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January 2026 Newsletter

Wed, 07 Jan 2026 01:46:48 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

January 2026: Upcoming Tax Due Dates

Wed, 07 Jan 2026 01:43:19 GMT

January 15

Employers: Deposit nonpayroll withheld income tax for December 2025 if the monthly deposit rule applies.

Individuals: Pay the fourth installment of 2025 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

February 2

Employers: File 2025 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration.

Employers: File a 2025 return for federal unemployment taxes (Form 940) and pay any tax due if all the associated taxes weren’t deposited on time and in full.

Employers: Report Social Security and Medicare taxes and income tax withholding for the fourth quarter of 2025 (Form 941) if all of the associated taxes due weren’t deposited on time and in full.

Employers: Provide 2025 Form W-2 to employees.

Businesses: Provide 2025 Form 1098, Form 1099-MISC (except for those with a February 18 deadline), Form 1099-NEC and Form W-2G to recipients.

Individuals: File a 2025 income tax return (Form 1040 or Form 1040-SR) and pay the tax to avoid penalties for underpaying the January 15 installment of estimated taxes.

February 10

Employers: File a 2025 return for federal unemployment taxes (Form 940) if all associated taxes due were deposited on time and in full.

Employers: Report Social Security and Medicare taxes and income tax withholding for the fourth quarter of 2025 (Form 941) if all associated taxes due were deposited on time and in full.

Individuals: Report January tip income of $20 or more to employers (Form 4070).

More Taxpayers May Qualify for the Casualty Loss Deduction

Wed, 07 Jan 2026 01:40:22 GMT

Starting in 2026, personal casualty loss deductions will no longer be limited to federally declared disasters. Certain state-declared disasters will also be eligible. For a disaster to qualify, the governor (or D.C. mayor) and the U.S. Treasury Secretary must agree that the damage is severe enough to apply these rules. Now more taxpayers affected by natural disasters or by fires, floods or explosions, regardless of the cause, may qualify.

Note that taxpayers can still claim personal casualty losses not attributable to federally or state-declared disasters, but only to the extent of any personal casualty gains. Need guidance? Contact the office for help.

Heavy Tax Breaks for Heavy Business Vehicles

Wed, 07 Jan 2026 01:39:44 GMT

Did you buy a “heavy” business vehicle in 2025? An SUV, pickup or van with a manufacturer’s gross vehicle weight rating (GVWR) over 6,000 pounds that’s used over 50% in your business is treated as transportation equipment for tax purposes. That means the business percentage of its cost can qualify for 100% first-year bonus depreciation.

Heavy vehicles used over 50% for business may also be eligible for Sec. 179 expensing. But the maximum Sec. 179 deduction for 2025 is generally only $31,300 for vehicles with GVWRs between 6,001 and 14,000 pounds.

To claim one of these breaks for 2025, you must have placed the heavy business vehicle in service by Dec. 31, 2025. Contact the office to learn more.

2026 Tax Law Changes for Individuals

Wed, 07 Jan 2026 01:38:24 GMT

Here’s a sampling of some significant tax law changes going into effect this year:

New charitable contribution deduction for nonitemizers for cash contributions up to $1,000 ($2,000 for married couples filing jointly)
New 0.5% of adjusted gross income floor on charitable deduction for itemizers
New 35% benefit limit on itemized deductions for taxpayers in the 37% tax bracket
Reduced income thresholds at which the alternative minimum tax exemption begins to phase out (and a phaseout rate that’s twice as fast as 2025’s)
New tax-advantaged Trump accounts to benefit children under age 18
Increase in tax-free 529 plan withdrawal limit for qualified elementary and secondary school expenses to $20,000 (from $10,000 for 2025)
New requirement that higher-income taxpayers’ catch-up contributions to employer-sponsored retirement plans must be treated as post-tax Roth contributions
Elimination of certain energy-efficiency credits for homeowners
Wider income ranges over which the Section 199A qualified business income (QBI) deduction limitations phase in, potentially allowing larger deductions for some pass-through entity owners.
New minimum QBI deduction of $400 for taxpayers who materially participate in an active trade or business if they have at least $1,000 of QBI from it

Contact the office to discuss how these or other changes might affect you.

Make Smart Choices With a Sudden Windfall

Wed, 07 Jan 2026 01:37:11 GMT

An unexpected influx of money (such as from an inheritance, bonus, legal settlement or lottery win) can feel exciting and full of possibility. But without a clear plan, that financial good fortune might not last as long as you’d hoped.

Avoid Common Pitfalls

It can be tempting to immediately buy your dream car or home, which could turn out to be an unwise purchase. Or you might be feeling generous when charities come knocking, only to find out later that they were fraudulent.

You can avoid these potential pitfalls by stashing your windfall in a bank or money market account as soon as you receive it. Waiting at least a month before you touch the money can help prevent impulse buys and other mistakes.

Also, you may owe taxes. Some windfalls, such as lottery winnings and certain legal settlements, are subject to federal tax. This could be at a rate as high as 37% if your windfall pushes you into the top income tax bracket. State and local taxes may apply as well. A tax professional can help you determine what you owe.

