Here is an interview that I conducted with Vahan Papyan of RSVP CPAs & Advisors, Inc. about Tax Strategy in 2020
Denecia: Hey everyone, this is Denecia, your host at Soul-well Business. Thank you for visiting our show today. And today we’re going to have a special guest, someone who has been in the accounting arena for some time, who will share the updates with the taxes. A little about the background of our guest. He has been an accountant, CPA specifically for 17 years. He is a specialist in tax planning, tax strategy consulting. He’s owned his firm for some time now and he works with entrepreneurs, business owners as well as consultants and investors. Let’s welcome Vahan Papyan of RSVP, CPAs and advisors. Hi, Vahan
Vahan: Hi Denecia, hi everyone. Thank you so much for the warm introduction and it’s a pleasure to join you. Thank you. It’s an honor. I look forward to our conversation.
Denecia: Great. Thank you so much. Tell us a little bit about your background, what got you into accounting, and all that great jazz.
Vahan: Somehow I ended up in accounting about 17 years ago. I’ve been a CPA and I like working with different people and businesses and helping them. So that was kind of one of the big motivations for me to be in accounting. There’s a lot we can help from the numbers standpoint and I specialize in taxation as you mentioned, and there’s lots we can do to optimize tax strategy and generate a lot of tax savings. As CPA’s, we approach clients from a holistic standpoint, be it their wellbeing, their financial wellbeing and success is important for us. I consult my clients on a variety of issues not just taxes, tax is only just one part of it. Overall, we help our clients to be successful with their businesses and we also provide accounting and tax services and some financial planning.
Denecia: Nice. What was your background before accounting?
Vahan: I started finance, I got a bachelor’s degree in finance and then I did an MBA degree in finance. My first job was in accounting. I was in a private company first, I was working for a real estate developer and I figured, you know usually accounting is kind of on the back office. And many people don’t realize that really, even though accounting is kind of a back-office function, it’s very critical to the business’s success and how we account for all the numbers and there’s financial statements and financial statements are a critical piece of information, both for the business owner, the management and even the banks and investors that work with the company and how you interpret those numbers. I figured it’s really a critical function where I can be very helpful to this business owner I was working for. And then at some point I realized since I really liked this I can do it for more businesses and more clients at the same time. That was the natural next step to join the CPA firm where I had that opportunity. And I did work with different types of firms, small, midsize, and large. I’ve worked with companies from a startup all the way to a few hundred million dollars in revenue. I’ve seen kind of that growth, that company’s experience. And I’ve seen a variety of situations and my goal is to figure out what the client needs, what the person or the business needs, and really help them reach that goal. Whether it’s from a tax standpoint or financials or accounting.
Denecia: Nice. It’s so nice to know why someone’s gone into a particular business and what their passions are and how they actually help the clients. With everything that’s going on with Coronavirus right now, I would love to get some insight from you on how our viewers can prepare because there are many changes that are happening. Can you share a little bit about that?
Vahan: Of course. Happy to. It’s weird times, kind of interesting. It’s scary. And at the same time, we have this odd opportunity now to be home and maybe spend more time with the family. But it comes with a lot of challenges because if you’re able to work from home, you still have to get some work done. But at the same time, we have to worry about our health, but also all this new information that’s coming at us like the stimulus package and all the tax law changes. The government is trying to help you know, people and businesses to survive these difficult times. And a lot of information came out in the last couple of weeks, it’s coming up every day something new and we’re trying to absorb it. Some of the main things I want to share about is of course the most popular one is the government is going to send stimulus checks, kind of rebates. Those are kind of credits that we’re going to claim on next year’s taxes, but they’re sending it now because people need the money now. They’re going to mail those checks or if the government diaries have your bank account, they’ll just deposit the money there. And each person will get 1200, for married couples, it’s going to be 2,400 and for kids as dependents, they’re going to give 500 each. It’s possible that a family gets anywhere from $1200 to a few thousand dollars. There are some limitations on income, mostly people with less than $75,000 in income or for couples less than $150,000 in income, they will get the full amount and that is a phase-out and then above certain amounts about 200,000 for couples, for example, it phases out. They’re really kind of trying to help lower-income families or lower middle class, lower-income. Some of the really low-income ones may get small amounts. It’s kind of counterintuitive, they may get like $600 per person. It depends on their situation and the actual tax returns. It’s going to be based on the 2018 return, 2019 if it’s filed and if not 2018. And by the way, there were talks that if those people who did not file returns, the IRS was encouraging to file as soon as possible, they have the info. And something just came out today, I was talking to an IRS person yesterday and we were worried that if they want all the seniors, they usually don’t file tax returns, they just receive social security file and return to get this. It wouldn’t be practical. I just got some good news today that they most likely are going to waive that. Some of the seniors out there may just get their checks. And everybody else who did file an 18 or 19 return and their income is less than the threshold, they will automatically get the money they don’t have to do anything extra. Prior to businesses I wanted to share a couple of good tips also for individuals because some of the business owners also, for some pastoral business the taxes are paid on the individual level a lot of it is applicable as individuals. But a couple of things not related to businesses is if people really need some money now and they have a retirement account, they can pull out about a hundred thousand dollars up to COVID related hardship and use it. Typically, you know, the government charges a 10% penalty, four taking it out of their distributions, now they waived it. You don’t have to pay a penalty and you repay the income tax over three years. They kind of really help you out if someone needs some money out of their retirement and accounts now.
