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  • Thursday, April 30, 2020 1:22 PM | Susan Balcome (Administrator)

    Will the PPP Loan Save My Business?

    Restart or reinvent?

    The PPP loan program was designed to provide paychecks and not save your business directly. There are three goals for you to consider how to use the funds:

    1. How do I save my business or better yet, how do I make it thrive?

    2. How do I best protect my employees’ livelihood?

    3. How do I maximize the forgiveness amount in the program?

    These three goals are intertwined and picking one will not serve you well. If your business has shut down or greatly slowed, then bringing back employees for no work helps no one and will only lead to later layoffs. This kills trust and longer‐term plans for using the funds as a two‐year loan with partial forgiveness may be your best strategy.

    Remember that you certified in your application that you need these funds, but you do have some discretion in how to use them. Some companies are returning funds as they find they do not need them.

    Analyzing your options and goals.

    Your new normal is yet to be discovered as your customers and supplier habits have changed. Things going back to the way they were is not likely. Think about how we travel has forever changed since 9/11. Consumer habits, government controls and internet based human interaction have changed for the long term.

    If you serve businesses, contact them and ask about their plans for insight on how quickly your sales will pick up. If you are a consumer‐based business, look for information on the internet on how consumers are starting back up in other countries such as China, South Korea, Sweden or Italy. Knowing how quickly you need your staff back is a critical decision factor. It may make sense to use 40‐50% of PPP funds on employees now and save 50‐60% as a two-year loan that is not forgiven to provide capital needed for a slower restart.

    Cash flow is strength.

    We recommend putting together a detailed 26‐week cash flow spreadsheet. This level of detail gives foresight to survive payroll weeks, know how tightly you must collect from customers and how many employees you can afford.

    You can create scenarios based on assumptions for business growth and trigger points. Our analysis with clients has discovered that some do not need cash today but will in 90 days, so they opt for a slower return of employees knowing that less of their PPP funds will qualify for forgiveness. Others have decided to go for maximum forgiveness by bringing back as many employees as available and hoping business picks up quickly. (This is a higher risk approach) Some businesses are doing well now but still have received PPP funds. They are looking at this as “free capital” and are looking for ways to maximize the forgiveness amount by using funds quickly to boost their business.

    Some are looking at the opportunity to improve their staff through new hires of great people out of work. All these options appeared after their cash flow planning for six months.

    C Squared Solutions provides fractional CFOs and COOs for businesses in nearly all industries. We offer four hours free consultation to help you with the analysis and planning of these steps. Give us a call and let us discuss your concerns.

    1873 S Bellaire St., Suite 300, Denver, CO 80222 (303) 409‐6048 www.c2solves.com

  • Friday, April 17, 2020 1:20 PM | Susan Balcome (Administrator)


    Step 1: Discover your “new normal”

    · You and your business have experienced a major life impact event which requires a change in thinking and practices. Reach out to your customers and find out what has changed for them. Are they still in business and, if so, do they have the same needs? Will they still buy the same quantities?

    · Find out what your competitors have done: who is still in business, who is weakened and who is stronger?

    · Is your marketing strategy still viable? Likely customer buying habits will not instantly snap back to old ways. Web based purchasing will be greatly expanded as customers got used to it while being sequestered.

    · Which of your employees will come back once you ask them? Do you have the talent pool to deliver services or build products?  Some may now be working for Amazon.

    · Find out how key suppliers are doing, how willing are they, or can they supply you in a slow restart. Find out if your banker is still able to support you, or if you have been successful in receiving a PPP or EIDL loan, how does that change your banking relationship?

    · Evaluate operational changes made to operate under these extraordinary circumstances and determine if they make sense going forward to “normal” operations; don’t assume the way it was is the best way going forward.

    · After doing your homework, assemble an operating plan for a restart over 90 days. Operational efficiency, customer care, and cash conservation plans are vital to move forward. Hope will not conquer these issues.

    · Forecast three scenarios: best case, likely case and worst case for 90 day and six-month outlooks. Identify trigger events that will cause you to change plans. This focuses on what will work to regain your business health.

    Step 2: Getting back to work

    · From Step 1, look at your sales forecast and look for orders more than 90 days out. Focus on offering incentives for customers to move up the order delivery. Time degrades all deals.

    · Focus on doing the most you can with less people, less inventory and less cash. Operating efficiency is critical to extending your cash and timeline to recovery. Conserve cash.

