Streamed: Wednesday, April 7, 2021
Duration: 1 hour
Language: English
About This Webinar
The American Rescue Plan Act establishes a $28.6 billion Restaurant Revitalization Fund (RRF) available for the SBA to award eligible businesses within the food and beverage industry, as a tax-free federal grant
Webinar Transcript
Elizabeth Prehn:
Hello everyone and welcome. My name is Liz Prehn. I’m a attorney with Moskowitz LLP. Steve Moskowitz founded this firm because he saw a need to advocate for businesses and individuals. 30 plus years later he’s still doing this alongside with his team of attorneys and tax professionals including Cliff Capdeviell and much like Steve, Cliff began his career with a big four accounting firm and brings his years of tax law experience and accounting practice to Moskowitz LLP.
Elizabeth Prehn:
Today we present the Restaurant Revitalization Fund. Thank you.
Steve Moskowitz:
Liz, thanks so much and folks, the government has really stepped up to the plate and done something and it’s not just restaurants. It’s bars and food trucks and food stands and the government specifically left this very wide open so that they’re specifically talking about lots of businesses that sell food and beverages to the public. Essentially what they’ve done is they said okay, they’re going to make good your COVID losses, your losses of gross revenue, the total money you take in up to $10 million and for most of you in this audience, hopefully your loss was under $10 million and the government is giving you multiple bang for your buck here.
Steve Moskowitz:
You say, “Well wait a minute, do I have to pay tax on this?” No. It’s tax free and you say, “Well wait a minute, what about when I spend the money on something, even though the government gave me this free money, can I still deduct it from my tax return?” Yes you can. This is a tremendous giveaway. Now, this law was signed into effect by President Biden on March 11th and this one is a first come first serve. The government has put aside some money and although they put aside a large amount of money, $28.5 billion, if you think of all the restaurants and bars and food trucks and food businesses, that’s not that much per establishment. However, the government will give you up to $10 million first come first serve. So, what I’m trying to say to you is, it is paramount that you be in line early enough that they don’t say, “Sorry, money ran out. It was a great idea but none for you.” That’s what we want to do. We want to be there for you on the front lines explaining why you’re entitled to this money, how to get the max and to get it.
Steve Moskowitz:
Now, I’d like to turn the floor over to my friend and colleague Cliff Capdeviell who’s going to explain to you all the details involved here. Cliff, take it away.
Cliff Capdevielle:
Thanks Steve. This is absolutely a huge program, a huge benefit for all of the different types of food and drink venues in the United States. Restaurants, food trucks, food carts, caterers, bars, lounges, taverns, brew pubs. If you’re in the food or beverage business this is for you. You are very likely to be a qualifying business.
Cliff Capdevielle:
Who doesn’t qualify? There are a few categories where you’re not going to qualify for the fund. This would be a government operated business, a large business, a publicly traded company is not going to be eligible for the Restaurant Revitalization Fund grant, and businesses which owned or operated more than 20 locations as of March 2020, a year ago. So, this is intended for small businesses and we’ll talk about the Shuttered Venue grant, which is really an overlapping grant system also administered directly by the SBA. So, if you receive the Shuttered grant venue you’re not going to be able to double dip and get the Restaurant Revitalization Fund grant. But everybody else is eligible.
Cliff Capdevielle:
I see questions popping up. We’re going to get to those in a bit but certainly the key difference here, if you were a PPP recipient, instead of going through a bank these are going to be directly administered through the SBA just like the Shuttered Venue grants were or are now. So, you’re going to need a DUNS number and a register on the SAM.gov website. We’ll talk about how to do that in just a minute.
Cliff Capdevielle:
Some priorities here. If you’re a woman owned or veteran owned business you’re going to get priority for the first 21 days. This is huge. That means that you want to be first in line. There’s a lot of money. It’s not unlimited. So, you want to get your ducks in a row. That means you want to get with your accountant or tax attorney, get your financial statements in order and make sure all your tax returns are all done. Those are all going to be requirements to get any money from this program.
Cliff Capdevielle:
Are franchises eligible? Yes they are. They are limited like the general program limitations suggest. If you’ve got 20 or more then you’re not going to be eligible and that is regardless of the type. So, my example here, if you own 15 Jamba Juice’s and seven Arby’s locations that’s a total of 21 franchise locations. You would not be eligible. You would exceed the 20 location rule and you would not be eligible for the RRF.
