Podcast (Dental)

How Dentists Can Apply for a Second Forgivable PPP Loan

January 13, 2021

Since Congress finalized its new $900 billion economic stimulus package, which includes $284.5 billion to fund a second round of the Paycheck Protection Program (PPP), dentists can now apply for a new PPP loan. The Small Business Administration (SBA) recently released new guidelines with many details about the deductibility of PPP expenses and loan forgiveness.

In this episode of The Art of Dental Finance and Management podcast, Art discusses everything that dentists should know about the new stimulus package and how it may affect their bottom line. Art gives step-by-step instructions on securing a second PPP loan and planning for forgiveness:

  • New application form
  • New rules about who qualifies
  • How much you should apply for
  • Interplay between the PPP loan and the Employee Retention Tax Credit (ERC)
  • Strategy for full forgiveness
  • New PPP loan forgiveness form
  • Deadlines for filing with the Department of Health and Human Services (HHS) for HHS Provider Relief Funds

Reach out to Art if you have any questions regarding dental finance and management for your dental practice. More information about the Eide Bailly dental team can be found at www.eidebailly.com/dentist.

Art Wiederman, CPA
Eide Bailly LLP


Show Notes and Resources

The Transcript

Art Wiederman, CPA Hello, everyone. My name is Art Wiederman. I am a dental director at the CPA firm of Eide Bailly and very proud to be a member of Eide Bailly. Been a member of Eide Bailly now for about six months. My God, time flies when you're having fun.

And as I've been telling you, as they continue to put out guidance and laws and new laws and new laws on top of new laws, we're date stamping these podcasts. And for those of you who've been followers of my podcast and listen first, thank you so much for doing that. But you know that the podcast lasts about an hour. Well, tonight, we might go a little over that because I've got a ton of great information and very important information for you.

We're going to talk about the new stimulus bill and in particular, we're going to talk about the second round of PPP loans. So, folks, if you loved the first time around, you're going to love the second time around. And this stimulus bill was very, very dentist friendly. It did a lot of really good things for dentists. And we're going to spend the vast majority of the time on the new rules. They came out with 128 pages of rules, most of which had to do with people who had never taken a PPP loan, which is not most of the folks, I would guess, that are listening to this podcast. And we're going to get deep into the weeds here into how this how this all works.

So we may go a little over an hour. I don't think we're going to go two hours because that will put me past my bedtime here in Southern California. It's about 9:00 p.m. on Sunday night, December the 10th. And I still have the second half of the last playoff game to watch. So I want to do that before I go to bed, too. So we'll get through all this pretty quickly.

First, a little bit information. Please check out our website for our partner, Decisions in Dentistry. Again, I can't say enough about Lorene Kent and her team and what they've done to help dentists through this very, very difficult last nine months. And the great information continuing education courses they have. Go to www.DecisionsinDentistry.com. You can also click on a box and get a complimentary 30 minute consultation with a member of the Academy of Dental CPAs, which, as I tell you every week, is my mother ship, the www.ADCPA.org is a group of 24 CPA firms across the United States that represent over 10,000 dentists.

Eide Bailly represents about 800 of those dentists and we work with several hundred in our office in Tustin in Southern California. If you are not working with a dental specific CPA, you need to be with all these rules that are coming out. After I finish this today, I hope it will bring you to action. If your accountant doesn't have this information or doesn't understand how this works, we at the Academy of Dental CPAs do understand it.

We are all putting on webinars, writing articles and giving information to our clients. I spent most of the day, part of the day, not most of the day, writing up a letter for our clients that will hopefully go out sometime this week. While I was watching some of the football games and, you know, on all this information. And the best way to learn, I've learned over the years, about 44 years in public accounting is to write an article or do a podcast. That's how you learn the information. And I knew most of what was going on, but now we're going to get into it.

So let's start at the beginning. March 27th, PPP was enacted as part of the CARES Act. 349 billion dollars. And we know how that all went. And that was round one. And many of you applied for that round one. You got it. And we're just getting to the point of where we are going to be filing for forgiveness for these loans. And we'll talk about that a little bit as we go along here.

So obviously, the nine months since March the 16th when this country pretty much shut down for the first time, if you will, has been the most challenging nine months in maybe 100 years in the history of this country. We all know that it's no secret. And, you know, the Republicans and the Democrats have been arguing about what type of stimulus they wanted to do for round two. Round one was 3.2 billion dollars. It happened within 11 days, which is light years or warp speed, if you will, in this government from the 16th to the 27th of March. But then they were arguing for the next nine months. Well, what do we do next?

Well, next was signed on and I don't remember if it was December 27th. If the president signed it Sunday night or Monday morning, I think it was Sunday night, the 27th that he signed the new tax bill, I'm sorry, the new stimulus bill. And it was 900 billion dollars stimulus. It created unemployment benefits of 300 dollars a week. A lot of other things. But what it also did is it created a second round of PPP money, 285.5 billion dollars that most of you should qualify for. And we're going to go through that in great detail in this podcast.

So the time frame of this was that when the president signed this bill on the 27th, the bill said that the SBA had 10 days to come out with the rules of how this would work, as well as the simplified forgiveness which we're going to touch on tonight. But we're spending the gist of our time tonight on the second round of PPP loans. So 284.5 billion dollars passed on the 27th. They had 10 days to come out with the rules, so they came out with the rules at about 11:30 at night Washington, D.C. time. And again, 128 pages of interim guidance on the rules, which pretty much mirrored the first round of PPP. And we'll talk about that but gives you an opportunity to get some more money to help you in your business.

So they came out with the guidance on Thursday, on Friday night, also about 11:30, Megan Mortimer from the American Dental Association, who I cannot say enough wonderful things about she and Michael Graham and all the people at the ADA. You know, she's been telling me for months that whenever the government comes out with a law that's important, they like to do it on a Friday night at, you know, past bedtime so that the press can't jump all over them and they have a weekend to digest it and have a weekend to plan for it. Well, that's what they did. So on Friday night, they came out with the forgiveness form, I'm sorry, the application forms for round two of the PPP.

