Ep. 68: Paul Miller - Tax Implications and Planning due to COVID-19
Paul Miller, CPA is a driven individual and a tireless businessman with over 30 years in the accounting industry. With offices in New York, Florida, and the District of Columbia and approximately 2,000 clients internationally to his firm, Paul is a trusted and sought-after accountant. Now, due to COVID-19, there have been many changes that businesses and individuals need to be aware of. For example, the tax deadline in the US has been extended, government loans have been issued, and these happenings have certain implications. In this episode of Count Me in, Paul talks about what he has seen amidst this crisis for various businesses and helps explain the risks and opportunities associated with the money available to individuals and business owners. Download and listen now!
Miller & Company, LLP: https://www.cpafirmnyc.com/
FULL EPISODE TRANSCRIPT
Adam: (00:06)
Welcome back to episode 68 of Count Me In. IMA's podcast about all things affecting the accounting and finance world. I'm your host, Adam Larson, and today we'll be listening to an important conversation about the tax implications and guidelines for individuals and small to midsize businesses following the various government loans in response to the COVID-19 crisis. Paul Miller is a CPA with over 30 years of experience in the accounting industry. Keep listening to hear how he's been advising his clients during these uncertain times.
Mitch: (00:41)
All right, Paul, so to start off in general, you're an accountant from the clients that you work with. What are some of the trends that you've seen, whether it's individuals or businesses following this COVID-19 crisis?
Paul: (00:54)
Everyone wants to know how to or have obtained the Paychecks Protection Program and what it means to them, how they have to spend it. That's been the general focus of the last two weeks, and it's very demanding. I've been engaging a lot with an employment attorney because a lot of people are, they have to be very careful that this is going to be scrutinized at some time, and they have to be sure that they follow the first set of rules. If they got the first trench of money and the second set of rules, they got the second trench of money. So you have to navigate them, and I'm trying to navigate it the latter because I think that's more conservative than the first set of economic rules. So I've been referring clients to a SBA attorney and I've been referring clients to a labor attorney, and simultaneously we've constructed, and we're going to launch it today, which is an spreadsheet that gives people, not an official guideline but like a checker so you could keep track of where you're at, where you're spending is at, where your head counts at. That's, that's one of the most important things today that most of my businesses are focused on. The people who actually went out and got the money. I did have two or three clients obtain the loans and return them for their business is not in economic uncertainty anymore.
Mitch: (02:23)
So, you know, particularly in the US we here are very familiar with the stimulus package, you know, these government loans you mentioned and as a result of that or you know, on top of that, we've also recently seen the extension of the standard April 15th tax deadline. So that's been pushed back and you know, with your clients and everything you're working with these attorneys, what does the tax deadline mean now for everybody? And really, I guess you could start with the individual, or wherever direction you want to go. But what can people expect from this extension?
Paul: (02:57)
Well, it's definitely great. There's two schools of thought, right? The people who all money and the people who are getting a refund. The people who are getting a refund want to file. The problem is if your return contains any paper documents, your return is not getting processed. The IRS has made an announcement that they're not processing manual returns. So, you know, if you have any manual attachment or you have to file by paper, you're not getting a refund. For people who owe, and you would have voted on April 15th that extends everything till July 15th. So there's no penalties, no interest. You go to July 15th. There are States that have a broken from the federal government that a lot of your audience needs to be aware of. For example, New Hampshire is expecting their tax return on June 15th. DC expected their first estimate on April 15th. So you have to pay attention to where you file. You have to pay attention is the extension for not only the federal, and has the state connected with the federal and decided to align themselves and not break from, and have you have a separate filing, puts you under distress.
Mitch: (04:12)
And what about from the business side effects this small to medium sized firms. Let's say you receive some of these government loans. What does that mean for your taxes and your filing and everything else you need to be aware of?
Paul: (04:27)
Well, again, this is fluid, so it's changing every day, right? So as of today, the money that you received, is not taxable. The expenses that you pay, are not deductible. And the difference that you're not forgiven is a loan over 24 months at 1%.
Mitch: (04:52)
So many of our listeners are management accounts, right? They're really focused on the operations, the strategy within the business. With this kind of money, and there's different stipulations as you've just outlined for us, what does that mean to their day to day roles? You know, within the smaller business, even if you're a sole proprietor, as far as the planning, overall performance of the business, what are you recommending to your clients?
