The New York Post is reporting that IRS will stop showing up at homes unannounced in effort to protect agents, combat scammers.
The article can be found at https://nypost.com/2023/07/24/irs-ending-policy-of-unannounced-home-visits-by-agents?utm_source=gmail&utm_campaign=android_nyp
Jim Shenwick, Esq 917 363 3391 jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
We held individuals & businesses with too much debt!
Yahoo Finance published an article discussing the potential default of $500 billion in corporate debt. The article indicates that large corporate bankruptcies are accumulating at the second-fastest rate since 2008, surpassed only by the initial phase of the pandemic.
The article can be found at https://uk.finance.yahoo.com/news/500-billion-corporate-debt-storm-230005895.html?guccounter=1
Jim Shenwick, Esq 917 363 3391 jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
We held individuals & businesses with too much debt!
More than 800,000 borrowers are still eligible to benefit from student loan forgiveness according to NPR. The story can be found at
Jim Shenwick, Esq 917 363 3391 jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
We held individuals & businesses with too much debt!
RBC Royal Bank has an article about the "5 Common Causes of Small Business Bankruptcy " The article can be found at
Common causes cited by business owners for experiencing critical money issues:
Business owners can’t predict or control external events — like natural disasters, economic recessions or pandemics, but these can devastate a business. Part of your business plan should include scenario planning — envisioning possible conditions that could affect your business and how you might be able to mitigate them.
One option to consider is maintaining an emergency fund to help weather the storm during challenging times. Set aside a portion of your profits as an emergency fund to provide a financial buffer in case of unexpected expenses or downturns. This fund can help you bridge temporary gaps and avoid accumulating debt.
As an entrepreneur, no one can step in and do everything you do if you can’t work. And for many small business owners, if they can’t work, the business doesn’t make money. It’s important to have a plan in place to help minimize the impact of illness on your company. If you can still work, evaluate what you can do safely. Still, if you can’t, your contingency plan should include the necessary information so that someone you trust can run your business temporarily or communicate with stakeholders about the temporary disruption.
Picture this: your business is thriving, sales are soaring, and your products or services are in high demand. However, despite the apparent success, inadequate cash flow can swiftly bring down even the most promising ventures. Keeping a close eye on your finances and maintaining a healthy cash flow is crucial.
Implement effective cash flow management strategies such as invoicing promptly, offering incentives for early payments, and negotiating favourable payment terms with suppliers.
Managing a business entails more than passion. With everything a business owner has to do, it’s possible to deprioritize tracking expenses, chasing payments, or even overall budgeting. Over time these can add up and produce can lead to severe financial distress.
Consider working with a qualified accountant, financial advisor, or business consultant who can provide guidance on financial matters, tax planning, and overall business operations. They can also help you identify potential risks and opportunities.
Debt can be a useful tool for business growth, but excessive borrowing can create a financial burden that later becomes impossible to manage. Part of your business plan includes financing your enterprise: Before taking on debt assess your ability to repay it and develop a realistic repayment plan. Also, consider diversifying your funding sources — bank loans, grants, crowdfunding, etc. — to help provide additional support and reduce the risk of relying solely on debt to finance your business.
Running a successful business requires careful planning, financial insights, adaptability, and resilience. You can steer your business toward long-term success by staying aware of how businesses get into financial trouble and by taking proactive measures to mitigate risks.
Jim Shenwick, Esq 917 363 3391 jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
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We held individuals & businesses with too much debt!
Business Bankruptcies Pick Up Again
CFO Drive is reporting that Business Bankruptcies have increased. The story can be found at https://www.cfodive.com/news/business-bankruptcies-pick-up-again/686049/
Jim Shenwick, Esq 917 363 3391 jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
We held individuals & businesses with too much debt!
The SBA is offering a Hardship Plan for borrowers experiencing financial challenges.
Eligible borrowers are required to pay at least 10% of their monthly payment amount for six months.
Interest will continue to accrue, which may increase payments due at the end of the loan term.
Regular monthly payments will be required after the six-month Hardship Program period ends.