Now, what they wanted to do with this is they wanted to give groups of business owners who didn't really have a great shot at getting round one, a shot at getting round two. So what they did was that the SBA is going to open up the portal. And I will say they did open the portal because this podcast will be published on Wednesday, January 13th. So on Monday, which is tomorrow for me when I'm recording. But two days ago for you. And if you can figure that out, you're smarter than I am. But on Monday, the SBA is going to open the portal for applications to both minority and women owned businesses. That's Monday, January 11th. And then the portal is going to be open to everyone else. What they said was, quote, shortly afterwards.

So what you want to do, folks, is you want to check with your bank. Now, many of the banks that that we are aware of that deal with dentists or just in general have sent emails to their customers. A lot of my clients who are really good at sending me stuff when they think it might help me, which in many cases it does. Sometimes I get stuff from clients. I didn't know that, not too often. But sometimes. The banks are saying that probably by the time they've got this form, it didn't come till Friday after banking hours. So Monday morning, January 11th, they're going to take this form. They're going to take these rules. They're going to incorporate them into their portal. And they're probably going to let you know, hey, we're ready to take applications.

Now. Should you apply sooner rather than later? Wow. Does this sound like deja vu all over again? Yes, it does. I think you should, because when this program started back in the first week of April, and I think it was April 4th or 5th when the portals were open, because the President said you will have this done in, you know, by this date. And they did. It wasn't the smoothest rollout, but I think they did a pretty darn good job given what their resources were.

OK, well, nobody really knew what it was. It was early in the pandemic, people were kind of hesitant and a lot of people applied, I pushed dentists to get this money, I pushed them real hard and a lot of them did. Well, we're now nine months into this and we have seen the damage that this pandemic has done to our economy. We've seen, what's the statistics, close to 20 percent of all restaurants in this country are closed. I live in the state of California. The state of California is shut down. I mean, there's no restaurants that are allowed to have indoor or outdoor dining. You know, the zoos are shut down, the museums are shut down. Everything is shut down here.

In fact, the only thing to do is golf. Now, I went to the driving range today. Now, the driving range at the golf course that I normally go to with one of my good friends from college, there might be 30, 40 cars, that parking lot was as packed as I'd ever seen it today, and we had to wait 20 minutes to get on to the driving range to onto one of the mats to hit balls, because that's how that's how crazy it is out there. I mean, everything is shut down in the state as it is in many other states, you know, and it's just it's going to stay that way until the COVID numbers come down. The point of the whole conversation is that there are a lot of businesses that have now gone nine months and they're hurting, there are businesses that are out of business. One of my dear friends from college, his wife has an event planning business. She's out of business. There are no events going on. There are no weddings. There are no bar mitzvahs. There are no graduations. So, you know, things like that, nail salons, hair salons.

So what I'm saying this because I think that this money could go quickly. I don't know how quickly, 284 billion dollars is a lot of money. The maximum loan that you were able to take on round one was ten million dollars. Now it's two million. Now none of you, unless you own many, many, many dental offices, are going to need anywhere near that or are going to apply for anywhere near that. But I would apply sooner rather than later if you meet the requirements.

So let's talk about go from the beginning here. There are two applications. If you go to www.Treasury.gov and you go to the section where it talks about the PPP loans and all the rules and it's got all of the guidance. If you are having insomnia and you want to read all the rules back through nine months, which I have done multiple times, it's a lot of stuff. You look at the look under borrowers and it talks about the borrower application form and the second draw borrower application form. So that's dated January 8th. Click on that. And that is the form. Those are the forms you're going to use.

Now, most of you have already applied for round one of PPP. If you have not, you're not eligible for round two, but you can still apply for round one. There's still money left and it's all been incorporated into this. So the document called Borrower Application Form is only to be used for first time PPP borrowers, the form that most of you who have already taken a PPP loan in the first round, we'll call it round one or round two, that particular form is called Second Draw Borrower Application Form. And this is the one that most of you who got PPP loans in 2020 are going to basically use. And you will, now you don't, you can certainly print it out from your, you know, on your computer, but you're going to submit this the same way you did with the first form, which is probably through the bank's portal.

So you want to check with the bank, call your bank tomorrow, Tuesday. I think if you wait a couple of days, it's not a big deal. And you say, hey, Joe, Susie, hey, this is Dr. Smith here. I'm looking at a PPP round two. I heard this podcast. And are you guys ready yet? And they're probably going to say, well, yeah, we'll be ready in about a week, ten days. You should do this through the bank that you took the first loan through, because they've got all your information and they approved you for the first round. And you're going to be able to use some of the documentation that you used in the first round, which we'll go through in a minute.

So let's first start off with who is eligible for a round two PPP loan. Number one your business has to have under 300 employees. Well, that's easy. Most of you have under 300 unless you've got, again, multiple offices and there are affiliation rules that I'm not going to get into. So most of my dentists have five, 10, 15, 20, 25, 30 employees and they're going to qualify there OK. This is also eligible this second round for independent contractors, sole proprietors or self-employed individuals with no employees, same as the first round. You must have been in business as of February 15th of 2020. That's the rule. And you must have used the full amount of the round one PPP loan proceeds on or before the day you apply for round two and you have used the money for expenses specified in the law like payroll, rent, utilities and interest.

Now, virtually all of you, remember you borrowed the money back in April and May, it was for, you know, basically two and a half months of payroll, you had eight weeks originally to spend it. Most of you, many of you spent in that eight weeks, but virtually everybody has spent the PPP loan on wages, you know, salaries, payroll, rent and utilities. So most of you have fulfilled that. If you haven't, you're going to give some of that money back. So that's another conversation. But we've been working very closely with our clients at Eide Bailly, as have the folks at the Academy of Dental CPAs, to make sure that they meet all the rules. And you had to use the money for, you know, what was specified in the law.

I mean, I think I mentioned on this podcast there are people that have been convicted of felonies who have spent this money on Rolexes and trips. And I had heard one that paid off five years of back alimony. I mean, you're not supposed to do that folks, use the money for what it's intended and you won't go to jail. There are fraud provisions if you use this money for things other than what the law allows you to use it for.