Denecia: You can take out from now to three years without a 10% penalty?
Vahan: If you take out this year, I’m not sure if there’s a certain date. It could be the whole 20/20, then your penalties wave, and then you pick up the income over three years. Otherwise usually you just, pick up the income, all of it in the same year. They give you a kind of leeway to just pay it over three years, which kind of minimize those taxes. And a couple of other smaller things, typically to claim child develop deductions, you have to itemize, but now they’re allowing up to $300 deduction even if you do not itemize. This kind of encourages a lot of people to make that small, even the $50, you know, $10 helps to those nonprofits. So now the government allows you to deduct up to $300, even if you do not itemize. So I thought that was a nice thing.
Denecia: They’re definitely going to need a break right now, non-profits are getting under the house right now. So that’s a good thing that the government thought about that before.
Vahan: There are a few more stuff there, but let’s talk about businesses because businesses are really, I mean everybody is affected, but businesses have some more pressure there because they have all these employees, they have the overhead to stay afloat. It’s really difficult some of the businesses had to shut down their doors. It’s really difficult out there. Now some of the really good things that came out there, some kind of payroll tax credit. We’ll talk about some loans in a second. There are payroll credits and there are different types of payroll credits. F.E, If a business had to pay someone who got sick or if they’re taking care of a sick family member or if their child’s school is closed and they have to stay home and look after the children, they cannot work from home basically. If the employee or the business pays them either sick time or paid family time, paid family leave time, they can get a dollar-to-dollar credit for that amount from their payroll taxes. It’s kind of the government paying through businesses but that helps the business to retain the employees instead of letting them go. So That’s one great thing. There’s another one if the business is really affected, if they had to close the doors or if their revenue is going to be 50% of what it was in the same quarter of last year. If they have a significant drop in revenue, they can get 50% of their payroll taxes as an credit. There are some limits and there’s a lot of details I’m not touching on now as this is just kind of really high level. But there’s an opportunity to get up to $10,000 credit per employee for this year. That’s really another generous payroll tax credit out there. And on top of it, they can have a payroll deferral, it could be mutually exclusive benefits. I’m not sure yet. But another benefit is they can defer their payroll taxes that instead of paying now they can pay half of it next year and half of it the following year. This also helps the business retain more money. Those are some payroll benefits. There are other interesting benefits out there. If a lot of businesses are down, we’ll probably have losses for the year. In the 2018 tax reform they stopped allowing most businesses to carry back their losses. You only could carry forward. Now they are saying you can go back and if you had a loss in 18 or 19 or if you have a loss in 20, you can carry back for five years. If you paid tax five years ago, four years ago, three years ago, you could carry about those losses and claim some refunds. This is an important one for some of the businesses that had a loss last year. They could not carry it back, but right now they can carry back and get some refunds from previous years. That’s really another nice tax break out there.
Denecia: That’s going to help. Anything going on with the loans? What is happening, that’s a big deal right now. The SBA loan.
Vahan: Hot topic. There is a lot of confusion there. There two main types of loans, right? One is a disaster loan, the other one is for payroll protection and each has a unique and separate loan from each other. You could apply for both loans, but I’ll tell you a little bit about each one. With the disaster loan, it’s more of a full doubt loan where above certain amounts you have to put a personal guarantee in that collateral and provide them with financial statements and personal financials and a profit and loss statement. And it is kind of a full process. However, to accelerate the benefit, they give $10,000 within three days, three business days you can get 10,000 upfront as an advance. Now they’re saying if you don’t qualify for the loan at the end, they want to take the 10,000 back. It’s kind of could become a grant. However, it is most likely they would qualify, they would kind of approve some amount of loans. It really kind of would be a loan. It’s hard to know. There is a lot of confusion. We do not know yet exactly how it is going to work out.
Denecia: It’s so new. I mean like within the past week or two they created it.