Cliff Capdevielle:
As Steve mentioned, maximum grant is $10 million. That doesn’t meany you’re going to get $10 million. It’s a maximum of $5 million per location and they’re going to calculate your eligibility based on your gross receipts, the difference between your 2019 and your 2020 gross receipts. So, if you were established for example during 2019, you’re going to receive a grant that’s the difference between your average monthly gross receipt in 2019, it’s multiplied by 12 months, and your average monthly gross receipt in 2020, multiplied by 12 months. That’s going to be the maximum grant amount.
Cliff Capdevielle:
We did a question already, what if you were established after 2019? So, for businesses that were established after 2019, you’re still eligible. Your grant’s going to be equal to the eligible payroll expenses minus your receipts for the year.
Cliff Capdevielle:
What kind of eligible expenses are there? Well, they’re what you might expect. We’re going to talk about how to coordinate your payment of these expenses through the various programs but eligible expenses include of course your payroll cost. Interestingly, principal and interest on your mortgage spends are both eligible. So, even though that principal is adding to your equity in a property, that is a qualifying expense for the Restaurant Revitalization Fund grant. Of course rent and utilities count, all your normal food and beverage expenses, paid sick leave, and any expenses the SBA determines to be essential to maintaining your entity. Repair expenses. You’re not going to be allowed to build, expand greatly. You’re not going to be able to add another interior room for example, but any construction related to accommodating outdoor seating will qualify.
Cliff Capdevielle:
What is not going to count and not eligible is as I said, these are going to be any kind of expansion purpose expenses, adding another room or another kitchen. Those are not going to count. What is the covered period? So, the covered period, it’s scheduled to end at the end of the year although as you know, a lot of these programs have been extended. So, it would not be surprising to go beyond December but now with the vaccine and venues opening up, it could be that this is it. That 2021 is really it for this particular grant. We’ve got the authority. SBA has the authority to extend it for two more years, but there’s a set amount of money now and as things turn around it is possible that this will not be extended. So, spend your money.
Cliff Capdevielle:
This is going to be a theme throughout the presentation. You want to coordinate the various program expenditures but the goal would be to spend this money if you can. If you don’t spend this money you’re going to be required to return it. So, it’s a little bit different. If you had the PPP, you didn’t spend it all, it turns into a regular loan, you’re required to pay it back with interest. This, you’re required to just turn the money back over if you don’t spend this money.
Cliff Capdevielle:
How does this work?
Elizabeth Prehn:
[inaudible 00:12:09].
Cliff Capdevielle:
Yeah, go ahead Liz.
Elizabeth Prehn:
Sorry. Can the money be used for a new revenue stream?
Cliff Capdevielle:
Yeah. It’s not designed for a new revenue stream in general. This is to keep your existing venues open. It is to provide money for payroll but also any construction, for example, that would increase the ability to use the restaurant or other venue like outdoor seating and things like that, but not really designed for any kind of expansion or improvement other than those related to COVID.
Cliff Capdevielle:
As I said earlier, the process, it’s the same as the Shuttered Venue Operator grant. So, this is going to require you to go directly to the SBA and the SBA, first order of business, they’re going to want a DUNS number. If you don’t have that, every business should have done a Bradstreet number and they’re going to ask you to register with the federal system for award management. If you haven’t already done so that’s something that you can do right now even though money is not yet available. You can get your ducks in a row, get your DUNS number, get registered at the SAM.gov site.
Cliff Capdevielle:
Most importantly, and probably most time consuming would be to get your supporting calculations, your P&L, your tax returns. Get those all ready so that on day one you can be the first in line as soon as the program opens, especially if you’re going to be one of those lucky eligible people for that 21 day window. That’s going to be opening up very shortly so get your tax returns done for 2020. If you haven’t done that, Steve will give you a quote today. Get your P&L’s done. Get all the supporting calculations you need ready to submit as soon as the program opens.
Cliff Capdevielle:
How does this work with the PPP loan? So, I’ve got an example here. My example here is Steve’s Steakhouse did revenue of $5 million in 2019. In 2020 revenues dropped to half of that, $2.5 million. Steve got a first round of PPP money of $500,000 and a second PPP draw of $800,000. So, what is the maximum grant amount that Steve will be eligible for? So, we start with his 2019 gross revenue, $5 million, subtract his 2020 gross revenue of $2.5 million. His total pandemic loss is therefore $2.5 million. So, to calculate the Restaurant Revitalization Fund grant amount we’re going to subtract the first round PPP money, his $500,000, got it in the first round, subtract the $800,000 draw the second round of PPP. The maximum Restaurant Revitalization grant amount that Steve is eligible for is therefore $1.2 million. That’s basically what you need to know in terms of coordination with the PPP.