OK, now here's the big, big rule. Get your pencil and paper out. All right. In order to qualify for the second round of PPP, again, you had to get the first round. But your business must have experienced a 25 percent or greater reduction. Let me repeat that, 25 percent or greater reduction in revenues for any calendar quarter, comparing 2020 and 2019. Now you can use all calendar 2019 versus all calendar 2020 if you were down by more than 25 percent. But you don't need to do that.

So let's think about this. So the first quarter of 2020 was sailing along. I mean my dentists were just absolutely having some, they were set for an unbelievable 2020 year until March 16th, 17th, 18th when everybody in dentistry for the most part shut their offices down except for emergency procedures. So your revenues for the first quarter there is highly unlikely, possible, but unlikely that you're going to have a reduction of 25 percent when you compare, you know, 2019 to 2020. So probably not going to have a reduction of 25 percent.

But what happened in the second quarter? So you were shut down for, most of you were shut down the entire month of April, in many cases the entire month of May and maybe part of June, and many, if not most of my clients, unless you stayed open, some of the orthodontists didn't have as much of a reduction because they were still getting monthly payments from their, you know, from their patients. But, you know, some of them are. But most of the folks had a reduction of 25 percent. Many of you had reductions of over 50 percent. Which you're going to find out a little later is, you know, it is important.

And by the way, listen till the end, because at the end, I have an amazing tip that and a planning opportunity where we're going to combine the use of the PPP and the Employee Retention Tax Credit. We'll get to that at the end. So don't go away. I think in TV they call that a teaser, right? They tell you to watch it, tell you to watch and they get you to watch the whole program. Well, that's all I'm going to do here.

So. 25 percent. Now, what does gross receipts mean? Includes all receipts from any source. It does not include your first round forgiven PPP loans. You don't have to worry about that. That's off the table. But it probably includes your HHS Provider Relief Fund money, which we'll chat about briefly a little bit today. But that probably doesn't matter because most of you didn't get your HHS Provider Relief Fund money until August, September, and then you got your phase three if you got it at all after December the 16th. And we're looking at the second quarter.

So if your gross receipts for the second quarter of 2020 are 25 percent lower than they were for the second quarter of 2019, then you will qualify. If you cannot find a calendar quarter where your receipts were less than 25 percent less. I guess that's a good thing for you, but you will not qualify for round two of the PPP. So that's very important. OK.

A couple of special rules about entities that were not in business during the first and second quarter of 2019 but are in operation during the third and fourth quarter of 2019 because remember we're comparing 2020 to 2019. Applicants have to demonstrate that gross receipts in any quarter of 2020 were at least 25 percent lower than either the third or fourth quarter of 2019, and you're just going to have to go back and look at that.

Now for entities not in business during the first, second and third quarters of 2019, but that were in operation during the fourth quarter of 2019, maybe you bought your practice in the fourth quarter of 2019. Applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25 percent lower than the fourth quarter of 2019. So they're giving people an opportunity. You know if you weren't in business in all of 2019 to, to do these calculations and then foreign entities not business during 2019 but that were in operation on February 15, 20, 20. Remember you had to be in operation on February 15, 20, 20. Applicants must demonstrate that gross receipts in the second, third or fourth quarter of 2020 were at least 25 percent lower than in the first quarter of 2020. Well if you're in that unique situation you've got to call a member of the Academy of Dental CPAs because we've got to do some calculations for you.

All right. How much of a loan can we get here? Well, remember I told you that the first round you can get 10 million. The maximum here is two million. And most all of you aren't going to come anywhere near that, OK. You're going to be able to get two and a half times your payroll costs.

Remember when we talked about payroll costs for round one of this thing and it included all your payroll and overtime and sick pay and bonus pay and, you know, pay because you rooted for the Los Angeles Rams, whatever pay you got that was included in there. But it also included state taxes, state payroll taxes, not federal. It included two and a half times one month's of your retirement. That's included in here, too. OK, so it's two and a half times your average monthly payroll cost.

Now, you can pick here. This is really important. You might want to write this down, too. You can pick either as a baseline 2019, 2020 or the 12 months immediately preceding your application. Now, this is very important, I didn't mention this. You must apply for this loan on or before March 31st. So you've got a little less than three months to do this. So don't wait, folks. If you're going to do this, do it in the first two weeks of January or the second and third, fourth week of January. Don't wait. But you have until March 31st.

So you can use 2019 for wages. We can use 2020 for wages and or we can use the 12 months if we apply February 1st you can use from February 1st of 2020 to January 31st of 2021. But from a practical standpoint because of the fact that 2019 was a normal non-COVID year if you will, and 2020 was a COVID year, it is more than likely that your wages for 2020 for you and your employees are going to be higher in 2019 than they were in 2020. You might have laid off a bunch of employees because remember they were paying everybody more money to sit on unemployment while your dental office was closed. Maybe when you came back you didn't bring everybody back right away. Maybe you cut some hours, although a lot of people didn't, but some might have.

So I suspect you'll use 2019. So compare your. You should have just gotten your W-2 forms from your payroll service or your accountant for 2020. Compare that to 2019. I suspect you'll find that you're going to use 2019 because it's going to give you a bigger loan amount because remember you're going to have up to 24 weeks again to spend it. So if I can get, you know, if my wages on a monthly basis were I don't know, five or 10,000 dollars higher in 2019, I'm going to get an extra 25,000 dollars of potentially forgivable money, as with the two and a half times your payroll, including all the things we included before. And this is all on the form and in the instructions.

OK, now, as it was before, you're limited to 100,000 dollars per employee for payroll. So the maximum that you will be allowed to apply for is going to be 20,833 dollars, which is two and a half twelfths of 100,000 dollars. Now, if you look at the form and I would encourage you all to do so. If your loan is under 150,000 dollars, you're not going to have to show this gross revenue calculation for the quarters that create the 25 percent reduction. Remember, we said that you have to show a 25 percent reduction in gross revenues for any calendar quarter, comparing to 2020 and 2019.

