11.22.20

Preparing for Tax Season During a Pandemic: Tips to Ensure Success

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Bede Obasi, owner of Precision CPA, joins this edition of Money, I’m Home! to talk about how to prepare for the upcoming tax season and some tax implications for businesses applying for Paycheck Protection Program (PPP) forgiveness.

 

[transcript]

00:00 Lynne Jarman-Johnson: Money, I’m Home! Welcome in. I’m Lynne Jarman-Johnson with Consumers Credit Union. From finance to fitness, we have it all. And today, we are here talking with an expert that’s going to help you about something, you know, sometimes, you hear the words April 15, and that gets your blood going a little bit. But Bede Obasi, the owner and the founder of Precision CPA. He’s a business partner of ours, and Bede, thank you so much for joining us. You’re ramping up on a busiest time, aren’t you?

00:35 Bede Obasi: Yes I am, thank you for having me, Lynne. I appreciate you bringing me on the program. Yes, we’re getting ready to ramp up for the upcoming tax season here, and also finishing up extended taxes, individuals who filed later on during the year, and also helping small business owners with their PPP forgiveness applications.

00:58 LJJ: It’s really interesting. Consumers was one of the very first financial institutions in Michigan to have the PPP program structure ready to go for small businesses.

01:07 BO: Yeah.

01:08 LJJ: Bede, how have you found that businesses have taken advantage of that, and has that also made your life busier?

01:19 BO: Yeah. I would say, a majority of my clients who are small businesses and independent contractors were able to take advantage of the program. Some of them, it was a literal lifeline for them to maintain their mortgages and keep up with car payments and just everyday family expenses, so it has been really crucial in helping them financially and staying out of trouble. I believe a lot of the institutions that issued this PPP program, from my personal experience, the small institutions like Consumers Credit Union having quite personable in helping these small business owners as opposed to the bigger institutions that just require to fill out a form without having a personal contact. And right now, we’re coming towards the forgiveness application phase of the program. So a lot of those individuals that we helped are now applying for those forgiveness applications that allow those loans to be converted into essentially grants. So that’s where we are right now. So we’re busy on the back end of that program in helping these small business owners and independent contractors with the forgiveness applications.

02:39 LJJ: Bede, tell us a little bit about your background. So I love looking at your website. Your website talks about the fact that you are a virtual CPA firm.

02:49 BO: Yeah, yeah.

02:51 LJJ: Which for many people, prior to COVID, would have been what does that even mean? But tell us a little bit about your vision and how you got here.

03:00 BO: Yeah, so we’re a virtual CPA firm. We’re no different, say for example, than an independent insurance agent that you really interact with over telephone. And some individuals, they have accounts with internet service providers and never actually physically visit the businesses of those bigger offices of those businesses. Our vision was to save money on by not maintaining an expensive real estate, and then pass on those cost savings to our clients. I find that we really… Our clients fully appreciate when we visit their sites, their business sites, as opposed to them… There wasn’t really a whole lot of value in them coming into our businesses or our offices, if we had one. The value was more so us going to their locations, seeing their operations and interacting with them on a one-to-one basis.

04:03 BO: So as far as my background, I’ve had about 10 years experience as a CPA. I worked for some of the national accounting firms like Crowe Horwath and McGladrey. I had a couple of years of experience also at the Department of Defense. I was a financial consultant. So about four years ago, I started Precision really as a hobby. I was doing taxes and accounting and bookkeeping for some friends and family members, and it just grew from a hobby to a full-time job because I kept getting more and more requests from family members and friends to help them with their financials and staying compliant with tax regulations. So late last year, I decided to take the plunge and do this full-time, and so far, it’s been really good. So I can’t… I’m really blessed that I’ve increased my client base. I’ve gone from a one-man operation to having one full-time employee and two part-time employees.

05:06 LJJ: That is amazing, Bede.

05:08 BO: Thanks.

05:08 LJJ: You know, one of the things you said, I think that really sticks into the heart and minds of people is that when the PPP program started happening, which is the protection program, payroll protection program, when that started happening, and you literally saw firsthand how people could continue to live on a day-to-day basis and be able to sleep at night. That must truly make you really humbled about what you’re doing. It’s not just numbers.

05:42 BO: Right, you’re having a direct impact on people’s lives. Small business owners don’t… Up until this pandemic, they did not have a safety net as far as unemployment goes. So a lot of these small business owners who own restaurants, I had two clients who are restauranteurs, they were basically shut out and they had no means of livelihood because they have been small business owners for well over a decade, and they didn’t have any unemployment insurance set aside. So they literally needed the PPP funding as a lifeline to help them with their monthly bills, their mortgage payments. So I saw firsthand how enabling them to get this funding had a direct positive impact in their lives.

06:41 LJJ: You mentioned that personal touch, and even though your website says digital, obviously because you literally go and visit your customers…

06:50 BO: I do.

06:53 LJJ: Your client base, family base…

06:55 BO: Yes.

06:55 LJJ: When everything happened with COVID, what was your role with your employees to help guide through that digital… A, the digital quagmire of people not even understanding how to get on…

07:06 BO: So yeah, we… I did initially, when the lockdown was put in place, obviously we tried to practice some form of social distancing. There were situations where we… where our client preferred or wanted to take the risk of meeting in person just to have that personal contact. So I traveled from… anywhere from… I was in Ann Arbor, Grand Rapids, Battle Creek, Kalamazoo, South Carolina…

07:37 LJJ: That’s not a bad spot.

