What the CARES Act Means for Independent Workers, Self-Employed Professionals, & Freelancers
April 1, 2020 | 2:00 PM - 3:00 PM EST
McLean Robbins, Vice President of Enterprise Marketing, MBO Partners
Miles Everson, Chief Executive Officer at MBO Partners
Gene Zaino, Founder of MBO Partners
00:00 Introduction and welcoming of guests
02:50 Introduction of MBO Partners and CaresForIndependents.com
07:45 MBO’s purpose by Miles Everson
09:25 The State of Independence in America by Gene Zaino
12:23 Introduction of the Coronavirus Aid, Relief, and Economic Security (CARES) Act
14:08 Self-employment taxes or employer side Social Security payment deferred
17:24 Net operating loss (carrybacks) for income tax refunds and tax reductions
18:41 Low interest loans and immediate grants
22:18 Low interest payroll and overhead loans
29:57 Expanded unemployment benefits
38:15 Why a modern business model is needed to respond to events like COVID-19
1:03:27 Closing remarks
Determining the benefits of the Coronavirus Aid, Relief, and Economic Security (CARES) Act may be difficult to understand and incorporate into a business. Hence, many are still unsure about the specific details regarding this law. To fully utilize this law and gain expanded assistance and retirement benefits for workers, it is extremely beneficial to heed the explanation and advice of the key speakers of this webinar.
In this exclusive webinar, Miles Everson, Chief Executive Officer of MBO Partners and Gene Zaino, Founder of MBO Partners, discussed the CARES Act and how the 2 trillion USD economic stimulus package can provide liquidity to Americans and aid the economy through its provision of benefits, loans, grants, and deferred payments during the current COVID-19 pandemic.
This Q&A-style discussion talked about:
- The qualification criteria for independent contractors based on their current work status
- The qualification criteria for self-employed professionals based on historical payroll
- How to file an actual tax return based on previous years
- How the CARES Act affects the new business models of multiple companies
The Billing and Financial Management webinar series covers:
- How to defer employer-side tax refunds of net operating loss, carrybacks, actual cash grants, and payroll loans
- The benefits that workers are entitled to
- The importance of understanding information regarding expanded assistance for unemployment, direct payments, tax returns, and withdrawals for retirement
Are you interested in attending the next webinar in the Billing and Financial Management series? View our upcoming events.
McLean Robbins: Hey, everyone, we're just letting some attendees come into the room here and we'll get started in just one minute. We've got quite a number here still coming into the webinar, so just another 30 seconds or so, and we'll go ahead and get started. Gosh, we've got quite a few thousand of you guys coming into this webinar, and I'm really excited that everybody was so interested in learning more about the CARES Act today. Wonderful guys, it looks like many of you are in here, so hello, everyone, and welcome to today's webinar, What the CARES Act Means for Independence. My name is McLean Robbins' and I'm the Senior Director of Marketing here at MBO Partners. I'm so excited to bring you guys this valuable information today and to share all The CARES Act can do for you and your business during this trying time. Thank you for joining us.
McLean Robbins: Next slide, please. First, we'll begin with just a few housekeeping items. We'll be making the recording of this webinar available online on our website at caresforindependents.com within 24 hours. And we will also be streaming this on Facebook live. So be sure to share this valuable information with your fellow independent professionals and small business owners. Start asking those questions using the webinar's Q&A feature, and we'll get to as many as we can at the end of the webinar. Here's a quick overview. You'll remained muted and your video will be turned off for this webinar as we have a few thousand of you in here. That's an amazing number. You're one of 41,000,000 independent workers in the United States today. So just know that even if this time feels scary or you feel alone, you're part of an incredibly powerful group. Now, for a quick legal disclaimer that our attorneys mandate, I must read in full. Nothing like a good bit of legalese to get us started. This information provided here does not constitute illegal tax or financial advice, it does not take into account your particular circumstances, objectives, legal and financial needs, or situations. Before acting on any information, you should consider the appropriateness of the information for your situation and consult with a professional adviser of your choosing. This is a rapidly changing area of the law and will be subject to change and interpretation. I know many of you are already familiar with the work MBO Partners has been doing and lots of you know, Gene, our founder, wave up Gene, and Miles are CEO give-away of Miles personally. But for those of you who do not know MBO as well, here's a little background. At MBO Partners, our mission is to make it easier for enterprise organizations and top independent professionals to work together. For more than 20 years, we've been leading the charge to keep the independent economy moving forward. Building an authentic double-sided ecosystem comprising many of the world's most prominent companies and in demand professionals. MBO has always been committed to advancing the next way of working, and we are far from done. We'll continue to drive change on the ground, delivering innovative solutions that enable both organizations and talent to thrive in a constantly evolving workplace. Before we kick off this webinar, I want to point out caresforindependents.com, our brand new destination that offers a lot of great information that we'll be sharing today in an easy to digestible, and shareable format. I'd like to give a shout-out to our team members to help work through the weekend early this week to make the site available after the CARES Act was passed late Friday night. In the coming days and weeks, we'll be adding new calculators and functionality to the site to help you determine if you qualify for specific benefit programs and will update the site as new information becomes available. I encourage each of you to sign up on the website to receive new information directly into your inbox. There's a handy dandy subscribe link right there on the homepage.