Well if your loan is under 150,000 dollars you don't have to put that on the form. Now you will have to put that on the forgiveness form when you file for forgiveness, which will be probably sometime in 2022. If the world doesn't blow up by then, you know. It's, that's where it's going to be because remember you're going to have as much as a 24 week period. We'll talk about that and then another 10 months for forgiveness. Because the rules are pretty much the same as they were for round one.

If you're applying for a PPP loan that is greater than 150,000 dollars, then you will on this application for round two, you will have to show the revenues for 2020 in the quarter that you're claiming and the revenues for 2019 and it'll have to show a 25 percent reduction. So you either have to do it if it's over 150 you have to do it now on the application to get the money or if it's under 150 you have to do it on the application. Now. I'm sorry you have to do it on the application for forgiveness. So one way or another, you've got to make sure that you compute this, make sure you're comfortable that you're have a greater than 25 percent reduction, which, like I said, most of you are going to have.

The next rule has to do with the covered period. This has changed a little bit. Remember back in March, we started out with an eight week covered period and everybody said this is not working, it's not fair. They changed it in June to 24 weeks. But what they've done is they've given you a choice to make your covered period any number of weeks between eight and 24 weeks. So we're not really sure whether that is going to be a benefit to anybody. The only thing I can think of is having to do with the interaction between the PPP and the Employee Retention Tax Credit. But I think that's actually a negative. We'll talk about that like I said at the end here.

But again, you can use any period between 8 weeks and 24 weeks. We are probably going to recommend that as with the last round, you use 24 weeks because that's going to give you the maximum ability to use the money. And as you'll find out later, which I actually have a mathematical example that I made up. I didn't make it up. It's based on what I believe the rules are going to be. How we can get forgiveness and maybe some payroll money back, payroll tax money back.

You have to use, as we said before, 60 percent of the loan amount on payroll. The remaining 40 percent can be spent on rent, utilities and interest. But we've got a whole bunch of new categories. I'm not getting into them tonight. All I'm going to tell you is that you need to look at the applications and one of the main categories that they allow you to have, and it's right on the application, is called Covered Worker Protection Expenses. The bottom line is the ADA, Megan, Michael Graham, everybody at ADA was advocating that we be allowed to use PPE expenses for forgiveness.

And for those of you who have low rent expenses, no interest and no utilities, you still got to use, you know, you've got to use, you can use 40 percent of the costs on payroll. And if we start playing with what is going to be used for forgiveness to try and generate some Employee Retention Tax Credit, you might need it. So now you can use among several different categories. I'm not going to get into them tonight because I don't have enough time. I got so much ground to cover with everybody. So you're going to lose 60 percent for payroll, 40 percent for everything else, 8 to 24 weeks. Probably going to suggest we use 24 weeks.

So let's look at a couple of things here. If you're a self-employed individual and you're not involved in the hospitality industry, they've given the restaurants and hospitality companies who have just absolutely been decimated by this pandemic. Instead of two and a half months, they give you three and a half months and there's a whole bunch of different rules, which obviously we're not going to get into because this is the Art of Dental Finance and Management and not hospitality, finance and management.

So for a sole proprietor, you take two and a half twelfths times either your 2019 or your 2020 schedule C net profit. And again, the maximum is 20,833. So if you have a schedule C and you made 200, 250,000 dollars, it doesn't matter. 2019, 2020. If you had a bad year in 2020 but in 2019 you made 150,000. You want to use 2019 so you get 20,833 for yourself plus two and a half months of the payroll for your employees. Again you take that number that you know if you made over 100,000 20,833, add it to the two and a half months of payroll for your employees. You know, the lower let's see, the lower of two and a half months of the borrower's average monthly payroll costs or the amount they'll get them to two million.

So basically, you're going to take your 20,833 if you made over a 100,000 dollars, if you made less than 100,000 dollars on 2019 and 2020 you're going to take the higher number. And, you know, you haven't filed your 2020 tax return yet. So you have to estimate it and you'll come up with the best number that you can, again you get choices, plus the two and a half months of payroll.

If you're a partnership or an LLC, the fraction is two and a half twelfths times the 2019 or 2020 total net earnings from self-employment of individual general partners. Now, this guidance doesn't discuss limited partners or LLC interests, but for most of the dentists listening to this, it's going to be I think it's on line 14 of your K 1. I don't remember which letter was line 14.

And you have to reduce one Section 179 deductions unreimbursed partnership expenses claimed. And then you multiply it by .9235 and limit it to a 100,000 dollars per partner plus two and a half months of the payroll. Same thing. So if you are a partner in a partnership and you made 200,300,000 dollars in 2019, it's 20,833 plus two and a half months of payroll, including two and a half months of pension, two and some other things. OK, which will get to a minute.

So some other things you have to remember. Number one, if you use the money, rules are the same. Three ways you lose forgiveness, folks. Number one spend 60 percent of the money, if you spend less than 60 percent of the money on payroll in the 24 weeks, which shouldn't be an issue because we're giving you two and a half months of payroll and we're giving you five and a half months to spend, it should not be an issue unless something catastrophic happens. OK, so, basically 60 percent for payroll, 40 percent for all the other categories, including the new categories, which includes PPE.

Number two, you need you're going to need to have the same number of full time equivalent employees at the. My guess is going to be when they come out with these rules at the end of the covered period or when you file for forgiveness probably that you had when you filed for this loan. So if you have two hygienists and you have two assistants and two people at the front today, if you have the same number of full time equivalent employees. Five and a half, six months from now, you meet that rule.

The other rule is going to be the 25 percent reduction if you reduce anyone's hourly wage or salary by more than 25 percent and they're going to have to come out with some rules as to what we're comparing to. Are we talking the fourth quarter of 2020. Are we talking the fourth quarter of 2019 compared to the covered period and annualizing it so they don't have to give us some ideas of how this works. But the bottom line is, if you have the same employees for the most part, the same employees and you keep them on payroll and you keep them off of unemployment and now the dental offices are open, OK, you're probably again, unless something happens and we are very hopeful for a better 2021, you know, then you should be OK.