    · Communicate your COVID-19 restart plan to your landlord, banker, key customers, key suppliers and employees. This makes others view you as a more important customer, supplier and employer.

    Step 3: Scale up process

    · Work with your key suppliers on your growth plan and purchasing timeline. If growth is not an option, plan steps to extend your survival. You may need to tread water until the tide turns your way.

    · Set up a scale up plan to bring back staff based on sales growth. If you depleted your delivery capabilities, outline steps to recover those capabilities. Get it in writing to clarify your thinking.

    · Look for niches in your market where you can offer special deals to expand short term sales and create more brand awareness.

    · Look for new sales channels where you can expand geographically or expand product lines.

    · Companies that will prosper have a positive plan and know their options.

    C Squared Solutions provides fractional CFOs and COOs for businesses in nearly all industries. We offer four hours free consultation to help you with the analysis and planning of these steps. Give us a call and let’s discuss your concerns.  
  • Friday, April 10, 2020 7:46 AM | Susan Balcome (Administrator)


  • Wednesday, April 01, 2020 12:56 PM | Susan Balcome (Administrator)


  • Monday, March 30, 2020 12:37 PM | Susan Balcome (Administrator)

    March 30, 2020

    CARES Act Update

    Title I Highlights

    Coronavirus Aid, Relief, and Economic Security Act

    President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act allocates $2.2 trillion for assistance to individuals, business, and hospitals economically impacted by the Coronavirus (COVID-19) pandemic.

    The CARES Act’s Title I: Keeping American Workers Paid and Employed, contains several relief provisions. Two programs of note for NSA Members include:

    • 1.     The temporary expansion of the Small Business Administration’s (SBA) Economic Injury Disaster Loans (EIDL) to include emergency advance of up to $10,000 within 3 days of applying for an EIDL.
    • 2.     The new Paycheck Protection Program Loans administered under the SBA’s 7(a) Loan Program offering various loans to small businesses.

    Highlights of these two programs are detailed in the summary below. You may also visit the SBA’s website for information and applications.

    Website Link:  SBA EIDL Program

    Website Link: SBA Paycheck Protection Program

    1.    Temporary Expansion of the Small Business Administration’s Economic Injury Disaster Loans (EIDL)

    The CARES Act temporarily expands eligibility for Economic Injury Disaster Loans (EIDL) administered by the SBA and provides an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19. The advance will be available within 3 days of applying for an EIDL. To access the advance, you first apply for an EIDL and then request the advance. You will not have to repay the advance, even if your application for a loan is denied. The advance may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent, and mortgage payments.

    Who is eligible?

    In addition to the entities that are currently eligible for SBA disaster loans (small businesses, private non-profits, and small agriculture cooperatives), eligibility is temporarily expanded to include:

    •      Business entities with 500 or fewer employees:
    •     Sole proprietorships, with or without employees
    •      Independent contractors
    •      Cooperatives and employee owned businesses
    •      Tribal small businesses
    •      Private non-profits of any size

    You must have been in business as of January 31, 2020. Expanded eligibility criteria and the emergency advance are only available between January 31, 2020 and December 31, 2020.

    How do I apply?

    •   You can apply for an EIDL online with the SBA by clicking here
    •   When you apply, you can request an emergency advance of $10,000. The SBA will provide the advance within 3 days of receiving your application.
    •   Visit an SBA resource partner who can help guide you through the loan application process. You can find your nearest Small Business Development Center (SBDC) or Women’s Business Center by clicking here.

    Can I apply for other SBA loan programs?

    If you apply for an EIDL and the advance, you can still apply for a Paycheck Protection Program loan (see loan summary in Section 2 below). However the amount forgiven under a Paycheck Protection loan will be decreased by the $10,000 advance.

    2.    Paycheck Protection Program Loans

    The cornerstone of the CARES Act Title I is $349 billion for the Paycheck Protection Program loans administered by the SBA. These 100% federally-guaranteed loans are available under a new subsection 36 of Section 7(a) of the Small Business Act. The central goals of this program are to a) help employers retain their employees and b) help business cover their near-term operating expenses during the COVID-19 crisis for the period between February 15, 2020 and June 30, 2020.

    Who is eligible?