Cliff Capdevielle:
Now, if that was all you needed to know it would be a very simple calculation. Good and bad is the fact that we’ve got all of these other programs running together. The good news is many folks are eligible for more than one program. The challenge is that it does require a bit of coordination and calculation. That’s where Steve comes in, he’s going to help you get the most money from each of one of these programs.
Cliff Capdevielle:
The big…
Steve Moskowitz:
What I’d like to say there is that there’s so much coordination. For example, one of the things you might say is, “Well wait a minute, if the SBA portal hasn’t opened yet, what’s the big rush?” The answer is we need to have everything ready. Our tax returns, our financials. They’re still working on this but we have to be Johnny on the spot. I’m not kidding. There’s not nearly enough money to go around and it was like when the PPP first came out. The government said, “Don’t worry. There’s plenty of money.” Boom, a few days later it ran out. It ran out even faster when they did a next time. So, the bottom line is we need to have all of these things ready so we can respond instantly to it. Again, this is going to be like a table of food placed down in a group of starving people. There’s not going to be enough to go around. It’s going to be a wild, mad rush.
Steve Moskowitz:
Furthermore, we have to be careful because what if you got PPP money and there’s other programs? So, we have to coordinate everything. That’s why it’s so important to be ready because when your neighbor is looking at his information and trying to dig this and that out and you’ve got your money and they run out, you don’t want to be that one that ran out of time and didn’t do it fast enough. That’s why we have to be ready now.
Cliff Capdevielle:
Yeah. We’ve got a couple questions here. So, Steve, what about draft tax returns? Somebody’s got their draft of their P&L, a draft of their tax return. Is that going to be sufficient do you think for the government to make this application happen or are you going to need a filed tax return and a final P&L?
Steve Moskowitz:
I’m going to guess, and it’s purely a guess because this is a game where they’re still making up the rules before the kickoff, I’m going to guess that a draft is going to be acceptable. The reason I’m guessing that is the whole… People are hanging on by their fingernails and there are people where literally a day, a week, a month could make a difference between staying in business and keeping open your life dream or going out of business having no idea how to pay this mountain of bills. The bottom line is that I think they’re going to accept this and it’s because a lot of these things are going to be good faith estimates and that I’m going to guess is going to be okay because the portal’s going to open long before the due date of the return.
Steve Moskowitz:
Furthermore, you have to be ready for all the type of questions. Again, I can’t stress how important it’s going to be to hurry up before somebody else gets the money.
Cliff Capdevielle:
I got a question Steve. If somebody had a NOL in 2019 or 2020, we’ve got a potential carryback, do you think that’s going to affect their eligibility for this grant?
Steve Moskowitz:
I’m going to guess again, and I’m going to guess no. The reason I’m guessing no, is the grant was based on gross revenue. Gross revenue has nothing to do with an NOL. So, again, the whole idea of this program was to help out American business. So, again, they’re still making up the rules. That’s my best guess.
Cliff Capdevielle:
It’s a very good question. So, what a lot of businesses, a lot of people that I’m talking to and Steve’s talking to don’t realize, if you had a loss in 2019 or 2020, you have a window now where you can carry that loss back to your profitable year. So, if you had profitable years, any of the five years preceding 2019, you got a loss in 2019 and 2020, potentially take that NOL back up to five years and get yourself a refund. So, also look at that. So, I think you’re right Steve. I don’t think the NOL would disqualify you. I think it’s also another opportunity for a tax refund that you don’t want to miss.
Cliff Capdevielle:
How’s this work with the Employee Retention Credit? So, Employee Retention Credit’s a refundable credit you can claim on qualifying wages including your health insurance. Just recently, in March of this year, Congress has extended the Employee Retention Credit through the end of the year, through December, and it can be taken retroactively back as far as March of 2020. Now, with that said, most people took the PPP and because you couldn’t double dip most people ignored the Employee Retention Credit for the last three quarters of 2020.
Cliff Capdevielle:
Now, this year, Congress has changed its mind and is going to allow you to be eligible for both the Employee Retention Credit and for the PPP and the Restaurant Revitalization Fund grant. However, you can’t use the same money for the same expenses. So, you’ll be limited. In other words, there’s going to be some calculation here. It’s not rocket science but it’s also not really a back of the envelope calculation either, how to maximize the total benefit and coordinating these programs.
