XLinkedInFacebook

About Laura Stees, CPA

Laura Stees, CPA is a Partner and Business Strategist with Stees, Walker & Company LLP — a San Diego, Calif.-based boutique tax consulting firm focused on personalized tax and financial guidance to individuals and businesses.

Estimating Your Paycheck Protection Program Loan Amount

By |2020-04-10T18:05:58-07:00April 10, 2020|Categories: COVID-19|Tags: , |0 Comments

If you’re a small-business owner, sole-proprietor, freelancer, or independent contractor, you may be wondering just how much money you are eligible to borrow under the Paycheck Protection Program (PPP).

For those unfamiliar with the Paycheck Protection Program, it is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on Friday, March 27, 2020. As of April 3, businesses with fewer than 500 employees, and other entities that qualify as small businesses, are eligible for loans of up to $10 million to keep them afloat and their workers paid for up to eight (8) weeks, without having to pay back the portion of the loan used to cover payroll and other qualified costs — mortgage interest (or rent) and utilities.

Paycheck Protection Program Loan Amount

The short answer to how much money your business may be eligible to borrow under the Paycheck Protection Program is this:

  • You can borrow up to 2.5 times your monthly payroll costs or up to $10 million, whichever is less; however,
  • When you apply for a PPP loan, the bank will want a more precise estimate of your payroll costs and other qualified costs.

In this post, we provide some general guidance on estimating your Paycheck Protection Program loan amount based on our interpretation of law. Your bank (or your accountant if you’re not a client of our San Diego Tax Planning Firm) can help you determine the exact amount based on your bank’s interpretation of the law.

Calculate the Maximum Amount You Can Borrow

The Small Business Administration provides the following step-by-step instructions for calculating the maximum amount you can borrow under the Paycheck Protection Program: Continue reading… Continue reading… Continue reading…

Answers to Paycheck Protection Program Questions

By |2020-04-08T17:37:43-07:00April 8, 2020|Categories: COVID-19|Tags: , |0 Comments

Since the Payroll Protection Program (PPP) launched on Friday, April 3, 2020, small-business owners have been hard-pressed to find banks that will accept PPP loan applications. Many banks and small-business owners say they are struggling to understand Small Business Administration (SBA) and U.S. Department of Treasury PPP-related rules and regulations.

In addition to puzzling over these mandates that govern the distribution of funds, banks find themselves scrambling to get personnel and processes in place to properly handle the application and approval process.

Here at Stees, Walker & Company LLP, we are encouraging small-business owners who are waiting for banks to get up to speed on the Payroll Protection Program to make preparations in advance. See last week’s post, “Get Ready for the Paycheck Protection Program NOW!”

For the uninitiated, the Payroll Protection Program was established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on Friday, March 27, 2020. The PPP has allotted $349 billion to provide small businesses with low-interest loans of up to $10 million per loan to keep them afloat and their workers paid for up to eight (8) weeks.

Sole proprietors, freelancers, and self-employed individuals are also eligible. To qualify, applicants need not put up any collateral or make any personal guarantee of repayment Payments are deferred for up to six months and, most importantly, the portion of the loan proceeds used to cover payroll and qualified operating expenses (which can be up to about 25 percent of the total loan amount) are likely to be forgiven.

Part of the reason for the delay among banks and small-business owners is confusion over the rules and the process. To clarify the rules, on April 7, 2020, the Small Business Administration (SBA) issued clarifications, many of which address how small businesses should determine their payroll costs. Following is a condensed version these clarifications: Continue reading… Continue reading… Continue reading…

Get Ready for the Paycheck Protection Program NOW!

By |2020-04-01T15:26:59-07:00April 1, 2020|Categories: COVID-19|Tags: , , , , |1 Comment

Following the signing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on Friday, March 27, 2020, the Small Business Administration (SBA) and the U.S. Department of Treasury announced a mobilization effort of lending institutions — including banks and credit unions — to provide small businesses with the capital they need in these times of living under the Federal government’s Slow the Spread guidelines, which are now in effect until April 30, 2020.

The CARES Act establishes the new Paycheck Protection Program (PPP) to help businesses with 500 or fewer employees stay afloat and keep their workers employed and paid for up to eight (8) weeks. The program, which was announced earlier this week and includes access to $349 billion in funds, is expected to be up and running by April 3 (this Friday), at which time small-business owners can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved the same day. Perhaps best of all, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight (8) weeks of payroll costs, rent, utilities, and mortgage interest.

Paycheck Protection Program

The Paycheck Protection Program will be available retroactive from Saturday, Feb. 15, 2020, so employers can rehire their recently laid-off employees through Tuesday, June 30, 2020.