    •     A small business with fewer than 500 employees (includes all employees full-time, part-time, and any other status)
    •     A small business that otherwise meets the SBA’s size standard
    •    A 501(c)(3) with fewer than 500 employees
    •    An individual who operates as a sole proprietor
    •     An individual who operates as an independent contractor
    •    An individual who is self-employed who regularly carries on a trade or business
    •     A Tribal business concern that meets the SBA size standard
    •      A 501(c)(19) Veterans Organization that meets the SBA size standard

    Special eligibility may apply if:

    •     If you are in the accommodation and food services sector (NAICS 72), the 500- employee rule is applied on a per physical location basis
    •     If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply

    In evaluating eligibility of borrowers, a lender must consider whether the borrower was operating on February 15, 2020 and had employees or independent contractors for whom the borrower paid. Additionally, unlike other SBA loans, you are not required to prove you cannot receive credit elsewhere in order to receive funds provided under this program.

    What can the loans can be used for?

    •  Payroll costs:
    •   Includes: compensation to employees, such as salary, wage, commissions, cash, etc.; paid leave; severance payments; payment for group health benefits, including insurance premiums; retirement benefits; state and local payroll taxes; and compensation to sole proprietors or independent contractors (including commission-based compensation) who earn up to $100,000 in 1 year, prorated for the covered period;
    •   Excludes: individual employee compensation above $100,000 per year, prorated for the covered period; certain federal taxes; compensation to employees whose principal place of residence is outside of the US; and sick and family leave wages for which credit is allowed under the Families First Act;
    •     Group health care benefits during periods of paid sick, medical, or     family leave, and insurance premiums;
    •     Payments of interest on mortgage obligations;
    •      Rent/lease agreement payments;
    •      Utilities; and
    •     Interest on any other debt obligations incurred before the covered   period.

    In evaluating eligibility of borrowers, a lender must consider whether the borrower was operating on February 15, 2020 and had employees or independent contractors for whom the borrower paid.

    How much of a loan can I receive?

    •      Loans are designed to cover two-and-a-half months of payroll, using a calculation of the average monthly payments during the last year period before the loan is issued.

    For example, if your annual payroll payment was $1.2 million, you can request a loan of up to $250,000 ($1,200,000/12 = $100,000, $100,000 X 2.5 = $250,000).

    •      No loans may be larger than $10 million.

    Note:

    A.     Allowable payroll costs for employers are the sum of payments of any compensation with respect to employees that is a: salary, wage, commission, or similar compensation; payment of cash tip or equivalent; payment for vacation, parental, family, medical, or sick leave; allowance for dismissal or separation; payment required for the provisions of group health care benefits including insurance premiums; payment of any retirement benefit; and payment of state or local tax assessed on the compensation of the employee.

    B.     Allowable payroll costs for sole proprietors, independent contractors, and

    self-employed individuals are the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.

    Are there loan fees?

    There are no borrower or lender fees for participation.

    What are the loan Terms?

    •   Up to one year deferral of principal and interest payments.
    •  Loans are available for up to a 10-year term (amortized) at an interest rate not to exceed 4 percent.
    •  Some traditional SBA requirements are waived for this loan program. Specifically, these loans are available with:
    •   No personal guarantees of shareholders, members or partners
    •   No collateral
    •   No proving recipient cannot obtain funds elsewhere
    •   No SBA fees (may still have to pay lender processing fee)
    •   No prepayment fee

    Is there loan forgiveness?

    Borrowers must apply for forgiveness with the lender servicing the loan. Lenders have 60 days to review and make a determination. Any portion of the loan that is forgiven will be excluded from gross income. Section 1106 of Title I outlines forgiveness of loans obtained under the CARES Act. Specifically:

    •     The forgiven amount will be equal to the amount actually paid for payroll costs, salaries, benefits, rent, utilities and mortgage interest during the eight weeks following disbursement of the loan. Additional wages paid to tipped employees under Section 3(m)(2)(A) of the Fair Labor Standard Acts may also be forgiven.
    •     The forgiveness amount is subject to reduction if there is a workforce reduction or a reduction in the salary or wages of an employee.
    •      The loan forgiveness Incentivizes companies to retain employees by reducing the amount forgiven proportionally by any reduction in employees retained compared to the prior year.
    •     To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
    •     Reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will be disregarded for purposes of reducing the forgiveness amount so long as the reductions are eliminated by June 30, 2020.
    •     The forgiven amounts are not taxable as income to the borrower.