Cliff Capdevielle:
So, what we’re doing, we’re having people on a Zoom call or phone call and we can walk you through the various options here but the big picture is you want to make sure that you benefit from all of these programs if you can. So, the PPP money needs to be used at least 60% for payroll. That leaves 40% that can be used for non-payroll purposes. So, last year it didn’t make a big difference if you used it all for payroll or 60%. This year it makes a huge difference because if you leave some money available to cover payroll, you can potentially be eligible for the Employee Retention Credit.
Cliff Capdevielle:
So, if, for example, you use 60% of your PPP money for payroll, you use 40% for rent and utilities and paying Steve’s bill, you can be eligible for the Employee Retention Credit. Steve’s going to tell you the difference between a credit and a deduction, but it’s a big deal. It can make a very, very big impact and because it’s a refundable credit that means all eligible employers can go back and amend their fourth quarter 2020 payroll tax return 941 and now if you haven’t filed for the first quarter you can include the Employee Retention Credit in your first quarter payroll calculation or if you’ve already filed for the first quarter of 2021 you can file an amended 941x and claim your refund that way. Again, this is free money. This is, like I said, not rocket science but it does require a few calculations.
Steve Moskowitz:
Let’s understand what a big deal it is. The difference between a credit and a deduction is this. A deduction you have the benefit of your tax bracket. So, even if you were in a 40% tax bracket and you got $100, you’d only save $40 in taxes. With a credit it’s dollar for dollar. So, if you get a credit for $1000, you save $1000 in tax. Yes, we can go back and there’s the different rule between 2020 and 2021, the 2021 is far more generous. The 2020 is only giving you $5000 per employee for the year. 2021 is $28,000 so if you’ve already filed… And this is so new. The IRS had to revise the 941 three times in order to do this, but that’s okay. The forms available and we can go ahead and amend and get that money back.
Steve Moskowitz:
But also, the government, and they’re giving away the store here, they said, “You know, you can keep the cash and not pay the appropriate payroll taxes by using another form.” So, that means… Suppose I’ll make up a number. Suppose you’re entitled to $100,000 back in credit and you say, “Well this quarter I have to pay the IRS a check of $30,000.” You can say, “IRS look. Instead of writing you a check for 30 I’m going to use 30 of my credit. So, I’m going to give you zero for this quarter and you just give me back 70.” Very powerful stuff.
Steve Moskowitz:
Also, one of the things that we want to stress to you, is all these things have to be coordinated. How you use the PPP money, the ERC – the Employee Retention Credit, the Restaurant Revitalization act and other things too. Obviously we have limited time in a webinar but there’s other things that we have to consider too and other government benefits.
Cliff Capdevielle:
All right. So, just a little history, just for some of you who haven’t been following this as carefully as maybe we have. There are several versions of the Employee Retention Credit so under the CARES Act in 2020 employers who were qualified took a loan under PPP, the credit was allowed to be claimed up to 50% qualified wages on the first $10,000 per employee between the beginning of the program and March 2020 and the end of the year. So, as I said, that is still open, that fourth quarter is still open if you’re eligible. In other words, if you had qualifying wages that weren’t paid with PPP money you can go back and claim 50% credit up to $10,000 per employee for that fourth quarter.
Cliff Capdevielle:
Then we had a change with the Consolidated Appropriations Act in 2021. This bumped up the credit to 70% of qualified wages. So, that was a nice change and it also applied to the first $10,000 per employee. Under the Consolidated Appropriations Act that was scheduled to end in June. So, that was for the first two quarters of 2021 under the Consolidated Appropriations Act. Under the American Rescue Plan just rolled out last month, the 70% credit was preserved, so that’s going to be a maximum of $7,000 per quarter but it’s been extended through the end of the year. So, that’s going to apply to all four quarters of 2021. That’s a nice credit. That’s up to $28,000 per employee. Now, again, it requires some coordination with the PPP money because if you pay that payroll with PPP money, guess what? No credit. So, you want to make sure that you’re maximizing the credit by allocating some of the PPP money for non-payroll expenses.
Cliff Capdevielle:
So, can a business use the RRF grant for payroll and claim the credit? Well, there’s no double dipping. So, eligible payroll costs don’t include qualified wages used to obtain the Employee Retention Credit. You can still claim the ERC credit for ’20 and ’21 but the wages used in calculating the ERC can’t be paid with grant funds. It’s a limitation but it just requires a little coordination and tracking here to make the most of both programs.