Paul: (05:19)
There's two schools of thought. You know, if you took the money, the money was to bring your staff back. Okay. Again, it's fluid so I'll blend it in. I've been telling people to preserve capital because you don't know how long this is going to last. Access to capital is very important. I'm explaining to people that it's not.... what is your objective? I asked that question to the employee. Is it too forgive the money and you're not worried about your business, or your business is going to sustain and be fine anyway. Or is your concern, I need the cash flow, because another disconnect with this PPP program, the Paychecks Protection Program is the government has not aligned themselves with the States. So technically from the day you received the money, you have eight weeks to spend it. That really doesn't line up in a lot of States, because a lot of businesses may be a different phase and not open. So you may ask people to come back to work, and they may not want to come back to work. Technically, and I'm not a lawyer, so I don't want to speak legally, but it's my understanding you're supposed to write a letter to the employee saying your job is available, we're willing to pay you, and then you're supposed to notify unemployment and then put them on family leave. This has been a big challenge for a lot of people.
Mitch: (06:44)
When should a business and individual really seek some additional guidance like yourself here? I know, you've obviously dealt with clients, we were talking about it just before we got on here, all over the place, right? Is there a threshold or a point in time where you say, or you've seen people are, you know, right in time or maybe it's too late before they contact an accountant and start to plan how to work through all these loans and the different tax extensions and such, you know, when is that point in time that you really need to get in touch with an accountant?
Paul: (07:22)
The minute you have the money. I think if you're not working with your accountant or your accountant is not up on top of this, you're in trouble. You're in trouble. You know, people, there's so much information out there, we send out very limited emails in bulk to have effectiveness so that when people get them, I'm getting calls from other clients who have accountants and so I just want to thank you for your email. I'm trying to give people the guidance that I get, not only from what I read, I talk to clients, I have clients who are lobbyists who are working on the bill. They are working on the revision of the bill. I talked to my friends, the SBA, just trying to get as much information as I can to get my clients as informed as they possibly can. And I think a client who does not seek counsel is, unless they took a little bit of money, they may not have a high risk, but if we took anything over 50 grand or over a hundred thousand, you have to be mindful that everybody above 2 million is going to get audited and they're going to audit small people, and it's not going to be really hard to audit you. You know, this is a headcount driven test, and they're going to ask you for a lot of detailed information. One of the documents I've trying to get my hands on is what does the forgiveness worksheet look like, and that has not been drafted yet.
Mitch: (08:50)
Sure. So, you know, you just mentioned the audit. What other risks are there for individuals who are collecting this money?
Paul: (08:59)
It could be committing a crime. You know, I don't think it's the government's intention to prosecute people, but I had a client the other day telling me that they got six point $6.6 million dollars. I told him he needed to get a legal opinion. The woman is a friend of mine. She's a controller of a quasi public company. And I said, you took the money without a legal opinion, and she was like, we're confident that we're okay. I'm like, okay. I had another person who took $400,000 using the real estate business, he returned the money. A lot of people don't want to go into the government scrutiny. We don't know, there's that old saying nothing's for free. You know what I mean? I would just tell everybody listening to try to pay as careful attention to the law as possible.
Mitch: (09:47)
So I guess to really wrap things up, you know, from what you've seen, what you envision coming up in the future, what are some of the takeaways that businesses or individuals, should learn from this? What recommendations do you have for future business operations and future handling of money after all this crisis.