[laughter]

07:41 BO: No, it wasn’t. I remember I traveled to South Carolina in March just as the lockdowns were taking place, and I remember being on a American Airlines flight, and there were only three of us on the airplane. [chuckle] And so it was a little eerie, but my client needed me there because he’s an owner of a pretty sizable trucking company in South Carolina. So it wasn’t the sort of transaction that would have been effective over a telephone or a WebEx video conference. So in that situation, you just have to take the risk and you just have to take precaution as far as social distancing and mitigating potentials for infecting or cross-contamination from the disease. But basically, for clients who needed us to be there in person, we tried as much as possible to meet that request. And for other individuals who were more comfortable having a video call or a telephone call, then that’s exactly what we did.

08:52 LJJ: Well, yeah, the safety is the key there. And also, yet the listening to what the client, the customer needs.

09:00 BO: Right.

09:00 LJJ: So Bede, tell us a little bit about the future. So right now, we’re getting ready to go into a new tax season, and those laws may very well … There might be a lot of different tax rules and regulations that change. When people call you right now, what advice do you give them as there seems to be things up in the air?

09:21 BO: Right. So this year has been a whirlwind for different reasons, obviously, if you follow the news and other things going on in the economy and country. So most of what my clients want to know given that this year, the PPP was rolled out, a lot of individuals, self-employed, small business owners also got unemployment benefits for the first time since that program was created. They want to know how it’s going to impact their 2020 taxes when they file in 2021. So what I would tell individuals is that for anyone who received unemployment taxes, these are taxable benefits. When you applied for the unemployment under the PUA program, which was the Pandemic Unemployment Assistance, you had the option to either receive those benefits pre-tax or after tax. For individuals who selected the pre-tax portion, the pre-tax option in order to get a bigger payout, they will be required to pay taxes on those incomes come 2021 when they file their 2020 tax returns. So that’s one thing to keep in mind.

10:47 BO: And some individuals who, perhaps don’t have enough reserves set aside to meet a tax obligation, if they happen to actually owe taxes as opposed to a tax refund, they might need to look into setting up a payment plan with the IRS, and that form is called Form 9465. So it’s something that they might want to start looking into. Meet with your tax advisor or your tax preparer and get a gauge on where you’re going to end up at year end. So if it turns out that you’re going to be owing taxes and in the past, you’re more used to getting a tax refund, you might want to start putting money aside for a tax obligation that you might have at the end of the year.

11:35 BO: And then for small business owners, like I had mentioned before, we’re now in the forgiveness application phase of the PPP program. And what is coming as a shock to some of the recipients of this program is that if you apply for the PPP and also got an advance under the EIDL, the Economic Injury Disaster Loan, this was another emergency funding that was rolled out during the pandemic. So if you were a recipient of both programs, there is a … The advanced a year obtained on the EIDL actually reduces the forgiveness on your PPP, so you might end up owing an amount on that PPP. So you might not be completely forgivable. So this is something to keep in mind because if it ends up that there’s an amount that is non-forgivable, you’re going to have to pay that over a two-year term at 1.00%. So it’s something to… You want to discuss with your accountant to get a gauge on so you can forecast and plan your finances for 2021 and moving forward.

12:50 LJJ: Well, it sounds to me, Bede, like knowledge is power.

12:53 BO: Yeah.

12:54 LJJ: In at a time when a pandemic hits, nobody knows what to do. And so you might have made decisions that now, it’s really time to know what those decisions will impact you for your taxes for 2020; so that’s awesome. Well, Bede, thank you so much. Is there anything else that you’d like to say about running a small business yourself? Give us the best tips that can help people just continue to have that perseverance to just look at we can succeed, pandemic or not.

13:28 BO: Yeah. I will just say … Obviously, I still consider myself a work in progress. I’m not quite where I want to be ultimately. So I would say, there are other individuals out there that people can look at as role models who have built much bigger organizations, but for myself, just keeping an eye on the costs, having a shoestring budget, and finding resources for getting services that you need to run your business at an affordable rate. A lot of small business owners realized there are free bookkeeping software out there. A lot of them sign up to very expensive service providers from the inception of their business, and really your goal should be to have minimal costs. Obviously, it depends on what kind of business you’re running. I happen to be in a professional services industry that requires very little capital, very little. I don’t have … My most expensive equipment is my laptop and my computers, so … But my advice would be just focus on your costs. Andrew Carnegie had a saying where if you watch your costs, the profits will take care of themselves. So that would be the advice that I will give to others that has helped me in being able to run my firm profitably and coming as far as I have. But like I said, I’m still a work in progress, so we’ll see where I’ll be this time next year. [chuckle] Maybe I’ll have more advice.

15:13 LJJ: And we are going to take it, too, Bede, so thank you so much.

15:17 BO: Yeah. Thank you for having me, Lynne. I appreciate it.

15:19 LJJ: We’d also like to thank Jake Esselink, our production coordinator. And if you have a topic or an interesting informational tip, or a person that you’d like us to interview, please send us our way. Money, I’m Home, from finance to fitness. I’m Lynne Jarman-Johnson with Consumers Credit Union.

[music]

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