Cliff Capdevielle:
So, who’s going to qualify for the Employee Retention Credit? That’s going to be any employer carrying on a trade or business which has suffered significant decline in gross receipts and/or is suspended because of some government order. How do we calculate the gross receipts for the Employee Retention Credit? So, that’s going to be the receipts of the taxable year net of returns. Generally not reduced by cost of goods sold. So, that’s obviously an advantage for those of you in retail or selling goods in addition to services and for restaurants in particular. So, gross receipts do however include investments such as interest, dividends, rents and royalties if you were fortunate enough to have some savings in investments or in an interest earning account.
Cliff Capdevielle:
Significant decline for the purpose of the Employee Retention Credit. Gross receipts, we start with the first calendar quarter in 2021 in which the employer’s gross receipts are less than 80% of the gross receipts in the same quarter in 2019. So, we don’t look to 2020. This year a significant decline for the purpose of the Employee Retention Credit for 2021 is going to be a comparison with 2019. So, for almost all restaurants and other eating establishments, bars, etcetera, that’s going to be a pretty easy threshold to show that your gross receipts are not more than 80% of what they were in the same quarter in 2019.
Steve Moskowitz:
Also don’t get hung up with the title of this act, Restaurant Revitalization Fund. You don’t have to be a restaurant. You say, “Well what if I’m a bar tasting room, food truck, food stand?” But also they specifically left the definition wide open. It talks about an establishment that sells food and beverage to the public. So, what if you were a bakery? Does a bakery count? I would take the position yes. Then if you have any type of business that’s selling food or beverage to the public, even if it’s I’ll call non-traditional, at least talk to us and say, “Do we think you fit in here?” Because, I mean, again folks, do you understand this? The government is giving you your COVID gross revenue losses up to $10 million and here the… I’ll call it restaurant etcetera area has been singled out.
Steve Moskowitz:
There’s some other things that were singled out like the performing arts with the Shuttered Venues Act that Cliff was talking about earlier, but the bottom line is this is a tremendous opportunity and that’s why I’m saying to you when the gate lifts, when the bell rings, this money is going to go in an instant. You got to be ready to apply or what a shame if you get left out. That would be a crying shame. Cliff, back to you.
Cliff Capdevielle:
Thanks Steve. Now, Steve and I do a lot of planning for clients with retirement programs, good times and bad times. I want to introduce another government program that was beefed up this year and certainly if you can afford it, it makes sense to set up some kind of retirement plan this year. Under the Secure Act you’ve got a potential credit up to $15,000 to start a new retirement plan. Now, some of you are thinking, “Well, my gosh. I’m barely making ends meet. How could I possibly afford to set up a retirement plan this year?” But the government is creating a major incentive. They’re paying essentially all of your start up cost to set up a new retirement plan.
Cliff Capdevielle:
How do you claim that? If you’ve got less than 100 employees who received at least $5,000 in the preceding year and in the three years before the first year you’re eligible for the credit your employees weren’t substantially the same, who receive contributions, that is going to eliminate you but certainly for most of you, you are very likely to be eligible for this credit as well.
Cliff Capdevielle:
This is… It’s going to be eligible for 401(k), for profit sharing, defined benefit, cash balance plan which Steve will talk about a little bit, ESOP, or annuities. So, essentially any of the typical plans a small business would consider are going to be eligible. Certainly if you have the money this year to set up a plan it’s a good idea to do so.
Cliff Capdevielle:
Steve, did you want to talk about retirement plans at all?
Steve Moskowitz:
I love talking about retirement plans and there’s so much to them. When people think about retirement plans they normally only think about what I call the simple ones. What everybody knows about. 401(K), SEP, IRA, and they’re fine and there’s nothing wrong with them, but they’re so limited and what most people don’t know, there’s over 20 different types of plans. I classify them in two different groups, the simple ones that I just mentioned, and the fancy ones.