  • Monday, January 20, 2020 8:50 AM | Susan Balcome (Administrator)

    If you need immediate SBA assistance in Colorado

    Please note these helpful resources:

    www.sba.gov/partners/lenders/

    SBA One Questions:   [email protected]OR 877-245-6159, Option 5

    SBA One Updates:    https://www.sba.gov/content/sba-one    

    Eligibility Questions can be sent to: email    [email protected]

    Servicing Questions:    [email protected] or call 1-800-644-8564

    Colson Services:   http://www.colsonservices.com/main/index.shtml or call 1-877-245-6159

    For-Lenders website: https://www.sba.gov/for-lenders

    [email protected]– general questions about liquidation

    [email protected]– secondary market questions

    [email protected]– status of purchase requests

    [email protected]– questions about guaranty purchases

    [email protected]– charge off tabs and status of charge off reviews

    [email protected]– semi annual status report submission

    [email protected]               -- two year extension request

    WEBSITE - http://www.sba.gov/for-lenders      

    All the Best!  Steve White, Lead Lender Relations Specialist


  • Tuesday, April 09, 2019 5:01 PM | Shina Culberson

    Entrepreneurship has many upsides.

    Business owners get to decide what they stand for and choose which customers they want to work with, owners set their own schedule and have control over their time, and they have the option to generate a nice income from their business.

    But what happens when you’re ready to leave your company? How will you replace that income you were receiving from your company?

    What is your plan to transition your business – finally sell and cash out?

    Here are a few tips on surviving after your business is sold.

    Have a cushion of cash in the bank.

    Many business owners never sell their businesses. They just close the doors. According to the Exit Planning Institute (EPI), some 4.5 million firms representing more than $10 trillion in business value will transition over the next decade or so, but Christopher Snider, President of the EPI believes only about 20% to 30% of businesses that go to market end up selling.

    In addition, according to Transworld – one of the largest business brokers in Colorado – 70% of business owners provide owner-carried financing. That means that the owners typically do not get much cash up front and accept payments over time.

    So, be prepared to lower your expectations for a large cash payout or quick sale.  It’s prudent to put some money away to get you through the sale and on to the next phase of your life.

    Talk with a financial planner.

    As a business owner, you’ve got options in how to plan for the future that doesn’t include a steady income from your business. Abe Fitzsimmons and his company, WealthWave, works to increase the financial literacy of his clients and provide solutions to business owners and entrepreneurs.

    Having a plan eases the anxiety of moving onto the next phase of life.

    For more information about how to create a plan for your future and that of your business, check out the Denver Entrepreneur Education Network event on April 18, 2019. You can talk with Abe about your situation.

    Review options for alternative revenue streams inside or outside your business.

    Develop revenue streams that are not related to your business. Can you create a consulting practice to help other business owners accomplish what you have done? Perhaps a portfolio of other assets such as real estate or investments can provide another source of income.

    These are just a few strategies business owners and entrepreneurs can use to keep income flowing after a transition. What are your plans after you sell your business? Let us know in the comments.

    Want to know more about positioning your company for a transition? Rest assured 35 years of experience is behind Management Insights™Forward Insights™, and Expert Insights™ – the tools you can use to understand how to strengthen your company.

    Contact:

    Shina  Culberson, President

    Quist Insights

    303-643-5737

    [email protected]

    www.quistinsights.com


  • Monday, April 01, 2019 10:07 AM | Susan Balcome (Administrator)

    Denver Entrepreneur Education Network 

    Mission Statement

    To engage entrepreneurs and business experts through an educational platform that provides practical know-how, information and tools to support and fuel business growth.

    Vision Statement

    To become the premier source for (Colorado) entrepreneurs to inform themselves through free educational seminars and publications in order to achieve unattained business growth and success. By leveraging a comprehensive network of business experts to mentor entrepreneurs, DEEN aims to create long term financial stability for entrepreneurs, their businesses and the (Colorado) community.

    Core Values

    Principled Entrepreneurship – practice a philosophy of mutual benefit. Create value for all stakeholders: the entrepreneur, the business expert (mentor), the organization, and the community.

    Knowledge – attain the best knowledge to improve business performance. Share knowledge proactively.

    Transformation – seek development, understanding and strategies that will create business value and growth.

    Self-Actualization – be a lifelong learner and realize your potential as a leader within your business and the community.

    Mentors

    Seasoned subject matter experts provide multi-disciplinary business training to entrepreneurs and business owners, helping to create more self-reliant businesses with greater cash-flow, greater value, stronger relationships and better exit strategies.