Paul: (10:08)
When the crisis is over, it's going to teach you a lesson. You know, you have to have some bunk money. You have to be aware of the unexpected living way above your means, which is what the government's doing, and advising clients by having a massive deficit and saying it's okay to spend more than you make. You need to be prepared. You need to be prepared not only for today but for tomorrow to have a certain amount of money put aside so that you can support your staff, and support your business and make capital investments, especially in the time like now. Now I find there's an incredibly good opportunity for people who are, you know, in the professional services business where they should be marketing themselves, not today, but for tomorrow. The SBA attorney that I'm working with was an M&A attorney. He's taken several classes to become SBA and flipped his career for the interim while he's doing SBA work. So there's a lot of things you have to say. So if you know the world is funny, it's, it's not, it's never what it was, it's never what it's going to be. So this is an interesting time going forward where we're going to have harder bank rules to get financial statements. Going to have harder lending rules, what's going to make businesses even harder to get money, even though the government is rolling out the next line of loans, which is the Main Street Lending Program, which will be the next thing that a lot of people will be talking about. In addition to, if you want to talk about it for a few minutes, a lot of people are now being offered their EIDLE loan. A lot of people are now getting the acceptance, and it varies from as little as $1400, i've seen up to $150,000 where it's now capped. And I'm recommending to a lot of my clients, and this, the clarity is becoming, it's becoming clearer that you can take the EIDLE loan and it will reduce, so you will have to refinance your PPP, but you can't spend the money for the same purposes you use the PPP money for. So again, it's not official yet, but that's my understanding, and if that's the case, I'm recommending to a lot of my clients to take the money. It's interesting principle for free and you could prepay it at any time, so I can give you an extra cushion, maybe pay your vendors to maybe pay your suppliers and or market, or do some things that will need to be done to get your business, redirected and back, back up online.
Mitch: (12:35)
So I guess this will be my last question for you. With all this available funding and lessons learned, so on and so forth. What are the opportunities coming out of this? I know we talked a lot about some of the negatives, some of the risks, but you know, what kind of positives do you see potentially coming out of this?
Paul: (12:50)
Oh, there's tremendous, tremendous opportunities. There's going to be acquisitions where companies can't survive. You know, there's going to be tremendous buying opportunities. Look where one person loses another person gains, and the person who's in a better financial position we'll capitalize on, on this market. Okay. And it doesn't necessarily mean the rich get richer, smarter businesses that like architectural firms that couldn't do it on their own, maybe they group their businesses together and they work better together to bring in jobs and cross over, you know what they do. A lot of different things. There's going to be a lot of activity in, either M&A or an acquisitions or restructuring businesses. That's what I see. I think it's going to be, well, you know, once we get through the downturn and people, this is pushing the digital age forward faster, and it's going to teach, people are gonna need to retool themselves, being more computer literate and it's going to advance a lot of things that, you know, we were slowly getting there. It's kind of accelerated it. So the, I can do a Zoom meeting. I don't need to fly across the country. I can do the, you know what I mean? Things like that are very obvious that are going to save companies money, but you, the real estate industry will have to refigure themselves out, and there'll be a lot of, figuring going on.
Announcer: (14:16)
This has been, Count Me In IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at www.imanet.org.
FULL EPISODE TRANSCRIPT
Adam: (00:06)
Welcome back to episode 68 of Count Me In. IMA's podcast about all things affecting the accounting and finance world. I'm your host, Adam Larson, and today we'll be listening to an important conversation about the tax implications and guidelines for individuals and small to midsize businesses following the various government loans in response to the COVID-19 crisis. Paul Miller is a CPA with over 30 years of experience in the accounting industry. Keep listening to hear how he's been advising his clients during these uncertain times.
Mitch: (00:41)
All right, Paul, so to start off in general, you're an accountant from the clients that you work with. What are some of the trends that you've seen, whether it's individuals or businesses following this COVID-19 crisis?
Paul: (00:54)
Everyone wants to know how to or have obtained the Paychecks Protection Program and what it means to them, how they have to spend it. That's been the general focus of the last two weeks, and it's very demanding. I've been engaging a lot with an employment attorney because a lot of people are, they have to be very careful that this is going to be scrutinized at some time, and they have to be sure that they follow the first set of rules. If they got the first trench of money and the second set of rules, they got the second trench of money. So you have to navigate them, and I'm trying to navigate it the latter because I think that's more conservative than the first set of economic rules. So I've been referring clients to a SBA attorney and I've been referring clients to a labor attorney, and simultaneously we've constructed, and we're going to launch it today, which is an spreadsheet that gives people, not an official guideline but like a checker so you could keep track of where you're at, where you're spending is at, where your head counts at. That's, that's one of the most important things today that most of my businesses are focused on. The people who actually went out and got the money. I did have two or three clients obtain the loans and return them for their business is not in economic uncertainty anymore.