Steve Moskowitz:
The fancy ones you can put away a tremendous amount of money. Our average clients that have these put away hundreds of thousands of dollars a year for themselves and some clients even put away seven figures and there’s all kinds of benefits. One, you get a tax deduction. So, you have to ask yourself the tough question, “Would I prefer to A, pay less taxes and put less money away for my retirement, or B, pay more in taxes and not have the money for retirement?” After you get the answer to that one, the next question is would you prefer to put your money where somebody can grab it like if you get sued and you’re in business and let’s face it, people get sued all the time, and you could also lose it if everything goes bad, if you file bankruptcy. Or there’s special protection with ERISA protected plans, meaning that if you get sued and there’s a judgment awarded against you in excess of your insurance, the plaintiff can’t touch your pension.
Steve Moskowitz:
Although I hate to mention his name, O.J. Simpson is the poster boy for this because O.J. has a multi-million dollar judgment against him but he’s not paid one penny of his pension. He’s not lost one penny of his pension. Also, if everything goes bad for you and you wind up going bankrupt, and again, with COVID there’s a lot of people that never thought they’d be inside a bankruptcy court, they’re going to find themselves there. Not to mention the bankruptcy laws have changed far more favorably towards debtors. You would get to keep 100% of your pension, an unlimited amount, which means if you do get sued there’s a great chance that your attorney can work out a sweet deal for you and you won’t even have to go bankrupt. So, there’s so much that can be done here. The bottom line is, these retirement accounts are fantastic and we have a whole separate section where we counsel about these. Cliff, back to you.
Cliff Capdevielle:
Thanks Steve. So, let’s just answer a couple questions here. Questions are coming in, which is nice. With regard to that 21 day priority window, if a business is owned by men and women, is that going to qualify for the priority? Now, this is my hunch is that it’s going to have to be a majority owned women business. I think, you know, a minority ownership by men is not going to qualify but I think it’s going to be required to be a majority owned by women.
Steve Moskowitz:
My guess is right there with you. If it’s… Like so many other benefits there are other benefits for women owned businesses. They have to be 51% or more. So, I can see a lot of these, not to mention I would think that a lot of husband and wife businesses are like this. So, again, you want to get in line as early as you can.
Cliff Capdevielle:
Are there going to be restriction on owner salaries? Yes. So, all the programs are slightly different but the basic idea is you’re not going to be able to pay all of the salary to the owner and to the owners kids. Right? The family members, related parties, there are going to be severe restrictions on that for the ERC and for the other programs. That said, owner salary does qualify as long as it’s reasonable and for the credit if it’s up to the $10,000 per quarter will be eligible. Now, there’s some debate there regarding majority owners. So, I’ve heard both the regs are a little unclear as to whether a… For example, if it’s a 100% owned business, will the owners’ salary qualify for the credit at all? I’ve heard arguments on both sides. If you’re a minority owner, if you own less than 50%, absolutely. There’s some debate for owners who own more than 50% whether or not their full salary’s going to qualify.
Cliff Capdevielle:
Another question. Can we apply to multiple lenders and see who pays us first? So, it’s different. This is different from the PPP. This is a direct application with the SBA. There’s no bank intermediary for the RRF grant. So, that’s a little bit different.
Cliff Capdevielle:
What else? When will the SBA portal be open? I don’t know that they’ve announced a date yet. It’s any minute. So, make sure you’re checking that daily. When the bell rings it’s going to be off to the races.
Cliff Capdevielle:
Just a little bit more on setting up a retirement plan. The start up expenses are covered, the cost to administer the plan of course is covered and educating your employees, if you hire a specialist to come out, somebody independent, to explain how the plan works that’s going to be covered expense. [inaudible 00:43:51].
Steve Moskowitz:
Also, the government gives a credit to the person setting up the plan for you. So, even there the government is giving you money there. You say, “Well why is the government being so generous here?” Remember, if you don’t take… Everything’s an incentive in the tax law. If you don’t take care of yourself, the government’s stuck taking care of you, so they’re giving you these incentives. But you have to know about them and a question that I get all the time is, “Steve, how come all these big companies get all these benefits?” You always see in the newspaper, Fortune 500’s making billions with a B in profit and paying zero taxes, how is that possible? One of the reasons I founded the practice over 30 years ago was because I said, “You know what? Smaller businesses can take advantage of these too but you have to know about them.” Here’s the example I give.
Steve Moskowitz:
Suppose you’re sitting at your desk and I take one piece of paper and I put it on your desk and I say, “If you take this piece of paper to the IRS they’re going to write you a check for a million dollars. I’m willing to bet you’d go ahead, take that piece of paper to IRS and get your check for a mil.” But suppose I put that same piece of paper on your desk for the mil but then I back up a dump truck, dump a million pieces of paper on your desk, many of them looking like this piece of paper and then drive away. What chance do you think you would find that million dollar piece of paper? You probably wouldn’t. But the Fortune 500 have an army of guys like Cliff and Liz and me and the other members of the firm that know where that million dollar piece of paper is. That’s part of what we do when we come through the internal revenue code and say, “Here’s all these benefits for you.” Cliff, back to you.