    Mentors play a key role in monthly meeting and workshops. The model is to provide free quality education thereby creating better educated members and engendering goodwill among Members toward Mentors.

    Seeking Mentors who build relationships based on trust and a give first attitude. Mentors should be recognized as experts in their field, have strong reputations and the ability to bring value to members and peers. Each Mentor will drive their clientele and network to the platform to benefit from the education. Mentors thereby create value for their existing clientele by exposing them to world-class business training, but also gain opportunity to connect with other members who may need their services.

    Members

    Members are entrepreneurs and business owners who seek to develop new tools, elevate their thinking and sharpen their skill sets from the world-class education provided by the network of Mentors.  

    The platform is free to all Members and is most beneficial to accelerate existing businesses that are ready to move to the next level of development.

    Meeting Program

    Member meetings are held on the 3rd Thursday of the month, 6pm to 8pm. Agenda includes networking, Mentor Presentation, Q&A, and Announcements.

    Location

    6160 S Syracuse Way, Training Room Unit #B2

    Greenwood Village, CO 80111

    Mentors Membership Types

    Gold Mentors - $500 (Limited to 12)

    • ·        1 Hour Topic Presentation (Featured Lesson)
    • ·        10 Minute Pitch - 1 per Quarter
    • ·        Logo on Website with Bio
    • ·        Logo on Marketing
    • ·        Table positioned at back of room
    • ·        Hand out marketing materials - Unlimited
    • ·        Announcement for Private Workshops
    • ·        Article postings on the Website – Unlimited
    • ·        Opportunity to lead quarterly paid workshops

    Silver Mentors - $300 (Unlimited)

    • ·        10 Minute Pitch - 1 per Quarter
    • ·        Logo on Website with Bio
    • ·        Logo on Marketing
    • ·        Table positioned at back of room
    • ·        Hand out marketing materials – Unlimited
    • ·        Article postings on the Website - Unlimited

    Featured Lesson – Mentors have an opportunity to lead a training session for the group to develop understanding on a topic in your expertise. This can last up to 50 minutes and is not a sales pitch but a learning session. You may close with your contact information, copy of presentation and other marketing handouts.

    Pitch – Mentors will have any opportunity once per quarter to give a 10 minute presentation on their business to the group (as pre-scheduled with the Administrator).

    Logos - Will be placed in obvious areas of the website and occasionally marketing materials. Mentors may also add a unique selling proposition or Bio with their logo and a link to their website (limited to 200 words).

    Table - Mentors that sign up in advance or are holding a training session will be provided a table on the perimeter of the room to mingle with people prior to or after the meeting with handouts.

    Hand Out Fliers – Can be a discount offering, holiday special, announcement or mini infomercial. It is limited to one page both sides unless you are the featured speaker and then you may do a full handout.

    Article Postings – Mentors are encouraged to provide articles, whitepapers and case studies to publish on the Website. We request that you provide at least one article related to your expertise.

    Private Workshops – Gold Mentors will receive special marketing for the workshops at other locations with their logos on announcements.

    Shout Outs - Can be fundraisers, request for volunteers, items of business interest for sale, awards won or offered, special interest trainings held through this group.

    It would be expected that a mentor continually sends out meeting notices throughout the year to their client list in order to build up group participation.

    We look forward to having an exceptional team and a prospers New Year.

    Agenda

    6:00pm       Sign in and Mingle

    6:30pm       Meeting Called to Order

    6:40pm       Intro for 2 Mentors (10 min each)

    7:00pm       Presenter Topic (50 min)

    7:50pm       Shout Out (10 min)

    8:00pm       Next Meeting Topic and Dismiss

    8:10pm       Clean up


  • Thursday, February 21, 2019 4:00 PM | Susan Balcome (Administrator)

    If your small business doesn’t offer its employees a retirement plan, you may want to consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions and help you attract and retain employees. For a variety of reasons, a SIMPLE IRA can be a particularly appealing option for small businesses. The deadline for setting one up for this year is October 1, 2018.

    The basics

    SIMPLE stands for “savings incentive match plan for employees.” As the name implies, these plans are simple to set up and administer. Unlike 401(k) plans, SIMPLE IRAs don’t require annual filings or discrimination testing.

    SIMPLE IRAs are available to businesses with 100 or fewer employees. Employers must contribute and employees have the option to contribute. The contributions are pretax, and accounts can grow tax-deferred like a traditional IRA or 401(k) plan, with distributions taxed when taken in retirement.