McLean Robbins: Now onto the good stuff. I'm honored to introduce all of you to Miles Everson, the CEO of MBO Partners who joined us in 2019. Most recently, he served as the Global Advisory and consulting CEO for PriceWaterhouseCoopers, better known as PWC, leading the company's Asia Pacific America's Advisory and Consulting Practice. He had a rich history of nearly three decades, with the PWC beginning in the firm's assurance practice before moving on to many different leadership roles within the company. He has worked with many of the world's largest and most prominent organizations specializing in executive management. He's a sought-after public speaker and contributor and has been a case study from Harvard Business School. He's a Certified Public Accountant, a member of the American Institute of Certified Public Accountants, and the Minnesota Society of Certified Public Accountants. He graduated from Saint cloud University with a B.S. in Accounting. To make a long story short, I can't think of a better person to help bring this CARES Act information to you today. Welcome, Miles. Please take it away.
Miles Everson: Great thanks, McLean and good day, everyone. I really feel blessed to be here with you today so we can have a really rich dialog about how we can help you and frankly, your families as we as a society go through what is certainly a very challenging time for us. We're going to get into the discussion in just a minute. But I think it's fair to say that COVID-19 has created a significant amount of uncertainty for people and, you know, when you're faced with uncertainty, one of the first things is fear can set in. And for a lot of people, fear can mean fear everything and run. But I'll say those that really thrive viewed a bit differently, and that's why we're here with you today, is to help independents, instead of run from fear, face everything and rise up. We're here to help you do that. We've been committed to that for decades. And we certainly think today will go a long way to help you figure out how do you get your arms around what this largest relief program in US history is. And navigating the relief can be quite complicated. And I say that because the way the government does stimulus programs is they tend to think of them as what gets administered by what agency. And so, there's multiple opportunities to get the relief that come from different agencies. And what we've done at MBO, and I got to really, you know, thank our team for doing this. As we said, let's just put ourselves in the seat of the independent. What does it look like to me when I look at that 800-page bills and try to figure out what the benefits can be? So what you're going to see today is what's available and how you can access it. So let's just set the stage for the next hour. We're going to get right into it. A discussion about the environment about the Cares Act and how you can actually get money, and then we're going to-- Gene's going to walk us through some very detailed specifics of the bill and put context of where do you go to get the money? What's the bill saying? What's a grant, what's a loan, etc. And we're doing this because, you know, MBO's Heritage started with it's my business office, and our purpose here in life is to give people the control to do the work they love, the way they want. And independence is where we live and really take a true caring for. So I can think of nobody better than the founder of MBO to help us walk through this. So I'm happy to welcome Gene into this discussion. And Gene, you want to pick up and share some introductory comments and let's get right into the act. And then after that, we're going to give you just a few minutes on our view of what's happening in the larger society around us to set the stage for how we continue to rise up in the face of uncertainty. So, Gene, over to you. Gene, I can't hear you.
Gene Zaino: It would help if I took myself off mute. Thank you, everybody, for joining, and I hope you're all safe and enjoying your social distancing, which I can't emphasize enough, is really important for us all to do. We need to get rid of this thing. So I'm going to spend the next 15 or 20 minutes. And Miles, please jump in if I miss a gap or you could ask a conversational question, but I'm going to spend the next 15 to 20 minutes kind of walking you through what we think are the critical pieces of this eight hundred and eighty-page law that are important for the people we care most about, which are these great people in the independent workforce. And first, I just going to explain to make sure we know who we're talking about here, when we talk about independence. As many of you may know, MBO Partners has for the last nine years, and actually this coming year will be the 10th year, we've had consistent research, by an independent research firm, to study the independent workforce in America. We were the first ones to come out with this report. There has been lots of others and our definition of an independent is people that choose to be independent. They are doing it on a regular basis, some part-time, some full-time. And they could have an LLC that could be a 1099. They could be a small corporation. They could be a temporary worker. These are people that have taken their career into their hands and have built their own jobs and there's nothing more admirable to anybody than to be able to take care of yourself. And so based on that research, we've got 41,000,000 people in America that are doing this work. And over the next few years, this number is expected to double. And I believe with this current event and people working remotely and companies needing to get access to more and more talent as needed, things will actually accelerate this movement in independent work. So these independents are across all ages. They actually, on average, are earning about 15% more when they're doing this type of work than their counterpart, that's full-time. And on average, it's about 68,000 dollars a year. The fastest-growing segment of this workforce really are the people that are over one hundred thousand dollars a year. And it really breaks out that 41,000,000 into a group that's doing this part-time and a group that is doing this full-time. So the full-time independents are about 15,000,000.
Gene Zaino: And we could go to the next slide, please. So to set the stage here, we're talking about a workforce that's approximately 6 to 7 percent of the American workforce today. Accounting for 1.3 trillion dollars of our economy, which is about the size of the economy of Spain. So this is a pretty important segment of the workforce, and I'm really happy to see for the first time, our federal government has actually recognized this as a significant part of our workforce and has created a policy in this new CARES Act that's actually taking care of our independents. So now that we know who we're talking about here, let's get into this bill, this 880-page Cares Act. And what I'm going to walk through is I'm going to spend time on the areas that we think are most important for independents. And even though I'm going to go into some level of detail, you know, if, I'm not going to get down to the street level, but I'll be about 2,000 feet above. And there are still many parts of this bill that are nuanced. There are many parts of this bill that regulations haven't been put out yet. But I could tell you that our government wants to get cash in your hands as soon as possible. And one thing I want you to take away from this, after this event, after this webinar, please go and get your money.