Cliff Capdevielle:
Thanks Steve. So, here’s a really good question from Tony. Are you going to be eligible for any of these programs if you’re profitable? Or is this just to prop you up if you’re unprofitable? So, the answer is yeah. So, as long as you can show decline in revenue, you’re not required to show a loss. You’re just required to show a significant decline in revenue and it’s slightly different for the different programs, but in general if your revenue is down anywhere from 20% to 50% you’re going to be eligible for some or all of these programs even if you are still managing to turn profit.
Cliff Capdevielle:
So, again, the retirement plan is eligible for credit. This is going to be up to $5,000 total and that is for the first three years of the retirement plan. That’s duplicate. As Steve described, a credit is so valuable because it reduces your tax on a dollar for dollar basis. So, this startup plan credit for the retirement plan is similar to the Employee Retention Credit and other credits as you apply for the claim using an IRS form, in this case its 8881 for small employer pension plan startup costs and you will receive a refund for any refundable portion.
Cliff Capdevielle:
A quick example here. Plan has a startup, an administrative cost $6,000. How much credit are they eligible for? So, it’s 50% of the total. The plan has 20 lower compensated employees that are eligible. It’d be 20 times 250. So, they’re going to qualify for a $3,000 credit. If they had only five then the credit would be $1,250. As I said, that’s eligible for three years. Like all of these credits, you don’t get a deduction if you claim the credit. So, whether we’re talking about the Employee Retention Credit or the retirement startup plan deduction or credit, you’re not going to get to deduct the same expense for which you claimed a credit.
Cliff Capdevielle:
A couple of other government programs I’m going to talk about are the credit for the small employer health insurance premiums. 50% of full time employees say that health insurance is the most significant benefit they receive. So, certainly this should be on your radar if you can possibly afford to pay for the group health insurance for your employees, you should be doing that. This credit covers up to 50% of the amount you pay toward your premiums for two years. If you have fewer than 25 full time employees and paid less than $51,600 a year and if you’re funding at least half of the health insurance premiums.
Cliff Capdevielle:
Another credit that’s available. Some of you restaurant owners have built disabled access. You are eligible for a government credit there for the constructions of ramps, wheelchairs, any text that you have that’s in brail, accessible dining rooms, restrooms, removing barriers. Those are all eligible for the disabled access credit and covers 50% of your expenses up to $5,000.
Steve Moskowitz:
Also, on a slightly different topic don’t forget all that money you spent building those outdoor enclosures. I’ve walked past restaurants where I see they basically built another structure outside. They left one side open and said, “Here you go. It’s outdoor dining.” All those things cost money. You have advantages there too.
Cliff Capdevielle:
Yeah.
Steve Moskowitz:
Back to you cliff.
Cliff Capdevielle:
For most of you, you would have thought you could deduct those expenses, which is correct, but again, we want to take a careful look to see if you’re eligible for a credit because a credit is much more valuable than a deduction. So, that’s why we’re focusing on these credits because they put dollars in your pocket above… Just typically we’re talking anywhere from three to five times what a similar deduction would be worth.
Cliff Capdevielle:
Most of you restaurant owners know about the work opportunity tax credit. This is a credit that’s available if you employ veterans, disabled veterans, voc rehab referrals, ex-felons, summer youth in empowerment zones, and food stamp or SSI recipients, the long term unemployed, and you can save up to $9,000 over a two year period per employee, that’s $4,500 a year per employee if you are able to employ these folks.
Cliff Capdevielle:
Family and medical leave credit. So, businesses who provided paid family or medical leave for employees are eligible for the family medical leave credits, can cover anywhere from 12.5% to 25% of what you paid your employees. Must’ve been at least 50% of your pre-leave wages. So, again, we’re going to want to look at all the money that you pay out in terms of payroll or leave and make sure that you’re coordinating all of these programs because what you don’t want to do is leave any money on the table. As we’ve harped on today, you want to make sure that if there’s a credit available you want to use that versus a deduction.