    As the employer, you can choose from two contribution options:

    1. Make a “nonelective” contribution equal to 2% of compensation for all eligible employees. You must make the contribution regardless of whether the employee contributes. This applies to compensation up to the annual limit of $275,000 for 2018 (annually adjusted for inflation).

    2. Match employee contributions up to 3% of compensation. Here, you contribute only if the employee contributes. This isn’t subject to the annual compensation limit.

    Employees are immediately 100% vested in all SIMPLE IRA contributions.

    Employee contribution limits

    Any employee who has compensation of at least $5,000 in any prior two years, and is reasonably expected to earn $5,000 in the current year, can elect to have a percentage of compensation put into a SIMPLE IRA.

    SIMPLE IRAs offer greater income deferral opportunities than ordinary IRAs, but lower limits than 401(k)s. An employee may contribute up to $12,500 to a SIMPLE IRA in 2018. Employees age 50 or older can also make a catch-up contribution of up to $3,000. This compares to $5,500 and $1,000, respectively, for ordinary IRAs, and to $18,500 and $6,000 for 401(k)s. (Some or all of these limits may increase for 2019 under annual cost-of-living adjustments.)

    You’ve got options

    A SIMPLE IRA might be a good choice for your small business, but it isn’t the only option. The more-complex 401(k) plan we’ve already mentioned is one alternative. Some others are a Simplified Employee Pension (SEP) and a defined-benefit pension plan. These two plans don’t allow employee contributions and have other pluses and minuses. Contact us to learn more about a SIMPLE IRA or to hear about other retirement plan alternatives for your business.

  • Thursday, February 14, 2019 1:30 PM | Susan Balcome (Administrator)

    The Tax Cuts and Jobs Act (TCJA) provides a valuable new tax break to noncorporate owners of pass-through entities: a deduction for a portion of qualified business income (QBI). The deduction generally applies to income from sole proprietorships, partnerships, S corporations and, typically, limited liability companies (LLCs). It can equal as much as 20% of QBI. But once taxable income exceeds $315,000 for married couples filing jointly or $157,500 for other filers, a wage limit begins to phase in.

    Full vs. partial phase-in

    When the wage limit is fully phased in, at $415,000 for joint filers and $207,500 for other filers, the QBI deduction generally can’t exceed the greater of the owner’s share of:

    • 50% of the amount of W-2 wages paid to employees during the tax year, or
    • The sum of 25% of W-2 wages plus 2.5% of the cost of qualified business property (QBP).

    When the wage limit applies but isn’t yet fully phased in, the amount of the limit is reduced and the final deduction is calculated as follows:

    1. The difference between taxable income and the applicable threshold is divided by $100,000 for joint filers or $50,000 for other filers. 
    2. The resulting percentage is multiplied by the difference between the gross deduction and the fully wage-limited deduction. 
    3. The result is subtracted from the gross deduction to determine the final deduction.

    Some examples

    Let’s say Chris and Leslie have taxable income of $600,000. This includes $300,000 of QBI from Chris’s pass-through business, which pays $100,000 in wages and has $200,000 of QBP. The gross deduction would be $60,000 (20% of $300,000), but the wage limit applies in full because the married couple’s taxable income exceeds the $415,000 top of the phase-in range for joint filers. Computing the deduction is fairly straightforward in this situation.

    The first option for the wage limit calculation is $50,000 (50% of $100,000). The second option is $30,000 (25% of $100,000 + 2.5% of $200,000). So the wage limit — and the deduction — is $50,000.

    What if Chris and Leslie’s taxable income falls within the phase-in range? The calculation is a bit more complicated. Let’s say their taxable income is $400,000. The full wage limit is still $50,000, but only 85% of the full limit applies:

    ($400,000 taxable income - $315,000 threshold)/$100,000 = 85%

    To calculate the amount of their deduction, the couple must first calculate 85% of the difference between the gross deduction of $60,000 and the fully wage-limited deduction of $50,000:

    ($60,000 - $50,000) × 85% = $8,500

    That amount is subtracted from the $60,000 gross deduction for a final deduction of $51,500.

    That’s not all

    Be aware that another restriction may apply: For income from “specified service businesses,” the QBI deduction is reduced if an owner’s taxable income falls within the applicable income range and eliminated if income exceeds it. Please contact us to learn whether your business is a specified service business or if you have other questions about the QBI deduction.

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