Gene Zaino: So let's get to the next, let's get to it. So there's there are eight sections I'm going to walk through quickly. Four of them are for your business as an independent contractor, sole proprietor, small corporation. The four of them on the left here, which is deferring employer-side tax refunds of net operating loss, carrybacks, actual cash grants, and payroll loans, as Miles mentioned. On the right side are things that every American is entitled to and certainly, I want you to point this out so that everyone understands. Some of these things, you probably know. But there's really exciting information about expanded assistance for unemployment, direct payments to everybody based on their tax returns, withdrawals from retirement. And actually, we don't have to pay taxes or file our taxes until July. So let's start with what's important for your business. And I might--
Miles Everson: Can I just chime in for one second. I just want to encourage folks, because of the myriad of options here, we're getting some questions about specific things. But I would really encourage you to stay and listen through the whole component of this webcast because of the number of benefits that are here. So there are lots of things that you may not have even uncovered or be aware of yet. I just wanted to highlight that for everyone.
Gene Zaino: Yeah. And again, this is being recorded. So, you know, whenever you're going to see it on the screen, you're going to be able to see it again. And actually, on our website, you're going to be able to get even more detailed information. Every one of these slides on these eight items that we're gonna go through is going to point to the section of the Cares Act, up on the top there, section 2302 here. And then the gray box on the right is going to be the call up that we think is most critical for you in terms of cash in your pocket as soon as possible. So this first one is for self-employed people that either has a corporation or sole proprietorship. And I think everybody knows that we all pay into the Social Security funds. And generally, that is paid half by an employee. Everybody that had a W-2 has known that they get taxes taken out withholdings as well as Social Security and Medicare. If you're self-employed, you don't get a W-2. If you're a sole proprietor or independent contractor, you would then pay self-employment tax at the end of the year or during the year and your quarterly's and that's usually the same amount doubled because you're the employer and the employee. So with this CARES Act has done is said, okay, we're going to allow all employers and self-employed to defer half of the Social Security tax that the employer normally pays. So if you're a corporation, you could deduct that 6.2% of wages that you need to pay yourself and your employees and defer that. I'll tell you when you have to pay it back in a second. If you're a sole proprietor, you can take pretty much half of the 12.4% that you pay for your self-employment tax. You still have to pay Medicare, but there's also the Social Security portion, you can defer half of that. You don't have to pay for it at all. You don't have to pay at all until the end of 2021 and the end of 2022 through 2020. So everything this year, related to the employer side, are half of your self-employment side of Social Security is deferred. You don't have to pay it. You have to pay it a year later and 2021 half of it. And the next half in 2022. So that's cash that you don't have to lay out for taxes. Impact your quarterly taxes if you're quarterly, so that's a big one.
Gene Zaino: Go to the next one. The next one is the net operating loss carrybacks, which in 2017 on the big tax act that was taken away. Now it's being put back at least for 2020. And this means that any losses in your business or in your personal pass through any losses in 2020, in 2019, in 2018 can be carried back to five previous years. So any taxes you paid in those years, you get a refund and you can apply for that refund now. So it'll reduce your 2020 taxes, of course, if you have a loss. But you could carry that loss even further back and get money back on taxes that you previously paid in the prior year's profits. Obviously, this is complicated. Taxes are complicated. Go talk with your accountant, but you should be able if you've had profits in private prior years or in losses in the last year or two, you could carry those back tax taxable payments back. That's the second one.
Gene Zaino: Let's go to the third. So these next two, this one and the next one are very interesting and very probably new to everybody. So this first one is called the EIDL Loan or Grant, and it stands for Economic Injury Disaster Loans and this has been around for a long time. It's only available through the Small Business Administration and it's only available to small companies under 500 employees, but it includes independent contractors and sole proprietors. And it was originally designed for disasters like hurricanes, floods, earthquakes, and since the current pandemic is considered a national disaster, the entire United States is considered eligible. So what this does, it allows you to apply right on the SBA site. And there's the on the bottom of the URL, the www.Covid19Relief.sba.gov. And you could apply for a loan that is to recover you and give you money for damages that you incurred as a result of this disaster. And those damages are, you know, could be equipment, could be your payroll, could be you're not able to pay mortgages or rent. Now, in addition to that, the CARES Act said people need money right away. So they added up to 10,000 dollar grant, emergency grant, that will get deposited to your account in three days. You go to the website, you apply. The only check your credit score because this is a matter of speed. You must sign an affidavit that you are obviously revealing the truth here. You do not want to take money that's not relevant for what you need it for. You can't take this money and go investing or do other things. It's for replacing financial loss as a result of this terrible event that we're all suffering through. I encourage you to go do this. I think the SBA site is really well done. I think it should take you 10 or 15 minutes, and I encourage you to do that. Now, you could also get a loan on top of that for up to 2,000,000 dollars that you could pay off over time. But we'll talk-- you know when you see this next loan, you may not want to do that. So let's go to the next.
Miles Everson: Gene before we leave that. I think just a broader important context here is that while this has been declared a national disaster, the effects that it has in local jurisdictions will obviously vary because there are hotter spots than others. So what we think will happen is that state governors will declare unique and special disasters for their own states. And we'll see additional stimulus coming at the state level that's funded by the federal government, but it'll get distributed by the state. So we'll be paying close attention to what's happening at the various state levels because we believe that as more programs come out, we're going to have to update this and we'll be doing that, and I'm flighting it because you can do it yourself. We'll also be monitoring that to see what the programs are. But this isn't really-- this is kind of the beginning, is what it feels like right now. And so paying close attention to this would be wise for everyone.