Borrowers may be able to renew the Hardship Accommodation Plan after six months.
The SBA Hardship Plan does not reduce the amount of money due the SBA for the EIDL loan, so at best the Hardship Plan is a temporary solution.
For many SBA EIDL borrowers a bankruptcy filing or an offer in compromise may be a better solution.
Jim Shenwick, Esq
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
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Index of Articles written on SBA EIDL Loans by Jim Shenwick
Defaulted SBA EIDL Loans, Limited Liability Company (LLC) and Cancellation of Debt Income (COD) under Section 108 of the Internal Revenue Code
https://shenwick.blogspot.com/2023/07/defaulted-sba-eidl-loans-limited.html
Offers In Compromise ("OIC") for Defaulted SBA EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted Income, a Trap for the Unwary!
https://shenwick.blogspot.com/2023/05/offers-in-compromise-oic-for-defaulted.html
EIDL LOAN WORKOUTS AND BANKRUPTCY
https://shenwick.blogspot.com/2022/07/eidl-loan-workouts-and-bankruptcy.html
EIDL Loan Default Questions & Answers
https://shenwick.blogspot.com/2022/10/eidl-loan-default-questions-answers.html
EIDL LOAN DEFAULT DOCUMENT REVIEW, WORKOUT, BANKRUPTCY FILING & OFFER IN COMPROMISE
https://shenwick.blogspot.com/2022/07/eidl-loan-default-document-review.html
EIDL Defaulted Loans
https://shenwick.blogspot.com/2022/07/eidl-defaulted-loans.html
New Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan"
https://shenwick.blogspot.com/2023/05/new-relief-program-for-sba-eidl.html
EIDL LOANS and SBA OFFER IN COMPROMISE PROGRAM
https://shenwick.blogspot.com/2022/07/eidl-loans-and-sba-offer-in-compromise.html
PPP & EIDL Fraud
https://shenwick.blogspot.com/2022/08/ppp-eidl-fraud.html
Better to connect-What small business owners need to know about repaying loans tied to pandemic relief from the SBA EIDL Loans
https://shenwick.blogspot.com/2022/11/better-to-connect-what-small-business.html
Defaulted SBA EIDL Loans, Limited Liability Company (LLC) and Cancellation of Debt Income (COD) under Section 108 of the Internal Revenue Code
https://shenwick.blogspot.com/2023/07/defaulted-sba-eidl-loans-limited.html
Offers In Compromise ("OIC") for Defaulted SBA EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted Income, a Trap for the Unwary!
https://shenwick.blogspot.com/2023/05/offers-in-compromise-oic-for-defaulted.html
EIDL LOAN WORKOUTS AND BANKRUPTCY
https://shenwick.blogspot.com/2022/07/eidl-loan-workouts-and-bankruptcy.html
EIDL Loan Default Questions & Answers
https://shenwick.blogspot.com/2022/10/eidl-loan-default-questions-answers.html
EIDL LOAN DEFAULT DOCUMENT REVIEW, WORKOUT, BANKRUPTCY FILING & OFFER IN COMPROMISE
https://shenwick.blogspot.com/2022/07/eidl-loan-default-document-review.html
EIDL Defaulted Loans
https://shenwick.blogspot.com/2022/07/eidl-defaulted-loans.html
New Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan"
https://shenwick.blogspot.com/2023/05/new-relief-program-for-sba-eidl.html
EIDL LOANS and SBA OFFER IN COMPROMISE PROGRAM
https://shenwick.blogspot.com/2022/07/eidl-loans-and-sba-offer-in-compromise.html
PPP & EIDL Fraud
https://shenwick.blogspot.com/2022/08/ppp-eidl-fraud.html
Better to connect-What small business owners need to know about repaying loans tied to pandemic relief from the SBA EIDL Loans
https://shenwick.blogspot.com/2022/11/better-to-connect-what-small-business.html
Defaulted SBA EIDL Loans, Limited Liability Company (LLC) and Cancellation of Debt Income (COD) under Section 108 of the Internal Revenue Code
As many readers of our emails and blog posts know, Shenwick & Associates has developed a specialty helping borrowers, who have defaulted on SBA EDIL loans. Jim Shenwick, Esq has an LLM in taxation from NYU Law School and is familiar with many tax issues involving SBA loan defaults.