Elizabeth Prehn:
Cliff and Steve, can you just walk through the process, we’re getting short on time here. I wanted to make sure that you could walk through the process on how people should contact us and then what to expect, how much time does it cost, what is our… How much time does it take to actually get the package to be submitted and then also what’s our fee structure and what can they expect.
Cliff Capdevielle:
Yes. Those are very good questions. So, just to reiterate [crosstalk 00:54:07] covered this already.
Steve Moskowitz:
They are in what we would say as far as contacting us…
Cliff Capdevielle:
Go ahead Steve.
Steve Moskowitz:
You can call us or email us or text us and we’ll get right back to you. I talk with a lot of the clients personally and if I don’t there are other firm members and then what we’ll do is we’ll say, “Here’s what you need” and in almost all cases we do things on a flat fee basis. The fee depends on the complexity of the work. Obviously if you’re a very large restaurant the fee would be mostly likely different than if you’re a mom and pop. But it’ll be reasonable fees. We haven’t been around for over 30 years by doing anything else. We also understand the urgency here and it’s not just urgency of the money’s going to run out. The urgency is, and as a small business owners we understand this, people are hanging on by their fingernails. It’s like drowning. If that lifeguard doesn’t get to you quickly enough it doesn’t matter. We understand that. Cliff, what would you like to add to that?
Cliff Capdevielle:
Yeah. Thanks Steve. So, just to get back to Liz’s question. How do you get going on this? Well, we would want to help you put together your tax returns, financial statements, and other calculations at minimum for the Restaurant Revitalization Fund application, you want to get going on that right away. We can also help you with the Employee Retention Credit calculation and filing amended payroll tax returns if you’re eligible for those. In terms of timing, typically on an amended return we’re looking at a couple weeks turnaround time. Same if you’ve got your P&L altogether typically we can turnaround a tax return in a couple weeks. So, that’s why Steve is pushing everybody to get their ducks in a row because if you need your accountant’s help it’s probably going to take 10 days, two weeks to get your documents together. You want to have this all ready to go when the starting gun is fired.
Cliff Capdevielle:
So, that is what you need. In terms of fees, Steve charges a flat fee. I don’t know. Steve, do you want to talk any more about your fee structure?
Steve Moskowitz:
What I’d like to say about the fees is I’d like to think that they’re reasonable fees and it depends on what we have to do. Depending on taxpayers there is a wide variety of what has to be done. Some people come in and they’re very well organized and we only have to do a small part of the case, in which case the fee is small. On the other hand, somebody says, “Oh, you know, I’ve been meaning to get my records together for the last few years and I have a bunch of 30 gallon trash bags filled with papers, I’ll drag those in. I think they’re the last several years. My friend also was storing some other papers for me, I’ll have him drop them off.” That fee is going to be much larger because there’s a lot more work to be done.
Steve Moskowitz:
So, basically what I’d say is it’s a reasonable fee for what you have. That’s why it can so vary, like anything else, how much does anything else cost? It depends on all the facts and circumstances but I’d really like to think after 30 plus years, that the fees that we ask are really reasonable.
Steve Moskowitz:
Furthermore, you have essentially a discount on the fees because so many of these are similar to so many others that we’ve done so we pass along the economy of scale. Most lawyers, before they do anything, they say, “Well I’ll have to do the research.” In most, not all, but most of the cases we do they’re so similar that we don’t have to charge you that. We already know how to do it. We just charge you for doing the work in most cases. Cliff, back to you.
Cliff Capdevielle:
Thanks Steve. We just have another minute. So, if Liz didn’t have any other questions I would just point out, here’s a slide with Steve’s contact information. Can people email you directly at your Steve@MoskowitzLLP.com?
Steve Moskowitz:
Absolutely.
Cliff Capdevielle:
Is that a good way to reach you?
Steve Moskowitz:
Absolutely.
Cliff Capdevielle:
The 415-394-7200.
Steve Moskowitz:
Call, email. [crosstalk 00:58:55].
Cliff Capdevielle:
That’s a good phone number for you?
Steve Moskowitz:
Absolutely. We look forward to talking to you and helping you.
Elizabeth Prehn:
All right. Well, thank you Steve and Cliff. That was very informative, and thank you restaurant owners for attending and we hope that we get to meet with you soon. Thank you very much.
Steve Moskowitz:
Thank you Liz and thank you audience.
Cliff Capdevielle:
Thanks Liz. Thanks Steve.
Elizabeth Prehn:
Bye bye.
Steve Moskowitz:
Bye bye.