Gene Zaino: Thank you, Miles. So that's the first loan that we just talked about, which is really a grant under if you're under distress, this next loan is called the Paycheck Protection Program, which is brand new. It's also administered through the SBA but you must go to a bank. You don't go to the SBA to get this one. You go to the bank, you go to your bank which is a member of the SBA lending community, and you could take a loan that is at 4% interest. You'd have six years to pay it back or actually longer depending on your situation. And the loan is really designed to help you replace payroll or keep your people paid, including yourself. And the way it works is it'll go back to last year the way you calculate the amount of the loan you cut. You look at last year's average payroll cost per month. So to give you an example, let's just use easy numbers. Say it was 10,000 dollars a month was your payroll. The loan is calculated at 2.5 times the average payroll of last year, including, by the way, it includes like benefits, payroll taxes, it even includes certain overhead. So basically, your bare expenses to run your business. So if that was 10,000 dollars, you'd get a loan for 25,000 dollars. Then once you get that money for the following 8 weeks or 2 months, if you can maintain that same level, you actually have this loan forgiven. If the level you're maintaining is less than that, it's a pro-rata amount that you get forgiven. So this is another way to get the cash that is not payable back, which is very exciting. Now, you can't double-dip. So we just talked about the 10,000 dollar grant from the EIDL loan. Whatever is forgiven on this loan, that 10,000 dollars will be deducted. Now you could, on the EIDL loan, borrow more money than just payroll. So that's the value of that loan if you want. If you're just trying to recover payroll and overhead, this is probably a better loan for you and you could then get it totally forgiven. But you could stuffy so you could have 10,000 plus the payroll loan, but you can't have the money counting twice, so be careful about that. You're going to sign all kinds of service certifications about this is subject to perjury. There's a lot of trusts here. And one of the things I just want to comment on, you think about this as kind of our national disaster, people that need this money, let's get it to them. If you don't need the money, don't go get it. It's important for us to make sure that we're not abusing the system. And there's a lot of features of a lot of these things in this CARES Act bill that's really based on getting the money out quickly and get rid of bureaucracy. But it's going to require people to do the right thing. So let's go to the next one.
Miles Everson: Gene, a couple of questions here that have come in that I'm watching. One is there's a question that says if I'm an independent contractor, can I qualify for payroll because I'm self-employed? Does it count?
Gene Zaino: Yes. So if you're an independent contractor and you're getting paid on a 1099 and your income is flowing into your schedule C, that counts as payroll for this purpose. So you would go back last year and look at your average payroll now. Now, if you didn't have one last year, there is a way to look at it. I think what happened on February 15th of this year, I'm just not clear on that in my mind. But basically, yes, your independent contractor work counts as payroll for this purpose of calculating this loan. And also for other things, but we'll get to those.
Miles Everson So, Gene, another question that's coming in and you and I are very familiar with this is often times, independent professionals have a significant lag between when they deliver the work and they've quote earned and when they get paid, it can be even months at a time. And so there's a few questions asking about whether they can qualify. But if I understand this right, the qualification criteria are really based on your historical payroll, not on whether your current payroll has stopped.
Gene Zaino Correct. Well, it's based on your historical payroll in terms of calculating the amount of the loan and then you have that money so that money you get and its 4% interest loan and you have a long time to pay it back. But in terms of the forgiveness of the loan, if you could recoup as much-- if you could keep your payroll as much to what it was a year ago, I mean, they're trying to keep people employed so and keep people working. If you can keep it maintained at that for eight weeks, you don't have to pay the money back. If it says, 3/4 of what it was a year ago, you get 3/4 of it removed and you only got to pay back 25%. So, you know, it's still a very good thing, but of course, you know, people are in, you know, probably challenged to try to keep payroll the same as it was last year. But that's the goal of this program.
Miles Everson Correct. And then another question, and we can move on, but if someone hasn't filed their 2019 tax return, they use the amounts from their 2018 return, correct?
Gene Zaino Well, that's for the-- we're going to get to that in a while. That's for calculating the rebate that everybody's going to get, which I'm going to get to in a little while.
Miles Everson Yeah.
Gene Zaino This is for your actual payroll on an average basis. Now, could you use your AGI to calculate that? I don't think so. I think you got to use the actual payroll, but the big question.
Miles Everson Okay, great.
Gene Zaino Right. So those are the four things that we just went through for your business, right? So deferring your Social Security tax employer side, carrying back your losses to get refunds, the emergency grant for 10,000 dollars, and the payroll protection program. So those are the four things that you should work on for your business right away. The next is, if you're unfortunate with this, millions and millions of people are going on unemployment. I just recently saw a prediction of a crazy number of 47,000,000 people is going to be unemployed in the second quarter. So if you're one of them, there's enhanced unemployment benefits, which we'll get to. So let's get to the next slide.