If the loan is not forgiven, then it turns into a 5 year loan with one percent non-compounding interest is what it says. Now, if you use the same lender for the second round that you used for the first round, you will not need to resubmit your form 941s or state quarterly unemployment forms, payroll processor records and schedule C.  If you already sent those forms in for 2019 and you used 2019 to compute the maximum second draw amount. So for most of you, when you apply for round one, you used your 2019 numbers. Well for round two you're probably going to use your 2019 numbers. So they've already got that information. Check with your bank.

That's why it would be better if you checked with your bank. Now I've heard some stories. I did hear this from my good friend Mark Rosen from Rosen and Associates in Boston and his partner in crime, that's facetious, his tax director, Jeff Cristoff, who's one of the sharpest tax guys I've ever met. And, you know, he was saying on one of the webinars he was doing that he, and I've heard this from other people, too. I've heard this from two or three other people. But we were talking about the fact that there are some banks who are saying, you know, we're not going to make you the second round of PPP loan unless you file forgiveness for the first one.

Now, remember, folks, the banks, I don't believe, get paid by the government for all the work they put in for these loans until the borrower gets forgiveness or files for forgiveness or the whole transaction is finished. So if the bank says no no no you have to file for forgiveness first, I'm going to tell you later why you may not want to do that yet.

Go to a different bank. You know, and there's a whole list of banks on the government's website that you can go to. But for most of you, for 98 percent of you, you're going to want to use the bank that you used on the first round. OK, so that's the second thing we want to talk about. We talked about the fact that if it's less than 150,000, you don't have to show the gross receipts until, you know, until you file for forgiveness. So we talked about that.

And again, you know, same unless otherwise stated by the SBA, same rules regarding the use of the funds like we talked about and obtaining forgiveness apply to the second draw as opposed to the first draw. There's going to have to be some more guidance and more reading and more regulations. And I'll get to practice reading a lot more. I can't wait. That was sarcasm, folks. There's going to be more rules.

Now, don't forget when you're figuring your two and a half months to include your health insurance and they added group health insurance to this round. So add health insurance, retirement contributions, the employer portion of state unemployment taxes, not federal, state group life, group disability, group vision and dental when computing the average payroll cost. So there's a whole list of things that you can use.

And again, you know, we can help you Eide Bailly, the ADCPA can help you. I've gotten two emails in the last week that have said, well, you know, my CPA doesn't know anything about this. Can you help me? Yeah, we can help you. We definitely can help you. And this is a time, folks. And by the way, this is an advertisement right now for dental CPAs and members of the Academy of Dental CPAs and members of Eide Bailly, which is my firm. Folks, between the EIDL loan rules and the PPP rules and the first round, the second round and the HHS Provider Relief Fund. If you're not working with a dental CPA, you might lose some money here. So I'm going to suggest again www.ADCPA.org. My email is awiederman@EideBailly.com. My phone number is and I'll give it out at the end to 657.279.3243. Call me and we'll help you through all of this insanity.

Now, we're going to get to this at the end, but I'll give you a little preview. Before, under the CARES Act in round one, there was also created something called the Employee Retention Tax Credit, which is basically a credit that could be as much as 5,000 dollars per quarter per employee. And I'm going to go through the rules when we get to the end here. If you got a PPP loan, you couldn't get one of these loans. That has changed. Again - teaser, teaser, teaser. Wait till the end and I'll tell you how that works. OK. And then, you know, SBA is going to take particular notice of loans of two million dollars and they may ask for necessity.

Now, in the loan application, it states, quote, current that you are attesting to many things. You know, you're going to use the money for the intended purposes, etc. But it says here, I'm going to read it right off the form. Current economic uncertainties make this loan request necessary to support the ongoing operations of the applicant. You must attest to this. OK, so that's that was a concern the first time around. And many of you might have gotten a big chunk of HHS money and many of you might be back to 100, 110 percent of where you were. And we're back to normal. And, you know, who knows?

Now, again, in L.A. County, I'm hearing the last 30 to 60 days, it's getting slower. In Orange County, it's a little slower in the dental offices because, you know, people are heeding the stay, you know, shelter in place, stay at home orders.

So here's my feeling about the whole thing. Given the state of the pandemic, sadly, sadly, sadly, we're now going over, I think, 4,000 people losing their lives every day. The vaccines are rolling out very slowly, the state of our government, I am not getting into politics, but we all know that what happened. We all know what happened on Wednesday at the Capitol Building in Washington, D.C. And it was horrific. And that's all I'm going to say. So our government right now is in a matter of flux. We're going to have a new administration on January 20th. All I can tell you is we're all hoping and praying that things are going to get better.

But I would say if you talk to people, there's a lot of uncertainty out there, uncertainty about the pandemic and certainly about the state of our government, uncertainty that the vaccine is going to turn things around. A lot of people are not, you know, we're all very hopeful and I'm sure it will. However, we don't know. Are government's going to shut down dental offices? I have heard nothing to that effect. I do not want to alarm you, but I have heard nothing.

FEMA has declared dentistry the number four most critical health care provider in the country. And I do not see that happening. But you know what if this thing gets worse, I don't know. So because of all of this that's going on. To me, I'd say there's definitely economic uncertainty and I would you know, I'm not going to say I would fight to the death, but I would certainly argue very strenuously that, yeah, I need the money now.

Here's the deal. If your practice has come back and you got PPP money and you got HHS money and you've got an EIDL and you've got 750,000 dollars sitting in your checking account, which you shouldn't have 750,000 because the FDIC, FSLIC, the banks only insure 250. But if you have that in your bank accounts, if you will, do you really need the money? I think all of you are really going to have to make a decision as to whether you really need to apply for this second round of PPP money. Again, I'm not suggesting that you should or that you shouldn't. You have to look at your individual situations and see where you're at. But again, you know, we don't know where this thing is going.