Vahan: I spoke with five, six bankers in the last few days, and all of them are trying to figure out and waiting for guidance from SBA and they’re saying… You know, disaster law, you can apply with the SBA directly through their website. Let me tell you a little bit about the other loan and then how they interact. The other loan is payroll protection program loan. It’s really intended for parallel protection. You can qualify for an amount that’s going to be based on your payroll average payroll for the last 12 months. If your average payroll was $10,000 for the last 12 months, you can get two and a half times of that amount. F.E., Say if your payroll was 10,000, you got 25 and so on, and there’s a limit. I don’t remember what they were saying, 10 million I think, but it’s a first come first serve basis and there are many applicants, so we don’t know. They’re encouraging businesses to apply as soon as possible, and the banks are saying they’re going to be ready to process applications either tomorrow or early next week. The great thing about the PPP loan is, if you use it for payroll, 75% of it for payroll and the rest for rent, utilities, those are some of the covers of the expenses. And if the business has a mortgage, you can use the money to pay those, as long as you use your 75% of it for payroll purposes then you’re going to get forgiveness. In the end, basically that loan will be forgiven if used for that purpose. This is a great opportunity for businesses to be able to keep the employees and the goal is to keep the employee, so you have to maintain the same level of payroll. If you let people go, the forgiveness amount will go down. But they’re lending you, some businesses already had to let employees go, if you rehire them then you get a chance to get that forgiveness. These are great loans. They are saying you could apply for both at the same time. The disaster loan came out first, so a lot of businesses applied for it first. They are saying if you already have that loan, you still apply for the PPP, you can combine them into one loan, or if you keep them separate at the end, if you took advantage of that $10,000, they’ll subtract it from the forgiveness amount. Which kind of puts you in the same position anyway. With two, if you apply to both loans, you would get more money as a loan to survive, we don’t know how long this situation is going to continue.
Denecia: That’s amazing. Okay, well I’m looking forward to getting my check in the mail, like tomorrow maybe. With the cheques coming in the mail should they be like a week or two?
Vahan: They’re saying really April so I guess people can check their accounts within the next few weeks or the mail. If they didn’t give their account to the IRS, usually you will do a direct deposit or direct debit. If you didn’t do that, then you’ll get a check in the mail, which could take a little bit longer. But it’s great, I mean, we got a nice government, they’re trying to help out people and businesses.
Denecia: I definitely agree. I mean, here, yesterday I read an article from Mark Ridley, who’s head of LA County and he basically decided to go with the rent control freeze and also the hold on evictions because it’s just like, please just don’t evict. We’re not allowing any evictions for the month of April. We just need people to get it back together, get themselves back on track. There is no way that we could avoid this, and we need to make sure that we’re holding down the house. I’m very, very impressed with how the government has come together no matter what political lines they’re in just come together to make sure that their being of service to us.
Vahan: One of those situations where like, well we’re paying all these taxes, and this is when we see how great it is. It’s a civilized country and in this kind of situation, you realize, okay, we’re paying these taxes at least the government does something using that tax money to help people. Most of the banks also allow you to defer mortgage payments. Some of the banks will defer it for like three months. Some of them may be shorter. If people are falling behind on their mortgage payments, they should talk to the mortgage company and try and see if they can defer those payments. Even health insurance companies, they’re okay to wait for one month. If people are falling behind and health insurance is a big expense for most people out there. Now each family pays 1500 to health insurance per month. If you defer that, defer the mortgage, it kind of helps out to survive for a few months until things get better.
Denecia: And then any news on student loans and credit cards, anything about that stuff too? Because I mean, we’re in a country where sometimes the student loans are as much as a mortgage.
Vahan: Oh yeah. There’s some good news for student loans. If the employer pays for the employee’s student loan it’s a small benefit relatively, but it’s still a good amount, $5,250 I think was the amount. It’s kind of exempt from income. Basically, it’s kind of a benefit an employee can get from the employer. If the employer just paid the employee $5,000, that would be income. It would be part of their W2, and they would pay tax on it. But now for $5,000, the government is giving a break. The company can pay their loan for $5,000 and there’s not taxable income. I mean, it’s a small benefit. I know a lot of us out there with large student loans, wish there was more help here. I’m not sure, maybe some of the loan companies are okay deferring some payments. It comes down to, for every individual they need to assess their situation and the business they need to assess their situation and see which of those benefits they can take advantage of. It’s quite some work. I get phone calls constantly from clients and friends, and everyone is trying to understand how those benefits would apply for their situation.
Denecia: That’s right. I’m sure you’re getting a lot of questions right now, so I really do appreciate you coming and taking some time to allow us to understand how this is all going to work in the future and hopefully reduce some anxiety for everyone. Thank you so much for being here. I really appreciate you.
Vahan: Thank you. This was a nice conversation. A nice break from all the work and I’m happy to educate. I like to educate and share the knowledge so it’s really a pleasure.
Denecia: Thank you. So how do our viewers find you on social media and the web?
Vahan: My company name is RSVP CPAs and Advisors inc. And RSVP like repondez s’il vous plait.
Denecia: That’s right. I like that. I like the name.
Vahan: Thank you. So RSVPCPA.com is the website. Probably the easiest to remember. I am on LinkedIn and Facebook as well.
Denecia: Exciting subject right now, where people are needing it the most. Thank you for being here. To our viewers thank you so much for being here. And if you like this and want more tips and tricks on how to keep balance with business and wellness, please like us and share us with someone who might need us, and they’d be happy that you did. Good to see you, until the next time we meet be beautiful and be well.
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