Gene Zaino So for the first time, there's this new unemployment program called Pandemic Unemployment Assistance. And for the first time, it adds self-employed and gig workers to this to be able to claim unemployment, which is unprecedented to have that added. It also removes any waiting period. So, again, you could get benefits immediately, you're eligible immediately to start accruing benefits and then are, by the way, the wait state, the way unemployment is administered, it's administered at the state level. You have to go to your state. You've got to go and each state has its own sets of rules. Each state has its own amounts of they determine to be your benefit. It's usually about 50% of your weekly wage with a cap, and the cap is around 400 dollars, in some states it's more, some states it's less. And that's what the state unemployment benefits are. In addition to that, the federal government, the Treasury Department is adding 600 dollars on top of that for 4 months. So that would be about a thousand dollars a week, effective immediately if you need to go get unemployment. In addition to that, unemployment traditionally lasted for 6 months, they've extended that to 9 months. So this unemployment benefit will go on for the entire 2020 for self-employed or obviously traditional workers as well. The other thing they added, which is this last bullet, which is quite interesting is, what happens if you're partially unemployed or you have three projects and you lost two of them or, you know, your gig work, you're, you know, you don't have as much work as you had in the past. There is this a rule here to adjust for that and give you compensation to bring you back to some number and I will tell you that, I don't know how the states are going to figure this out, but they're working. Be patient with the states. This is overwhelming for them in terms of volume. They have never had so many people claiming unemployment and now they've got to figure out how to do it for gig workers. They've got to figure out how to do it for partial labor. They've got to add the 600 dollars. They've got to do it immediately. So I think this is probably going to be the most difficult area, but it's one of the most important areas to get money out to our citizens that need it. Go to your website for the state to go get.
Gene Zaino And then finally, let's talk about the benefits that everybody will get, whether you're unemployed or whether you're a business and you've likely seen this before. So the first one is it's basically a direct deposit, it's a recovery rebate. This is you know, this is cash coming from the sky. The IRS is going to send checks to you or to directly deposit based on your tax return in miles. This is where, if you did not file your 2019 return, they will use your 2018 return for the information they need to compute the amount of money you're going to get back, and this is happening now. I think everybody should be getting their checks like in the next week. The way it works is for anybody that had adjusted gross income on their tax return on their Federal 1040 Tax Return of 75,000 dollars or less, if they're single filers, they'll get 12 hundred dollars. If they're married and filing joint, it's double that, so they'll get 24 hundred dollars. As long as the total adjusted income is under 150, it phases out as you make more money. They don't want to give money to people that don't need it. So for an individual, it phases out up to 99,000 on a pro-rata basis. If you're married, filing joint defaces out of the 198,000, which is similar to the 99 times q. There's also if you're head of household it's one-twelve and faces out on 46. So in addition to that, you get 500 dollars per child. So a family of 4, that's under 75,000 dollars each or 150,000 dollars, with two children will get approximately 3,000 dollars or actually more than that 34 hundred dollars. So now, the way that's working is based on your tax return of 2018 or 19, and if you have both W-2 income and pass-through income, so if you're doing some good work and some full-time work, you can put that together. It still goes on your adjusted gross income, so that's how they will calculate that. And there's a little bit of, it's not clear as to how that plays out exactly works. I believe it phases out completely once you get over that threshold. So that's the direct cash to your bank. We go to the next one.
Gene Zaino This is quite interesting, too. This is where everybody's got it, you know, who has got a retirement account, whether it's an IRA or 401(k), you could actually make a withdrawal now, without a penalty. There's usually a 10% penalty, they remove that and you could take a withdrawal. You have six years to pay it back. You do have to-- I'm sorry. You don't have six years to pay it back, you have three years to pay tax on it. And that you could only take out as a withdrawal if you have some severe situation, such as you've been subject to an infection of this Covid-19 or dependent or you have severe adverse financial consequences as a result of it, then you could take it out without penalty and you pay tax over the next three years. If you don't have severe, severe issues and you just want to take the money out, you can now do that with a loan from it's increased from fifty thousand two hundred thousand and you could repay that over six years and any current loan you might have with your retirement account is deferred. The employers are no longer having to take that money back from you. So this is another hundred thousand dollars that you could remove, that you could take for yourself from your retirement plan so that's pretty valuable.
Gene Zaino Next, and this final one is your federal income tax, as everybody knows, you don't have to submit your tax return until 2000, july 15, 2015. And obviously, if you think you're going to get a refund, go file it now and get your money. If you think you're going to pay, wait till the 15th. And you still do need to make your quarterly tax payments as a self-employed by June 15th. So those are the four things for the individual, the unemployment, the retirement withdrawals, and your tax refunds that you're getting the rebates and then the deferral of your tax return. So that's it. Thanks for listening. I think I did it in the amount of time I was supposed to. Just tons of questions coming in, You obviously we're not going to be able to get all of them. We'll stay on longer if for a little bit if people want to. But, Miles, I'm going to get back to you, and maybe you could wrap this up and then we get to questions.
