A Tax Planning Attorney as a Resource For Your Business

As I sit down to write this article, I struggle for ideas. There are a few new directives coming out from the federal government, and a few from our Governor’s office.

PPP Loan Packages

There is a new PPP loan package coming out, and by the time you read this article, it will be old news. However, I want to make sure everyone understands. First, to qualify, you need to have had a quarterly down-turn in gross revenue of 25%, compared to the same quarter in the prior year. Was your first quarter revenue in 2020, 25% less than your first quarter of 2019? The same test goes for any quarter in 2020, versus 2019. If so, then please, get with your bank and put in your application for the PPP extension funds. You will still have to use 60% of the funds for payroll. You can also qualify for PPP funds, even if you are an employee of one place but have another business on the side. The second PPP loan will be based upon 2.5 times your average monthly payroll costs for 2020.

There are two recent inclusions into the new federal legislation for the PPP loan. The first is that the PPP funds you received in 2020 will not be includable as income — yet you will still be able to deduct your expenses that were attributable to your 2020 expenses. This is a really rare tax win for all business owners.

Saving on Taxes

The second little win is one for both employers and their employees, if the employer and employee choose to take advantage of this change. For the next five years, an employer can make payments to a student loan lender, on behalf of their employee, and the payment will not be treated as income to the employee. Additionally, the payment will not be considered as payroll for either the employer or employee. This will save the payroll taxes for both the employer and employee, and it will save the income taxes against the employee. Remember, the employee has to work to create income, and then the employer pays the employee. The employer must withhold all of the payroll taxes, like FICA, FUTA, Medicare and Medicaid, and then the employer must withhold the estimated income taxes on the employee, based on the submitted W-2 from the employee. The employer would also have to pay its share of the payroll taxes to the government as well, in a normal payroll situation. Whatever the employee has left over, after taxes, the employee can then make as their student loan payment. However, with this new program, the employer can make the payment directly to the student loan lender, with pre-tax dollars, for the benefit of the employee. In essence, this should save 20-30% for the employee and approximately 7.5% to the employer. Not a bad deal for both parties.

Learn from Others 

Learn from other business owners, restaurateurs, bar owners, and hoteliers by watching some fantastic business interviews on the Silverman Law Office YouTube channel. An attorney, like a Montana tax planning attorney, would also be a good resource for your business this year. If you have any topics or questions to be covered in future articles, or if you would like to receive our monthly newsletter, then please email me at [email protected].