to see if you can stay flexible with any economic climate. So then your business can still thrive, not just survive but thrive.

The other thing is that, let’s all be positive, we can all get through this together. And I believe we will be able to do that. I think supporting people is the best thing. Sometimes the government trying to help us but they’re usually a few steps behind, and therefore there’s always, if you can help another fellow business owners to understand these type of things, or just simply pass along the information that hopefully someone’s family or some business can be saved, please do that and we’ll be all coming out stronger after this particular crisis.

So with that, I’m going to turn the floor back to Josiah and Hratch to see if there’s any questions coming from the floor. I think we’d have some questions already answered in the chat box.

Yeah, so, yeah there was one question regarding the business income requirement yes that’s all you have to compare is, if it’s more than 20-50% it has to compare to the same quarter of 2019.

All right, so I’m going to turn the floor back to Josiah if there’s no additional questions. I think there’s one more question in the chat box.

Yeah, so for companies that have more than 500 employees. There are some other provisions available to them. And so, for the most part, they are more on the loan side, on the working capital loan side, not necessarily on the protection of the payroll side. So there’s a different provision for those businesses, that larger business, and I believe the larger business also has more available stimulus compared to the smaller business there. So I did not include that in there, but there is a section specifically for that. And Jeff, I can email you some links for that there is very little information on that I have to let you know that it’s not a lot of information. But the bigger business does have a different type of scenario.

Hratch Karakachian:

In regards to the companies that have less than 50 employees there’s an exception for essential service businesses and or businesses who layoff employees, and they will end up being shuttered or go bankrupt. Then there’s an exception that those businesses do not need to comply with Family and Medical Leave Act (FMLA) but there’s no information of how to apply for this exception, or exclusion and the procedures around it. Because there’s labor issues that the Department of Labor is involved in, in addition to the IRS and various state, state agencies are also involved, and other jurisdictions like the city of Los Angeles in businesses are located in Los Angeles, they have passed their own ordinances to help employees.

Chia-Li CHien:

Okay, thank you Hratch for that. Josiah, are you ready? 

Josiah Gonzales:

Yes, yes I am. Thank you Dr Chien, we’re so glad to have you for the Next Gen Mentoring Forum. What an informative session, it was. Thank you for California Lutheran University School of Management Financial Planning Program for sponsoring today’s Next Gen Mentoring Forum, California Lutheran University School of Management offers MBA financial planning, helps financial planning advisors pursue a leadership position or grow their financial planning practice by deploying advanced financial planning, effective plan communications last counseling streamlined practice management, as well as leveraged FinTech, please sign up for info session for more information. Thank you and see you at the Next Gen Mentoring Forum.