Miles Everson That sounds great. So Gene I'll take a look at some of the questions, why I spent just a couple of minutes talking about why a modern business model is needed to respond to events like Covid-19. For some time, I've been looking and studying about what are the real forces affecting the world and what kind of business models are the ones that thrive. And so that I refer to it as a modern business model but there's four forces. And look, folks, people can classify things in a number of different ways. But there are four things that we believe are happening in the world that you'll see by the time I get done really bode well for the independent contractor and independent professionals. But so the first of those is that the rate of change is accelerating. I understand that most people would say I know that. But the significance of the rate of change accelerating is that you end up with innovation is converging more frequently, so AI's invented in 1959 and doesn't really start getting any attraction until the mid-90s and very limited areas. But today, because of network capacities, because of data capabilities, data storage, mobility capabilities, AI affects everybody's life. So it's the convergence of technological innovations that is so significant. And then what happens with that because of that, when there are innovations that converge, that have societal impact, you effectively end up with deflation. So progress is deflationary. And this is one when you get your mind wrapped around it, it becomes obvious. At first, it's not so obvious but, you know, we all have smartphones today and can buy them for under a thousand dollars. And only 40 years ago it was billions of dollars to get less computing power. In 2000, it was 100,000,000 to decode the genome. Today, you can get it decoded for a thousand dollars, and that's only 20 years later. You know 5G is now coming through. I think this pandemic is going to highlight with 5G and convergence again of the other technologies. It's going to start to have downward deflationary pressure on a lot of activities and business services that can be done in a distance as opposed to in concentrated environments. And then the third item here is the power of knowledge flows and it's really knowledge flows versus knowledge stocks. And the industrial era knowledge stocks were the model, which is you found a knowledge stock, something that was proprietary. You protected it and you traded it in binary single transactions to make money, whereas today it's knowledge flows. And there's a number of places where this can come through in spades but I think one that most people relate to is many, many, if not most of the real technological breakthroughs coming today are coming through open-source software. And if you go back even 25 years ago, people were not open to open source software, etc. and so that starts to get us to the fourth one, which is the fractionalization of everything. Now, fractionalization has existed for hundreds of years. The first public company that was created was the East Dutch Indies Company Shipping Company because they wanted to diversify the risk of individual shipments and that's how public companies came into being. So they started to fractionalized, the ownership and do risk sharing. And on the shipping routes, so now we have stock exchanges in the 80s, we came out with mortgage-backed securities. So, you know, in America today, only 25% of Americans will ever actually hold the deed or title to their home. But if you have an investment in a balanced fund, you own a fraction of somebody else's home through a mortgage-backed security. And then we fractionalized homes, Airbnb, etc. We fractionalized, all kinds of assets, cars, in fractionalize your boats, in fractionalize your table sides, frankly, through the use of platforms, and that fractionalization brings liquidity to a market and it also brings great flexibility. And what we view that what we're doing at MBO is we're helping people like you, fractionalized, the human workday and human career. The ability to use high impact talent to accomplish what people would most CEOs would say is their most valuable asset, IE people. We're making it possible to connect people and companies in a fractionalized model. And so we are very committed and bullish that the future is going to be reliant on a much more concentrated, independent workforce that has a real significance to companies. And coming on the backside of Covid-19, you can see where there's going to be a real need for companies to look at their workforce strategies and say, gee, I now know I can work remotely better than I ever thought I could. I want access to this talent that's growing. It's the fastest-growing talent in America today. It's growing 3 times faster than any other workforce. And so we're very bullish in helping to make this happen for all of you and frankly, for companies. And so we're we wanted to share those views. We'll take any comments that you may have on them. But that's what we're about at MBO right now, is trying to make all that happen. So I think with that Gene, let's get back to the primary matter at hand here and answer a couple of these questions before we run out of time.
Gene Zaino Miles, before we get to that. Can you hear me?
Miles Everson Yes.
Gene Zaino Before we get to that, go back another go back to the other side. I just want to get something to this. So, you know, Miles, you brought this to MBO and started sharing this with me. And I will tell you, everybody out there that's running a business, you know, you might have to sleep on this to really absorb it and understand it, but you could make decisions about your business every day with understanding these core principles. And I just want to add one thing to the rate of change. The biggest, you know, we all know that things change and things are changing fast. The biggest impediment to change is the status quo. People don't like to change or there's always a reason, whether it's personal, whether it's societal or whether it's government, whether it's your company. An event like we're going through is forcing and destroying a status quo that will accelerate further the change. Things have been loosened up and we're going to see things change that we've never thought of before. And this fractionalization and the knowledge flows. You know, right now on this webinar, we're throwing out knowledge. You know, it's because it's the way to do things. And, you know, deflationary people are going to be not meeting Brant as much, not giving space. I mean, the world is changing faster than we could even think about. So anyway, I just wanted to point that out, that for people on this call that are running a business, think about these poor trends and theories. And I will tell you that it helps you run your business. So with that, let's get into questions and McLean, Miles, whatever this does…
McLean Robbins Yeah hi, guys. We have a ton of questions coming in and one of the most common questions that we're getting right now is will we be posting this? Yes, absolutely on caresforindependents.com within 24 hours of the webinar, we know we've already answered over a hundred questions here and we see almost three hundred unanswered questions. So we're going to do our best to churn through a number of things and synthesize them as we can. By all means, if you are an existing at MBO client, please feel free to reach out to your client care contact, if you have questions about your unique client situation with MBO partners. Before we dive in, a few of you have asked the question of how you can find new work? You can go to MBOPartners.com/marketplace to create a profile in our marketplace to apply for contract positions and to sign up and create a profile if those positions are available to you. Now, I'm going to dive into questions here. We have a couple of questions about how the payroll construction loans will be forgiven. Gene, do we have any inside information about how they will be forgiven beyond that initial eight weeks of payroll and expenses?
Gene Zaino Well, there'll be the documentation you have to provide that shows that you maintained your payroll to the level that was calculated when you got the loan. And again, this is going to be done through your banks. So you're going to go to your local banker and they're filling it out. Actually on our site and McLean, I haven't had a chance to post it yet but I actually found the application to go get this loan. We'll put it up on the site if it's not there already. The actual application that the banks will use to get the loan and it also talks a little bit about forgiveness. But I think basically you just can have to prove that for the following 8 weeks that you got the loan, that the payroll was either the same as it was when you calculated the loan based on last year's monthly average payroll or that it went down a little bit and then that'll change the forgiveness amount.
McLean Robbins Sure. We have not, I believe, had any answers to questions about if there's a minimum credit score to qualify for any of these loans. Do you know any different, Gene?