So that's my feeling about it, is that there's plenty of uncertainty out there at this moment on January 10th of 2021. Plenty of uncertainty that makes it that, gee, you know, if I get an extra 100, 150, 200,000 dollars, you know, if something happens later this year, you know, I've got myself and again, folks build yourself a war chest, like I said in March and April, build a war chest. Absolutely. If you guys use this money for things other than the intended purposes, the government can bring fraud charges. Fraud charges. I'm not a licensed attorney. Let me be very clear about that. Probably going to jail, OK? I mean, you know, I've never been to jail. Don't plan on going there. Haven't heard really good things about jail. Foods probably not very good. So don't commit fraud. Don't use this money for things other than what they want you to use it for.

So here's an interesting little note. Side note. Now. Let's see, you can't get this second round if the President of the United States, the Vice President of the United States, the head of an executive department and the federal government or a member of Congress or the spouse of such person as determined under applicable common law does not directly or indirectly hold a controlling interest in your dental practice with such terms having meetings SBA form 23, 2483-SD in Section 322 of the economic aid to hard hit small businesses, nonprofits and venues.

The bottom line is, is that if Vice President Pence is a 50 percent partner in your business, you can't get this loan. I just thought that was kind of amusing. But those are the rules that you can't get the loan if you, an executive of the government or someone in government, in the federal government owns part of your dental practice. Not likely, although there are five dentists in Congress. So we'll see. And again, we said now you can.

OK, so now let's get down to the thing I told you to wait for, which is this Employee Retention Tax Credit. So here's how this works. OK, as part of the CARES Act, so I just want to be clear. We've talked about, you know, how do you apply? Go to the website, look at the forms, fill out the forms, be prepared to go on to the bank's portal. You don't do this with SBA like you did with the EIDL loan. You do this with your bank. And if you need a referral to a bank, I've got plenty of really good banks that would be happy to help you. OK, we talked about how much money you're going to get two and a half times payroll.

We talked about who's qualified. We talked about again, you must do this by March 31st in order to get this loan, the program is going to shut March 31st unless they choose to extend it, which they've done in the past. But for now, March 31st, if you choose to apply for round two, I would do it sooner rather than later. Again, can you wait a week? I think so. I don't think 284 billion dollars is going to be gone in a week. But again, I have no guarantees of that. I would apply sooner rather than later.

So let's talk about this Employee Retention Tax Credit. It was part of the CARES Act. It basically stated that if your business operations were either fully or partially suspended by a COVID-19 lockdown order. OK, we'll talk about that in a second. Or for any quarter in 2020, if your gross receipts were less than 50 percent of the gross receipts of the same quarter for 2019 you would be eligible for a credit for your employees for that particular quarter of up to 5,000 dollars per employee. It's wages of up to 10,000 dollars per quarter and the maximum credit's 50 percent.

So what does that mean? OK, first of all, it was irrelevant until December the 27th because under the original CARES Act, if you applied for a PPP loan, you could not take this credit and this credit would be taken on your payroll tax returns. And some people didn't apply for PPP. Maybe they didn't qualify, but they took this credit. Very few of my dentists, I don't think I remember any of them doing it. Under the new law. OK, under the new law, you are allowed to take this credit for 2020 or 2021. And I think the credit started March 12th of 2020 through December 31 of 2020.

You can take this even if you got a PPP loan. So all the rules are changed now and this opens a huge opportunity for all of you. OK, and for 2021, they've opened it up for two more quarters. Two quarters, first and second quarter of 2021. OK, again, if your business was either fully or partially suspended by a COVID-19 lockdown order or for a quarter in 2021, if gross receipts are less than 80 percent of gross receipts for the same quarter in 2019.

So let's think about this, then you qualify for the first two quarters of the credit. OK, so let's go back to 2020. Couldn't even think about this Employee Retention Credit. So here's a planning opportunity. Now, we don't have any guidance on this. There's nothing says we can't do this, and this is a reason I'm going to suggest that should not repeat, not file for SBA forgiveness on your loan, which I'll tell you when, probably after April 15th for a couple of reasons.

So let me give you an example. What we're allowed to do, folks, is we're allowed, it appears and I think this is this is going to be, we're going to get some guidance and we'll see if the SBA and the Treasury shuts us down. So we're going to be able to allow, be able to pick and choose what wages. Because remember, you can't, we can go back and amend returns for 2020. OK, so if you had a 50 percent or greater reduction in any quarter of 2020, and for dentists that's only going to be the second quarter, more than likely. If you had a greater than 50 percent reduction, then you qualify. If your business operations were either fully or partially suspended by a COVID-19 lockdown order, now, that might be a little more difficult. And again, I'm not a lawyer. You might check with your state dental board.

I know, for example, that some of the states actually shut down dental offices, whereas you have to remember that the ADA did not, you know, nobody mandated dental offices be shut down. They strongly recommended it. The CDC strongly recommended it. OK, as best as I know, but the question is, is did your city, state, county shut you down for a period of time in any calendar quarter? If they did, even if your revenues were not down by 50 percent, you might qualify for this. We've got to dig a little more into the weeds about that. But I just want to give you the basis for this.

OK, so for 2020, you had a 50 percent reduction in the second quarter. So let's use an example of how this would work. So let's say Dr. Wiederman got a PPP loan of 100,000 dollars on May 1st of 2020, which I believe was a Friday, if I remember correctly. My covered period ended 24 weeks later, on October 16th. I had a 55 percent reduction in my gross revenues in the second quarter of 2020. I was shut down for most of the second quarter of 2020, as compared to my second quarter of 2019. I paid wages to my employees of about 80,000 dollars from May 1st, the day I got the loan until June 30th, the end of the second quarter. And that was for six employees who all earned more than 10,000 dollars in the second quarter. Again, I'm making this up, folks. This is but this is how this works.