Mitch: (02:23)
So, you know, particularly in the US we here are very familiar with the stimulus package, you know, these government loans you mentioned and as a result of that or you know, on top of that, we've also recently seen the extension of the standard April 15th tax deadline. So that's been pushed back and you know, with your clients and everything you're working with these attorneys, what does the tax deadline mean now for everybody? And really, I guess you could start with the individual, or wherever direction you want to go. But what can people expect from this extension?
Paul: (02:57)
Well, it's definitely great. There's two schools of thought, right? The people who all money and the people who are getting a refund. The people who are getting a refund want to file. The problem is if your return contains any paper documents, your return is not getting processed. The IRS has made an announcement that they're not processing manual returns. So, you know, if you have any manual attachment or you have to file by paper, you're not getting a refund. For people who owe, and you would have voted on April 15th that extends everything till July 15th. So there's no penalties, no interest. You go to July 15th. There are States that have a broken from the federal government that a lot of your audience needs to be aware of. For example, New Hampshire is expecting their tax return on June 15th. DC expected their first estimate on April 15th. So you have to pay attention to where you file. You have to pay attention is the extension for not only the federal, and has the state connected with the federal and decided to align themselves and not break from, and have you have a separate filing, puts you under distress.
Mitch: (04:12)
And what about from the business side effects this small to medium sized firms. Let's say you receive some of these government loans. What does that mean for your taxes and your filing and everything else you need to be aware of?
Paul: (04:27)
Well, again, this is fluid, so it's changing every day, right? So as of today, the money that you received, is not taxable. The expenses that you pay, are not deductible. And the difference that you're not forgiven is a loan over 24 months at 1%.
Mitch: (04:52)
So many of our listeners are management accounts, right? They're really focused on the operations, the strategy within the business. With this kind of money, and there's different stipulations as you've just outlined for us, what does that mean to their day to day roles? You know, within the smaller business, even if you're a sole proprietor, as far as the planning, overall performance of the business, what are you recommending to your clients?
Paul: (05:19)
There's two schools of thought. You know, if you took the money, the money was to bring your staff back. Okay. Again, it's fluid so I'll blend it in. I've been telling people to preserve capital because you don't know how long this is going to last. Access to capital is very important. I'm explaining to people that it's not.... what is your objective? I asked that question to the employee. Is it too forgive the money and you're not worried about your business, or your business is going to sustain and be fine anyway. Or is your concern, I need the cash flow, because another disconnect with this PPP program, the Paychecks Protection Program is the government has not aligned themselves with the States. So technically from the day you received the money, you have eight weeks to spend it. That really doesn't line up in a lot of States, because a lot of businesses may be a different phase and not open. So you may ask people to come back to work, and they may not want to come back to work. Technically, and I'm not a lawyer, so I don't want to speak legally, but it's my understanding you're supposed to write a letter to the employee saying your job is available, we're willing to pay you, and then you're supposed to notify unemployment and then put them on family leave. This has been a big challenge for a lot of people.
Mitch: (06:44)
When should a business and individual really seek some additional guidance like yourself here? I know, you've obviously dealt with clients, we were talking about it just before we got on here, all over the place, right? Is there a threshold or a point in time where you say, or you've seen people are, you know, right in time or maybe it's too late before they contact an accountant and start to plan how to work through all these loans and the different tax extensions and such, you know, when is that point in time that you really need to get in touch with an accountant?
Paul: (07:22)
The minute you have the money. I think if you're not working with your accountant or your accountant is not up on top of this, you're in trouble. You're in trouble. You know, people, there's so much information out there, we send out very limited emails in bulk to have effectiveness so that when people get them, I'm getting calls from other clients who have accountants and so I just want to thank you for your email. I'm trying to give people the guidance that I get, not only from what I read, I talk to clients, I have clients who are lobbyists who are working on the bill. They are working on the revision of the bill. I talked to my friends, the SBA, just trying to get as much information as I can to get my clients as informed as they possibly can. And I think a client who does not seek counsel is, unless they took a little bit of money, they may not have a high risk, but if we took anything over 50 grand or over a hundred thousand, you have to be mindful that everybody above 2 million is going to get audited and they're going to audit small people, and it's not going to be really hard to audit you. You know, this is a headcount driven test, and they're going to ask you for a lot of detailed information. One of the documents I've trying to get my hands on is what does the forgiveness worksheet look like, and that has not been drafted yet.