Gene Zaino I think it's going to be up to the bank. I don't know the answer to that. I actually tried to find that out. It's going to be based on a credit score. I don't know what the number is, but I think a question I'm going to sort of quickly answer. Someone asked a question that in truth, on their 2018 tax return, they qualify for the full 12 hundred dollars, but in 2019, it's higher. Don't file your 19 return yet. Go, go. They're actually they're going to use your 18 return anyway.
McLean Robbins Miles, I've got a fun one, from what city is your Starbucks coffee cup?
Miles Everson Yeah, it's the Twin Cities.
McLean Robbins I've got to answer some of the smaller questions, too, guys. We have a lot of people asking if they are a W2, which benefits do they qualify for their papers, the W2, even though they think they're working independently?
Gene Zaino Oh, so in other words, like payroll services or temp or someone like that, so they're entitled to certainly all of the unemployment benefits. They're entitled to-- they can't get the loans. They're not entitled to the loans cause that's for business. But they're entitled to unemployment benefits. They're entitled to retirement withdrawals. They're entitled to the rebates coming directly from the IRS and, of course, not filing your taxes to the 15.
McLean Robbins A couple of questions about subsidiaries of foreign corporations qualifying any answers there
Gene Zaino Subsidiaries of foreign corporations. I have no idea. I would think not.
McLean Robbins We will certainly update the website as information becomes available. Can an LLC sole proprietor, not a salaried on payroll, somebody who is taking a dividend access unemployment for independence? And if so, how?
Gene Zaino Can they assess unemployment? Yes, anybody can access unemployment now. So the answer is yes, but they know they're not going to be able to take the deferral of the self-employment tax on any kind of dividend they've given themselves, so if you have an escort and you're taking cash through a distribution, that you're not going to be able to take advantage of the payroll loans. You're not going to be able to take advantage of the deferred Social Security tax because you didn't take it as payroll.
McLean Robbins Sure. Can you get unemployment and a payroll protection loan and or EIDL?
Gene Zaino Yes. You can't go, as long as you're not, unemployment, absolutely, you can't take the same amount of the EIDL loan for payroll and then take the Payroll Protection Loan for the same amounts and claim at both sides. You could stack them if you need more than one, the other one gives you, but you can't double-dip.
McLean Robbins But you can apply for paycheck protection and still take unemployment, apply forEIDL and still apply for unemployment.
Gene Zaino Absolutely and you should.
Miles Everson Hey Gene, it might be worth talking just briefly about the calculation calculator we've been talking about on the website. It might help people think through what they can go to the website and help. Think through what might specifically be available to them given their circumstances.
Gene Zaino Yeah, so I know we're building that. I mean, McLean, you may have the answer better.
McLean Robbins We have the calculator. We have been working on and talked about, and that should be in the next 24 hours about the direct relief checks. And we will be releasing other calculators. It's a great reason to sign up on the subscribes part of the website. It will notify you as soon as these individual calculators become available. We're still working to make sure that we fully understand exactly which qualifications to make sure that calculators work here. Next question is, isn't it true that you can't take the payroll tax deferral if you go for the paycheck protection loan?
Gene Zaino No, no, you could definitely do the payroll tax deferral of Social Security, that half of it, and also get the payroll protection program and I don't see any reason why you can't. I'm not aware of that.
McLean Robbins Okay.
Miles Everson So let me just chime in for a second, I agree with Gene's assessment of this, but I think the way that we're viewing this is it's a little I'm going to use a sporting analogy. So the rules of the game have started to come out, at least at the federal level. New rules will get published at the state level. What we haven't seen yet is how the referees are calling the game, and that will evolve over time. So we're basing this based on the best information that we have at this time. And we don't see any explicitness saying that you cannot apply for both. So I'm just putting that answer into context, because we're learning as we go here, as are the people who are going to be refereeing the game, so to speak.
McLean Robbins Absolutely. A few people say they've just launched their consulting business this year, their first paid project would have started this year. Can they take some of these paycheck protection loans even though they didn't have any income last year or they had limited income last year?
Gene Zaino I know there are some rules about that you've got to show you are in business February 15 of 2020, and I'm not sure how they calculate the loan, but they're going to be interested to make sure that people are just starting a business to say they are business and should try to get the loan. You know this is for people that the goal of this loan is to keep people going and keep people payroll. So if you started a business in January, you might be able to show your payroll in January. I'm just not sure how they're going to do that.
McLean Robbins We have had a couple of people say they're having trouble accessing caresforindependents, it's a brand new domain. So if you have a particularly strict VPN or a corporate policy, they may have restricted it because it's new and we just brought it up for you. So go to www.mbopartners.com, the name of the company, and you'll find a big button right there on our homepage to take you to this information.
Miles Everson Just advanced the slide so people can see that website and writing, thanks.
McLean Robbins And a couple of people saying they've closed, they've moved on for whatever reason. They're close to their LLC last year and they still qualify for these emergency grants if they close their company in the last year? So they would have made income in 2018 or 2019.
Gene Zaino I don't think so. I mean, I think it's a good question. I don't see why if they don't have a business today now if they went out of business because of this event. In 2020, then I think there is a case for it, but if they closed it last year in June, I don't think so.
McLean Robbins Okay, thank you. Do EIDL grants apply to past their organizations and does payroll apply to payroll of owner shareholders also?
Gene Zaino Yes. So the answer to both is yes. They could get the EIDL loan and payroll to themselves, whether it's W2 through S-Corp or C-Cop or whether it's pass-through of a sole proprietor, that all counts as payroll.