The wages I paid for the third quarter of the year were 120,000 dollars. So for the second and third quarters, I paid 200,000 dollars in wages. How much was my loan? 100,000 dollars. They loaned me two and a half months of payroll to pay five and a half months of payroll. So the amount of payroll I'm going to pay during the covered period is going to be double what my loan amount is. And I only need to spend 60,000 dollars, only 60,000 dollars on payroll, of which 20,833 is going to be on me, Dr. Wiederman. So I'm going to blow past all of this like we did in the first round. So here's the strategy. And again, we are waiting for guidance.

OK, remember, there's a disclaimer at the beginning of the program that this is not financial advice and you need to talk to your financial advisor, but we are waiting for guidance. But this is what we're talking about. OK, so I only need 60,000 dollars of wages, so I'm not allowed to double dip. I can't take the Employee Retention Credit for the same period of time that I'm going to use wages to get forgiveness on my round one PPP loan.

So why don't we do this, ok? Remember I told you in the third quarter of 2020 we paid wages of 120,000. Let's use the third quarter as wages for getting forgiveness on the PPP loan. And then for the second quarter we'll take the Employee Retention Tax Credit. Well, how much is that going to be? Well, if I had six employees and they each get a five, that they qualify for a 5,000 dollar credit, that is a 30,000 dollar federal payroll tax refund. If you paid that much in payroll taxes, which you may very well have, you would just have to look and see, that you're going to get back? OK, and there's rules that go along with that.

So you have three years to file an amended payroll tax return. That's what has been opened up with them allowing us to get a PPP loan, as well as of getting, being able to use this Employee Retention Tax Credit. So what does that mean? If you've already filed for forgiveness and you have put 100 percent of your wages in for your covered period? Are you up the creek, can we file an amended application? I don't think so. Again, it's too early in the game to tell. Most of you have not filed because we have told you to wait. We want to see what the new rules are. Well, you are the new rules. All right. And we're going to talk a little bit about some of the new rules briefly. But this is more about, you know, this is important.

So if I can bifurcate, OK, that's a big word for me. Bifurcate. If I can bifurcate the wages paid during my covered period and take the wages that I need in a quarter where my revenues were not down by 50 percent. And use that for PPP forgiveness, then I can use the wages I paid in the second quarter of, you know, for my Employee Retention Tax Credit, I could be getting tens of thousands of dollars of refunds. And there's no rush to do this. Folks, I just want you to be aware of it.

We have three years from the due date of your payroll return. Well, when is your payroll return due? The payroll return for the second quarter of 2020 was due to be filed, I believe it's 30 days after the end of the quarter. So by July 31st, you have three years from July 31st I believe, it's been years since I've been doing payroll specifically. We have folks in our office that live and breathe this stuff. It's not me. But you've got three years to do this.

So this is why I'm going to suggest that you wait till at least after April 15th. So let's be real here. We CPAs have had a year like no other. Everybody's had a tough year, but we have been having to do taxes for all these changes day in, day out. We've been telling you all this. OK, so now we're getting to 2021 and now it's going to be tax season. So realistically, CPA firm staff their businesses to do tax returns. They're not staffing to, like we have almost 300 dentists in our office in Tustin, we don't have dedicated staff to help with 300 PPP and HHS, which I'll talk about in a minute, applications.

So it's going to be really hard to get a hold of your CPA and even the Academy of Dental CPA members who are working tirelessly. I've talked to many of them. We're all exhausted, I guarantee you this. So, you know, we can wait till after the 15th of April because then what we can do is, this will give us time to see if this strategy will work on the Employee Retention Tax  Credit or if Treasury comes out with some rules that say, oh, you guys are really sneaky, aren't you, you're going to try and get more free money from the government, run the debt up more? Yeah. Aha. Your point is what? Yes, that's what we're trying to do here.

So that's why we're going to suggest that you wait. Now remember, you have if your, most of you have a covered period that ended in either October or November, you have 10 months from the end of your covered period to file for full forgiveness. There's no rush, folks. There is absolutely no rush. So for 2021, they even enhanced this credit even more.

And for 2021, the rule that you had to have a 50 percent reduction, what you'll do is for the first and second quarter, is you will compare your wages for the first and second quarter of 2021 to your wages in the first and second quarter of 2019, and if there was not a 50 percent reduction, but now the new law says a 20 percent reduction, then you are going to qualify for a credit that is not 50 percent of 10,000 dollars, but it's going to be 50 percent of 14,000 dollars. So the credit is now 7,000 per employee.

So. Does that create some timing issues as to when you file for your PPP loan? Because again, we can't double dip, so, you know, you might be able to get something for 2020, 2021 for the first two quarters. I wouldn't count on it. I hope your revenues are not down 20 percent, but they might be. So that's something you need to look at.

Wow. I'm exhausted. OK, now let's hit two more things and then we'll call it a podcast and I'm pretty much on time, which is nice. So, number one, you need to be aware if you received a loan from the HHS Provider Relief Fund, remember, folks, that was part of the CARES Act intended to pay health care providers to fight COVID. Most of you got who applied, got two percent of your revenues back in August. And then phase three, you got potentially you got another payment which represented bringing you to 88 percent of your lost revenues for the year.

I'll give you an example. We have a long-term client of ours. He does about 800,000 dollars a year. He got about 16,000 dollars in the first round of the HHS Provider Relief Fund in August. He called me up. He said, Art, on December 16th, when they started, they said out 11 billion of the 24 and a half billion on that day. He got another 66,000 dollars. What kind of difference does that make? 66,000 of free money. Now this is taxable. OK, and you have to justify that.

You use this money, number one, to fight COVID, PPE expenses, the plexiglass in your reception area, all the ventilation and air conditioning equipment that you bought, you have to justify all that. The reason I bring this up is that the Department of Health and Human Services portal is supposed to open this Friday, January 15th.

It's complex, folks, you're going to have to get a lot of information, you're going to have to get eight quarters of revenues broken out between, if some of you take Medicare, your Medicare patients, welfare patients, you'll have to break those out. There's like seven or eight categories. But for most of you, if you don't do that, you'll have to break your revenues out between insurance receipts and private pay. You'll have to come up with information on your employees and you're going to have to fill out some boxes justifying that you got this money and that you spent it on, money spent on expenses to fight COVID and that you lost revenues.