This program’s intent is to help small businesses like those we work with here at Stees, Walker & Company, LLP, stay afloat and retain employees until the social distancing rules are relaxed and business owners can quickly ramp up businesses to pre-COVID-19 levels. To do that, we all need to retain our most valuable assets — our employees.

Below, starting with loan terms and conditions, is a rundown of how the Paycheck Protection Program works, and other thoughts on how to prepare yourself now to tap into this important business resource.

Loan Terms and Conditions

Following are the loan terms and conditions: Continue reading… Continue reading… Continue reading…

COVID-19 Relief for Small Businesses and Their Employees

By |2020-03-25T15:09:17-07:00March 25, 2020|Categories: COVID-19|Tags: , , , , |0 Comments

The same steps the federal government and many state governments are taking to protect citizens from the coronavirus known as COVID-19 are — not by design but by unintentional consequence — slowing down the economy and hurting many businesses. Especially small businesses like the ones we often work with here at Stees, Walker & Company, LLP. Looking at the prospect of going for several weeks or months without revenue or with significantly diminished sales, small-business owners we work with are naturally worried about paying rent and covering payroll. Some have already had to lay off employees.

Fortunately, some relief is on the way. Here in California, on March 17 of this year, Governor Gavin Newsom signed an executive order suspending the requirement that employers provide 60-day notice for any mass layoffs. One day later, the U.S. Congress passed the Families First Coronavirus Response Act to expand the Family Medical Leave Act (FMLA) and related tax credits for employers.

In this post, we offer an overview of what the U.S. government and the State of California’s latest efforts mean for small businesses. First up, the suspending of the 60-day notice for mass layoffs.

Suspending the 60-Day Notice Requirement for Mass Layoffs

California employers required to adhere to the Worker Adjustment and Retraining Notification (WARN) Act and Cal-WARN Act are required to provide 60-day advance notice of any plans for mass layoffs or terminations. Governor Newsom’s executive order (No. N-31-20) suspends the 60-day notice requirement for forced closings, relocations, or layoffs directly related to the coronavirus known as COVID-19. The Governor’s executive order remains in effect for the duration of California’s current State of Emergency.

Note: Newsom’s executive order does not suspend WARN (Worker Adjustment and Retraining Notification act) or Cal-WARN in their entirety — employers are still required to honor their other obligations under these acts.

As a California employer, you’re still required to provide written notice to Continue reading… Continue reading… Continue reading…

Understanding How Shifting Income May Reduce Taxes

By |2020-03-12T15:41:18-07:00March 12, 2020|Categories: Taxes|Tags: , , , |0 Comments

In our previous post — Four Proven Ways to Cut Your Taxes — we highlighted four areas we focus on when seeking to reduce the amount of taxes our clients owe state or federal taxing authorities: shifting, timing, code, and product. In this post, we take a deeper dive into the technique known as shifting, which involves transferring income or assets from a high-tax-bracket person or entity to a person or entity subject to low or zero taxes.

For example, suppose a portion of your business income is taxed at 37 percent, which is currently the highest income tax rate in the U.S. You hire a teenage son and daughter to work for you over the summer and pay each of them $12,400. As a result, you save $24,800 x 0.35 = $8,680 in federal income tax plus any state taxes as well as potentially any amount you would have been required to pay in self-employment tax on that $24,800. Assuming neither child earns more than $12,400, because of the current tax code, they pay nothing in federal taxes. This is a great way to shift business income you don’t need for yourself to your children.

This example illustrates just one of several shifting techniques that can be used to reduce one’s tax burden. Several techniques are available that can be broken down into the following two areas:

  • Business income: In business, the primary objective of shifting is to reduce personal income tax and, in many cases, pay less in self-employment taxes (Social Security and Medicare).
  • Estate planning: In the context of estate planning the objective is to reduce individual income taxes levied on investment income and capital gains while ultimately reducing or eliminating estate taxes. In this post, we touch lightly on shifting the context of estate planning, while in a future post provide more in-depth coverage of this topic.

Income Shifting in Business

If you own a business, you have three ways to use income shifting to reduce your tax bill: Continue reading… Continue reading… Continue reading…

How to Calculate Your Tax Bill — Simplified

By |2020-03-11T05:00:33-07:00March 10, 2020|Categories: Taxes|Tags: |0 Comments

To most taxpayers, taxes and how they’re calculated are a mystery. Consisting of 70,000+ pages, the Internal Revenue Code (aka, the Commerce Clearing House [CCH] Standard Federal Tax Reporter) is complicated, and when you’re filling out the forms (on paper, online, or in a tax program), determining what you’re being asked and how to supply the correct information can be both challenging and frustrating. Every so often, a politician expresses a vision of a time when our tax returns will fit on a postcard, but that never happens. (As an aside, the shortened version was attempted with the 2018 tax year and was an unmitigated disaster — the result… the tax return went from two pages to eight pages. In 2019, it was shortened to five pages. Simple, right!?)