McLean Robbins Well, the loans are grants given to individuals or distributed to my company?
Gene Zaino Well, it would be the company that's applying for the loan. So even if you're a sole proprietor, it would be your company that gets it, which is you, but it would be the company, either S-Corp, C-Corp or sole proprietor.
McLean Robbins Do I have to apply for the full EIDL loan if I only intend to go for the 10K grant?
Gene Zaino No, you don't have to, you could-- that's a really good question. I believe the answer is no. I kind of know people has done this already. You could just apply for the grant and then go directly to the paycheck protection loan if you need it. Or you could actually get the loan of the EIDL if you want to get it. And then you could actually refinance it with the payroll protection loan. So, or you could keep both as long as they're separate users, you can't double-dip. right. You got to be able to say I need both because you have that much money that you need to cover your payroll and other expenses.
McLean Robbins And can the EIDL be used to pay taxes, an estimated tax?
Gene Zaino I don't think so.
McLean Robbins What is payroll for a sole proprietor? This is firing squad questions, Gene.
Gene Zaino That's okay. Payroll for sale proprietor is whatever is on your schedule, see that you report. It's your income. It's not your gross. It's your income.
McLean Robbins Does average payroll cost include 1099 contractors?
Gene Zaino Wait that's average pay-- yes, it does if you're paying an independent contractor as part of a payroll, yes.
Miles Everson McLean, one of the questions I've seen a number of times are about this 10,000 dollar grant under the EIDL.
McLean Robbins Yes.
Miles Everson I guess the one thing that would be helpful, at least from my perspective is the cap. They've indicated in the act that there's a cap on this. I believe it's a 10,000,000,000 dollar cap, right. For the total amount, they've allocated 10,000,000,000.
Gene Zaino 10,000,000.
Miles Everson So somebody is asking if it's available to everyone and all I'm saying is...
Gene Zaino Oh, okay, there's 2 two things. One is an individual loan is up to 10,000,000 but the whole that the federal government put a 10,000,000,000 dollar appropriation aside for this. So, yeah, it'll run out right, Miles. Go get it. Go to the sba.gov site if you need it and go get it.
McLean Robbins We have a number of senior people trying to sort through and make sure that we answer some of the most common questions here. If your child is 17, are you going to get direct payroll relief for them? I believe it is 17 and under. So, yes, you should get it if they are 17 but 17 and under. One person C Corporation, can I use the ten thousand dollars to cover the difference in people for payroll tax on one pershon, one person?! Oh my goodness.
Gene Zaino So if you're a C-corp and you're paying yourself as a W2, that is your payroll and you still can get the EIDL, yes. And then you still could go for the payroll protection, as long as the numbers work out that you're not taking more money than you need.
McLean Robbins My work requires me to travel, which I cannot do so now that my and now my income is reduced, can I apply for the grant?
Gene Zaino I'm sorry, say that again.
McLean Robbins If my work requires me to travel and now obviously I cannot and thus my income has been reduced. Can I still apply for the grant? Answer yes.
Gene Zaino Yes. That's actually a reason to apply for the grant.
McLean Robbins Do you have to have a business bank account to access the funds? The answer to that one is no, you just have to be able to put it in a bank account.
Gene Zaino Yup.
McLean Robbins Any chance MBO advantage can help answer more specific questions? Can we talk a little bit about what MBO advantage is? That is a real question.
Gene Zaino You want to answer that one>
McLean Robbins Yeah sure, MBO Advantage is our premium membership program helps independents maximize the value of their expertise. It's geared towards independents who already have a pretty robust project stream and would like some additional guidance and support services. You can go to mbopartners.com/mbo-advantage to learn more and apply and see if it's the right fit for your unique situation. If you are already a member of MBO advantage, we encourage you to reach out to your direct advisor to discuss this and join our info session specifically for MBO Advantage membership for later today. Any other questions in here, Miles, that you'd like us to answer? I know we're just a few minutes over.
Miles Everson I don't see any to jump out. We're going to go through these questions, folks, and get a sense as to where there's consistency. Some of these are very specific. Some of them we've answered. So we can, on our website, we've got a lot of the answers and much, much more detail on what these bills say, what the bill says in those sections of the bill and the slides will be there as well so you can access them. And we're going to continue to refresh and update our understanding. There are some questions here about unemployment, access, and stuff. At this point, you can't answer that generally because the unemployment benefits are distributed at the state level, as Gene said. So some states don't have it up yet for independents. I can tell you that we're working hard to try to see if we can help them streamline getting access to independents. But again, that's 50 states with multiple agencies. So it's a bit of a plate of spaghetti in terms of getting it all put together.
Gene Zaino hey, McLean, I see there's someone trying to get a question answered on Social Security, they're getting a Social Security check. I believe the Social Security check will apply towards your adjusted gross income and then everything else should flow. So I don't see any reason why if you're getting a Social Security check, it should impact other than it would add to your supposed income. I see someone, I don't know how many questions we have here, but I just keep to see the screen.
McLean Robbins We've answered well over one hundred. We still have a number of open questions to be mindful of everybody's time. We'll go ahead and end the webinar now. As a reminder, you may check caresforindepents.com, this webinar will be available as well as on Facebook Live, facebook.com/mbopartners. You'll be able to do the recording of the webinar and we'll do our best to add the common questions to the website as well. Please reach out to your individual client or contact if you are working with MBO Partners right now. Thank you so much for your time today. Stay healthy and say well.
Gene Zaino Stay safe everyone.