Provided at the end of this email are links to many articles he has written about defaulted SBA EIDL loans.
There are actually two issues involved in Limited Liability Company SBA EIDL loan defaults, the first one involves a workout with the SBA to cure the loan default (or a bankruptcy filing by the LLC) and the second which gets much less focus and attention are the tax consequences to the borrower or members of the LLC, when an SBA loan goes into default.
An LLC is a pass-through entity for tax purposes, which means no taxes are paid by the LLC, they are paid by the members who own the LLC.
Section 108 of the Internal Revenue Code pertains to income from the discharge (non payment) of indebtedness and is also known as cancellation of debt income (COD). Section 108 provides that if an individual or a business borrows money and the loan is not repaid, the individual or business are enriched by the amount of the non-payment. The amount of no-payment is deemed ordinary income for tax purposes.
As an example, assume an LLC borrows $100,000 from a bank and does not repay the loan. The bank sends the IRS and LLC a Form 1099-C, reporting $100,000 of ordinary income. Since the LLC is a pass through entity, that $100,000 of ordinary income is reported by the LLC members (owners of the LLC).
If those members are in a 24% tax bracket, they would have to pay $24,000 in federal income tax on income from discharge of indebtedness.
If the member or owner of the LLC does not report that income on their tax return and pays tax on that income, the IRS will audit them. It will then assess penalties and interest on the unpaid taxes.
Many clients, accountants and lawyers are unaware of this issue or do not focus on the income from indebtedness issue (COD), regarding SBA EIDL loan defaults.
WHAT CAN BE DONE TO AVOID INCOME FROM DISCHARGE OF INDEBTEDNESS?
Section 108 of the IRC provides two exceptions to COD income.
The first is that if a Member of the LLC files for Bankruptcy (IRC 108(a)(1)(A)) then no COD income is reportable or payable.
The second is the Insolvency Exception (IRC 108(a)(3)). Insolvency means that the taxpayer's liabilities are greater than their assets.
Individuals using the Insolvency Exception need to attach Form 982 to their federal income tax return.
This email provides a brief overview of EIDL loan default tax issues. Clients are advised to consult with a specialist in this area of law and a tax adviser. Jim Shenwick, Esq. is available to speak with client’s or their advisors.
Jim Shenwick, Esq 917 363 3391 jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
We held individuals & businesses with too much debt!
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Jim Shenwick, Esq/Shenwick & Associates Blog Posts on SBA EIDL Loans
Offers In Compromise ("OIC") for Defaulted SBA EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted Income, a Trap for the Unwary!
https://shenwick.blogspot.com/2023/05/offers-in-compromise-oic-for-defaulted.html
EIDL LOAN WORKOUTS AND BANKRUPTCY https://shenwick.blogspot.com/2022/07/eidl-loan-workouts-and-bankruptcy.html
EIDL Loan Default Questions & Answers
https://shenwick.blogspot.com/2022/10/eidl-loan-default-questions-answers.html
EIDL LOAN DEFAULT DOCUMENT REVIEW, WORKOUT, BANKRUPTCY FILING & OFFER IN COMPROMISE
https://shenwick.blogspot.com/2022/07/eidl-loan-default-document-review.html
EIDL Defaulted Loans
https://shenwick.blogspot.com/2022/07/eidl-defaulted-loans.html
New Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan"
https://shenwick.blogspot.com/2023/05/new-relief-program-for-sba-eidl.html
EIDL LOANS and SBA OFFER IN COMPROMISE PROGRAM
https://shenwick.blogspot.com/2022/07/eidl-loans-and-sba-offer-in-compromise.html
Commercial Chapter 11 Filings Increased 68% Y/Y in the First Half of 2023 see the article at https://www.monitordaily.com/news-posts/commercial-chapter-11-filings-increased-68-in-the-first-half-of-2023/
