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Trust This.
By Joseph E. Seagle, Esq. ● Dec 06, 2024
Smart Brevity® count: 5 mins...1374 words
👋 Happy Friday! Tomorrow is December 7, the 83rd anniversary of the attack on Pearl Harbor, a day that will live in infamy as it shocked the U.S. out of “America First” isolationism and “head first” into WWII. My paternal grandfather was stationed on a Navy ship in the Battle of Guadalcanal. He made it through and never let us forget what it was like to fight fascism in the middle of the Pacific Ocean.
🚨 Situation Awareness: On Tuesday, a federal judge in the Eastern District of Texas entered a nationwide preliminary injunction against enforcement of the Corporate Transparency Act, which required LLCs to file Business Ownership Information Reports. We had already been advising clients that the filing deadline had been extended to May, and a wait—and—see approach to filing was advised in light of a new administration coming in. Now, we recommend no filings be made unless an appeals court overturns the district judge’s injunction.
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1 big thing: Trump’s Effect on COVID EIDL Loan Forgiveness
Meta.ai
The re-election of Donald Trump has reignited hope among some entrepreneurs for forgiveness of Covid-era Economic Injury Disaster Loans (EIDL). However, experts remain skeptical about any sweeping debt relief according to a recent article in The Business Journals.
Why it matters: Florida entrepreneurs, like others nationwide, face lingering financial strain from the pandemic, with $30 billion in EIDL loans sitting in hardship programs. These loans have become a critical burden, affecting the survival and growth of many small businesses.
The big picture:
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The SBA has charged off billions in EIDL loans, reflecting a growing debt crisis among small businesses. Defaults reached $52 billion in 2023 alone, underscoring many entrepreneurs' financial challenges.
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Advocacy efforts continue, with petitions and appeals to Congress, but the likelihood of forgiveness remains slim due to budgetary constraints and a shifting political focus away from the pandemic.
What they’re saying:
According to the article:
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Financial attorney Leslie Tayne highlights the logistical and fiscal hurdles of forgiving $50 billion in accrued EIDL loan interest.
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Rohit Arora of Biz2Credit predicts limited relief options, such as deferrals or tax relief tied to income thresholds, but warns of heightened enforcement of pandemic-era fraud.
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Joe Camberato of National Business Capital argues against forgiveness, citing flexible loan terms and the need for businesses to adapt rather than rely on government bailouts.
What’s next: The SBA continues to manage its ballooning loan portfolio, with 2.5 million disaster loans totaling $283 billion. Despite calls for relief, the agency focuses on servicing loans and recovering defaults, leaving borrowers with few options.
Bottom line: Florida entrepreneurs must prepare for the long haul, as widespread EIDL loan forgiveness appears unlikely. Advocacy and strategic financial planning may be the best path to navigating this evolving landscape.
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2. IRS is denying vast numbers of ERC claims
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The Internal Revenue Service (IRS) is rejecting a substantial number of Employee Retention Credit (ERC) claims from businesses that utilized the credit to keep their workforce employed during the peak of the COVID-19 pandemic. This surge in denials comes as the IRS intensifies its examination of ERC applications to weed out improper claims.
Why it matters: For many small businesses, the ERC represented a crucial financial support mechanism during unprecedented economic disruptions. Denials of these claims not only impact immediate cash flow but may also pose significant challenges to businesses still recovering from the pandemic’s effects.
How it works: The ERC was introduced under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to incentivize employers to retain employees on their payroll despite facing financial hardships. Eligible businesses could claim a refundable tax credit against certain employment taxes, based on qualified wages paid to employees.
Driving the denials:
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Documentation Issues: Inadequate or incomplete documentation to substantiate the claim.
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Eligibility Misunderstandings: Misinterpretation of eligibility criteria, such as revenue decline thresholds or operational suspensions.
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Fraud Prevention: Heightened IRS efforts to detect and prevent fraudulent claims amid reports of abuse.
What small business owners can do:
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Review the Denial Notice: Understand the specific reasons cited by the IRS for the denial.
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Consult Professionals: Engage with tax advisers or legal counsel experienced in ERC matters to evaluate options.
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Gather Evidence: Compile all necessary records, including payroll data and financial statements, to support the claim.
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Consider Appeals: If warranted, prepare to file an appeal or provide additional information to the IRS.
Between the lines: The IRS’s rigorous scrutiny reflects a broader initiative to ensure the integrity of pandemic-related relief programs. While this may create hurdles for legitimate businesses, it underscores the importance of accuracy and compliance in filing claims.
What’s next: Small businesses should stay updated on IRS communications and guidance regarding the ERC. Proactive steps, such as conducting internal audits of claims and documentation, can mitigate risks of denial.
Be smart: To navigate this complex landscape, small business owners should:
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Stay Informed: Keep abreast of any changes in ERC regulations or IRS enforcement practices.
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Act Promptly: Address any IRS correspondence quickly to avoid further complications.
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Seek Assistance: Don’t hesitate to seek professional help to ensure compliance and optimize the chances of a successful claim.
The bottom line: ERC claim denials present a significant challenge for small businesses relying on this tax credit. By taking deliberate and informed actions, business owners can address IRS concerns and work towards a favorable resolution.
Go deeper: Forbes
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We’ve received a lot of questions about the due on sale clause in mortgages and exceptions to when lenders are permitted to invoke it. So I made a video that I hope answers those questions.
Listen in or watch on your favorite streaming platform.
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Meta.ai
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Real estate investing declines as profit margins tighten. MPA Mag
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Florida's appeal tested: Migration drops as expenses rise Orlando Business Journal (gift link)
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The quiet rise of lightly regulated (surplus lines) homeowners insurance Bloomberg (gift link good for 7 days)
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Elon Musk calls for abolishment of the Consumer Financial Protection Bureau (CFPB). Yahoo Finance
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Texas “Short Sale Queen” associates face 30 years in prison for mortgage fraud. The Legal Description
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4. Closing Thought: Level Up: Applying The Game of Work Principles to Real Estate
It snowed on the Grove Arcade in downtown Asheville Monday night. It's one of the most iconic art deco buildings in Asheville, and covered in snow and Christmas decorations really set it off. https://grovearcade.com/
In The Game of Work, Charles Coonradt reveals how the psychology behind games can revolutionize workplace performance. Real estate entrepreneurs can use these principles to create an engaging, productive, and rewarding work environment for themselves and their crews.
Why it matters: Coonradt’s central insight is that people perform better when work feels like a game. By applying game-like elements—clear rules, scorekeeping, feedback, and rewards—you can transform task drudgery into engaging challenges.
How it applies to real estate:
Set clear goals (Define the “game”):
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Example: For agents, establish specific targets like the number of showings per week or total new client leads. For property managers, focus on metrics like tenant retention or cost reduction in maintenance.
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Why it works: Clear goals provide a roadmap and ensure everyone knows how to “win.”
Track progress with real-time feedback:
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Example: Use dashboards or CRM tools to display updated data on sales, leads, or project milestones.
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Why it works: Scorekeeping keeps motivation high, showing incremental progress toward goals.
Create rewards tied to performance:
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Example: Celebrate wins with bonuses, time off, or public recognition for exceeding leasing targets or closing a complex deal.
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Why it works: Rewards create anticipation and encourage repeat behavior.
Foster autonomy:
The bottom line: Real estate entrepreneurs can gamify their businesses by adopting Coonradt’s principles.
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This boosts performance and creates a culture where both work and wins are enjoyable.
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After all, business should feel less like a chore and more like the thrill of the game.
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Be on the lookout for our next issue! 👋
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