Mitch: (08:50)
Sure. So, you know, you just mentioned the audit. What other risks are there for individuals who are collecting this money?
Paul: (08:59)
It could be committing a crime. You know, I don't think it's the government's intention to prosecute people, but I had a client the other day telling me that they got six point $6.6 million dollars. I told him he needed to get a legal opinion. The woman is a friend of mine. She's a controller of a quasi public company. And I said, you took the money without a legal opinion, and she was like, we're confident that we're okay. I'm like, okay. I had another person who took $400,000 using the real estate business, he returned the money. A lot of people don't want to go into the government scrutiny. We don't know, there's that old saying nothing's for free. You know what I mean? I would just tell everybody listening to try to pay as careful attention to the law as possible.
Mitch: (09:47)
So I guess to really wrap things up, you know, from what you've seen, what you envision coming up in the future, what are some of the takeaways that businesses or individuals, should learn from this? What recommendations do you have for future business operations and future handling of money after all this crisis.
Paul: (10:08)
When the crisis is over, it's going to teach you a lesson. You know, you have to have some bunk money. You have to be aware of the unexpected living way above your means, which is what the government's doing, and advising clients by having a massive deficit and saying it's okay to spend more than you make. You need to be prepared. You need to be prepared not only for today but for tomorrow to have a certain amount of money put aside so that you can support your staff, and support your business and make capital investments, especially in the time like now. Now I find there's an incredibly good opportunity for people who are, you know, in the professional services business where they should be marketing themselves, not today, but for tomorrow. The SBA attorney that I'm working with was an M&A attorney. He's taken several classes to become SBA and flipped his career for the interim while he's doing SBA work. So there's a lot of things you have to say. So if you know the world is funny, it's, it's not, it's never what it was, it's never what it's going to be. So this is an interesting time going forward where we're going to have harder bank rules to get financial statements. Going to have harder lending rules, what's going to make businesses even harder to get money, even though the government is rolling out the next line of loans, which is the Main Street Lending Program, which will be the next thing that a lot of people will be talking about. In addition to, if you want to talk about it for a few minutes, a lot of people are now being offered their EIDLE loan. A lot of people are now getting the acceptance, and it varies from as little as $1400, i've seen up to $150,000 where it's now capped. And I'm recommending to a lot of my clients, and this, the clarity is becoming, it's becoming clearer that you can take the EIDLE loan and it will reduce, so you will have to refinance your PPP, but you can't spend the money for the same purposes you use the PPP money for. So again, it's not official yet, but that's my understanding, and if that's the case, I'm recommending to a lot of my clients to take the money. It's interesting principle for free and you could prepay it at any time, so I can give you an extra cushion, maybe pay your vendors to maybe pay your suppliers and or market, or do some things that will need to be done to get your business, redirected and back, back up online.
Mitch: (12:35)
So I guess this will be my last question for you. With all this available funding and lessons learned, so on and so forth. What are the opportunities coming out of this? I know we talked a lot about some of the negatives, some of the risks, but you know, what kind of positives do you see potentially coming out of this?
Paul: (12:50)
Oh, there's tremendous, tremendous opportunities. There's going to be acquisitions where companies can't survive. You know, there's going to be tremendous buying opportunities. Look where one person loses another person gains, and the person who's in a better financial position we'll capitalize on, on this market. Okay. And it doesn't necessarily mean the rich get richer, smarter businesses that like architectural firms that couldn't do it on their own, maybe they group their businesses together and they work better together to bring in jobs and cross over, you know what they do. A lot of different things. There's going to be a lot of activity in, either M&A or an acquisitions or restructuring businesses. That's what I see. I think it's going to be, well, you know, once we get through the downturn and people, this is pushing the digital age forward faster, and it's going to teach, people are gonna need to retool themselves, being more computer literate and it's going to advance a lot of things that, you know, we were slowly getting there. It's kind of accelerated it. So the, I can do a Zoom meeting. I don't need to fly across the country. I can do the, you know what I mean? Things like that are very obvious that are going to save companies money, but you, the real estate industry will have to refigure themselves out, and there'll be a lot of, figuring going on.
Announcer: (14:16)
This has been, Count Me In IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like what you heard and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at www.imanet.org.