Fortunately, people like me who’ve spent five years in college studying accounting and taxes, and countless hours since leaning about the practical application of Title 26 of the United States Code (i.e., the Internal Revenue Code), are available to help you navigate this minefield. We’ve been trained to quickly analyze taxable situations, however simple or complex, and complete our clients’ returns in a way so as to minimize their tax burden.

Still, you can benefit by understanding the fundamentals of how tax bills are calculated. In this post, I explain the process in plain and simple terms.

Seven Steps to Calculate Your Tax Bill

Calculating your tax bill is a seven-step process. Here I present the overall process and then take a deeper dive into each step. Before going there, however, below is a 30,000-foot overview of the seven-step process to calculating your tax bill:

Steps to Calculate Tax Bill

While that may sound like a lot of gibberish to you, to someone like me, it’s music to my ears. Starting with Step No. 1, here’s the deeper dive I promised:

Step 1: Calculate total income

The IRS wants to know how much money you have received over the course of the year — your total income. Total income includes money received from the following sources:

  • Earned income from wages, salaries, commissions, and tips
  • Profits from business and self-employment
  • Interest and dividends
  • Capital gains from the sale of property held for investment
  • Income from pensions, IRAs, and annuities
  • Rents, royalties, and income from flow-through entities
  • Alimony (from agreements finalized before January 1, 2019)
  • Gambling winnings
  • Barter proceeds
  • Illegal income (yes, you’re required to disclose income from illegal activities)

Income from certain sources is generally tax exempt, although you may still be required to report it, including the following: Continue reading… Continue reading… Continue reading…

Four Areas for Cutting Taxes, Growing Net Worth, and Achieving Peace of Mind

By |2020-03-06T12:43:13-08:00March 6, 2020|Categories: Financial Planning|Tags: , , , , , |0 Comments

People are funny. We tend to plan more for a vacation than we do for our own and our family’s financial future. Planning for vacation involves choosing a destination; deciding how to get there (means of travel, route, stops along the way); deciding how long to stay, where, and what to do while on vacation, and more.

Financial planning and even a subset of that — tax planning — is more involved and complex, yet we invest less time and effort engaging in it. As a result, many of us pay more than our fair share in taxes, leaving us with less of our annual earnings to enjoy and to invest in our own and our family’s future security, comfort, enjoyment, and self-fulfillment.

One way to simplify the process of tax and financial planning is to break down the task into distinct areas of your life where you can cut taxes, grow your net worth, and achieve peace of mind. This post steps you through that process.

Area 1: Family, Home, and Job

Age-old wisdom advises that “charity begins at home,” meaning that before we can help others, we need to build a firm foundation for our own financial health. It also means taking care of those closest to us first — our family members and friends.

Tax-savings and financial planning strategies should also begin at home with family, home, and job. Areas of focus should include the following: Continue reading… Continue reading… Continue reading…

4 Proven Ways to Cut Your Taxes

By |2020-03-03T19:30:04-08:00March 4, 2020|Categories: Taxes|Tags: , , , , , |0 Comments

As an individual, business owner, or investor, you leverage the power of compounding returns to grow wealth exponentially. Using a different approach, you can slash your taxes by layering four distinct tax-cutting strategies. Applying one strategy alone delivers good results, applying two strategies in tandem improves results, and applying all four maximizes your tax savings and increases your net worth. With every added layer, you not only keep more of your money, but also have more to invest to reap the rewards of compounding returns.

This post reveals four key tax-cutting strategies and explains how to leverage them, alone and together, to maximize your savings.

Shifting

Shifting involves moving taxable income from a higher tax rate person or entity to a lower one; for example, from a parent to a child, from an adult child to a parent, from a sole proprietorship to a corporation. In many cases, shifting delivers the added benefit of moving taxable income to a less audited entity, as well. Changing your business entity from sole proprietorship to S-Corporation opens the door to more tax strategies, lower tax rates, and lower audit rates.

Keep in mind that if you don’t specify an entity for your business, sole proprietorship, the least tax efficient, is the default chosen for you. Instead of letting the government default to that choice, make it yourself and take control of your tax rates.

Timing

In the tax world, timing isn’t everything, but it is certainly valuable in helping to reduce one’s tax burden. Timing strategies generally defer taxes to future dates to take advantage of lower future rates or utilize the time value of money. The most obvious tax strategy related to timing involves deferred tax instruments, such as individual retirement plans and 401Ks. Continue reading… Continue reading… Continue reading…

© 2014- Stees, Walker & Company, LLP (SWC). All rights reserved.
XLinkedInFacebook
Go to Top