And again, it's very complex. It's a whole nother podcast. I want you to just be aware that that portal is going to open on Friday unless they change it and go in. Read it. You have 30 days to report. You have until February 15th, let me repeat, February 15th to report. So you need to start gathering that information. I've been talking about this on the podcast for a couple of months now, but it's here, so you have till February 15th to report.

The other thing I want to share with you is that the forgiveness process has been greatly simplified. Now, it is Sunday night, almost 10:00 p.m. here in California. We do not have the new one page forgiveness form. So what the stimulus bill signed by the President at the end of December said is that for loans of under 150,000 dollars, that you will be able to sign a one page attestation.

Here's what it's going to say. Hi, this is Dr. Wiederman. And I've got this form and I'm going to send this to my bank and then to the SBA. I followed your silly rules. I took your money. I paid payroll. I did everything you told me to do. And you know what? Now go away. Go, go. Shoo, shoo. Get away from me. Leave me alone. Let me keep my PPP money. OK, that's great. But you still have to follow those three sets of rules. 60 percent for payroll, you know, full time equivalent employees.

Probably not going to have to deal with that but if you had a reduction in your revenues this year and if you laid off a bunch of people and you didn't bring them back by the time you file, by the time you're covered, period was done on December 31, you might have a reduction of forgiveness, even though folks you're going to mentally think I can just sign this form and I'm done. I don't have to worry about any of these rules. Not true.

Check with your CPA on all of this. But again, there's no rush to file, especially since you might be eligible for this tax credit. And if your government shut you down. I know. I think, I have to check on this. I think New Mexico actually shut the dental offices down by edict of the state. I'll have to check on that. And there are other states that did it and there were counties that might have had orders. And I don't have every single county of every single state in this country. But if your county or your city or your state shut you down, then you don't have to meet that 50 percent test and you can do this whole game of trying to get this Employee Retention Tax Credit.

So, OK, like I said, I'm exhausted. I'm done talking. I love talking. If you haven't figured that one out in two years of listened to my podcast, but bottom line, round two is out, the banks will probably start accepting applications sometime, I'm going to guess maybe sometime the week of January the 18th, somewhere around there, maybe right around the end of the month. Just depends on your bank. You know, if you feel that you've met these tests - 25 percent reduction and you need this money, by all means, that's what it's there for. It's 284 and a half billion dollars.

And folks, remember, under the law signed by the President, your PPP expenses are tax deductible. Tax deductible. How cool is that? They weren't tax deductible before the 27th. We were doing tax projections all through October, November and December for doctors who we told them, add back 120, 180, 90,000 dollars to your income, because all the that money that's in your profit and loss statement that you spent on from the PPP loan is not deductible. Well, that all changed on December 27th, which obviously gave me lots of time to fix everybody's tax projections. Not.

I mean, they do this. This is like the fourth or fifth time that Congress has changed the law. If you remember when the big tax, the Tax Cut Jobs Act passed in 2017. I think President Trump signed that on the 19th of December. I mean, this is what they do. I think they don't like CPAs. Maybe that's the deal. I don't know. Anyway, so folks, the bottom line is this. If you want this money, it's there for you. It's to be had. It's probably going to be a similar number to what you got the first time.

You know, look at the rules, look at the portal. When it comes out from your bank, make an application. I suspect it's going to go pretty quickly. So do it sooner rather than later. Again, you know, my phone number in Tustin is area code 657.279.3243. Send me an email at awiederman@EideBailly.com or go on to the website of the Academy of Dental CPAs www.ADCPA.org and look for a member in your area. Again, I'm with the firm of Eide Bailly on the ADCPA website. I have to check and see if they've changed us from HMWC. It might say HMWC, but you'll see my name there, Don Watson and Pam Chamberlain and my good friends who I've worked with for many, many years. So we can definitely help you.

But there's money to be had here. And folks, we don't know what's going to happen in 2021, the first week of 2021. Again, not getting into politics, but to say the least, it's been volatile and there is uncertainty. And I'll tell you what, you know, I'm a more careful human being than most. And if it were me, I'd apply for the money. And I don't think anybody in their right mind for you applying for this money in January of 2021 with everything going on in the world with this pandemic running out of control, you know, and it's so sad, so, so horribly sad, that there is certainly economic uncertainty. So there's certainly uncertainty. It sounds like a Jeopardy question. What is certainly uncertainty, I don't know.

But anyway, so I would strongly suggest that you take a look at this. So folks, again, want to thank my partners at Decisions in Dentistry magazine www.DecisionsinDentistry.com. And again, if you're not working with the dental CPA www.ADCPA.org. Or awiederman@EideBailly.com. You can also go to our website at Eide Bailly.com. We're doing a great series for dental societies in Southern California, which actually starts if you listen to this podcast today, comes out tonight from 6:00 to 8:00 p.m. January 13th, which is when this is going to come out and it'll be recorded. So you can see it on demand. From 6:00 to 8:00 California time. If you want to sign up for that webinar, just a quick email. I check my emails regularly and we'll get you the information to sign up. It'll be between 6:00 and 8:00.

Megan Mortimer and I are going to talk about these rules for about 15 minutes, and then we're going to have a wonderful, wonderful dental coach by the name of Kiera Dent out of Reno, Nevada, who's got more energy than any probably any human being I've ever met, and she's got unbelievable dental knowledge and she's got a lot of great stuff for you. And we're going to be doing that the second Wednesday of every month.

So with that, folks, I have got the second half of the Steelers Browns playoff football game to watch on tape. And I will retreat to my room and do that and take a rest. And I thank you all from the bottom of my heart. Remember, failure is not an option. That's been my saying from the beginning of this thing. Thank you, all of you, for listening to my podcast, for telling your friends for writing reviews. Please write a review, send me a comment, send me a complaint. Anything you want to do. I'd be happy to help all of you, because that's my legacy is helping the dental profession. This is Art Wiederman for the Art of Dental Finance and Management. And we will see you next time. Bye bye.