Use Your Windfall Wisely

What you eventually decide to do with your windfall will depend on many factors. If you have debt, you’ll probably want to pay it off, especially if it carries a high interest rate and the interest isn’t deductible. Also, establishing or boosting your emergency savings can minimize the need to incur future debt.

Next, consider where you’d like to be five, 10 or 20 years into the future. Develop a budget that will help you move toward your goals, whether that means retiring early, starting a business or something else. You probably shouldn’t quit your job without having thought it through carefully. Few windfalls are large enough to see you all the way through retirement (depending on your age).

Plan for the Long Term

Be cautious about requests for money. Friends and family members may expect to share in your good fortune or may pitch “can’t-miss” investment ideas. Before making any commitments, seek professional advice. Contact our office for help evaluating the tax impact, prioritizing goals and creating a personalized plan to make your windfall last for years to come.

Businesses: Act Soon to Take Advantage of Clean Energy Tax Incentives

Wed, 07 Jan 2026 01:35:57 GMT

While legislation signed into law in 2025 extends or enhances many tax breaks for businesses, it ends some clean energy tax incentives. Fortunately, your business may still benefit from certain clean energy breaks if it acts in the first half of 2026.

Make Building Improvements

The Section 179D deduction allows owners of new or existing commercial buildings to immediately deduct the cost of certain energy-efficient improvements rather than depreciate them over the 39-year period that typically applies. The deduction is available as long as construction begins by June 30, 2026.

The Sec. 179D deduction is available for new construction as well as additions to or renovations of commercial buildings of any size. (Multifamily residential rental buildings that are at least four stories above grade also qualify.) Eligible improvements include depreciable property installed as part of a building’s interior lighting system, HVAC and hot water systems, or the building envelope.

To be eligible, an improvement must be part of a plan designed to reduce annual energy and power costs by at least 25% relative to applicable industry standards, as certified by an independent contractor or licensed engineer. The base deduction is calculated using a sliding scale, ranging for 2026 from 59 cents per square foot for improvements that achieve 25% energy savings to $1.19 per square foot for improvements that achieve 50% energy savings.

Projects that meet specific prevailing wage and apprenticeship requirements are eligible for bonus deductions. Such deductions for 2026 range from $2.97 per square foot for improvements that achieve 25% energy savings to $5.94 per square foot for improvements that achieve 50% energy savings.

Look at Vehicle-Related Breaks

The Section 45W Qualified Commercial Clean Vehicle Credit is available for vehicles that were acquired on or before September 30, 2025. If your business acquired one or more eligible vehicles before that date, you may be able to claim the credit on your 2025 tax return.

And you still have time to install alternative fuel vehicle refueling property and claim a Section 30C tax credit for 2026. The credit is available for property placed in service by June 30, 2026. Property that stores or dispenses clean-burning fuel or recharges electric vehicles is eligible. The credit is worth up to $100,000 per item (each charging port, fuel dispenser or storage property).

Don’t Wait

Other clean energy breaks that might still be available to you if you act soon include the clean energy investment and production credits and the advanced manufacturing production credit. Contact the office for more information about clean-energy tax breaks and how your business might benefit.

Can You Claim a Tax Deduction for Tips or Overtime Income?

Wed, 07 Jan 2026 01:34:40 GMT

If you received tips or overtime pay in 2025, you may be eligible for a new deduction when you file your income tax return. Both deductions can be claimed whether or not you itemize deductions. But various rules and limits apply. Also be aware that such income may still be fully taxable for state and local income tax purposes. And federal payroll taxes still apply to tips and overtime income you deduct for federal income tax purposes.

Deducting Tips

Eligible taxpayers can deduct up to $25,000 of annual qualified tips income. The deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for married couples filing jointly). It’s completely phased out when MAGI reaches $400,000 ($550,000 for joint filers).

Qualified tips can be paid by customers in cash or with credit cards or given to workers through tip-sharing arrangements. The tips deduction is available if you receive qualified tips in an occupation that’s designated by the IRS as one where tips are customary. Some examples of eligible occupation categories are beverage and food service, hospitality and guest services, personal appearance and wellness, and transportation and delivery.

The tips deduction is allowed for both employees and self-employed individuals. However, those who work in certain trades or businesses (such as health, law, accounting, financial services, investment management) are ineligible.

Deducting Overtime

Eligible taxpayers can deduct up to $12,500 of qualified overtime income ($25,000 for joint filers). The deduction begins to phase out when MAGI exceeds $150,000 ($300,000 for joint filers). It’s completely phased out when MAGI reaches $275,000 ($550,000 for joint filers).

Qualified overtime income is overtime compensation mandated under Section 7 of the Fair Labor Standards Act. It requires time-and-a-half overtime pay except for certain exempt workers. Only the extra “half” constitutes qualified overtime income and thus is deductible.

Qualified overtime income doesn’t include overtime premiums that aren’t required by Sec. 7, such as those required under state laws or pursuant to union-negotiated collective bargaining agreements.

Reporting Requirements

Under the OBBBA, qualified tips income must be reported on Form W-2, Form 1099-NEC or another specified information return or statement furnished to both the worker and the IRS. And qualified overtime income must be reported to workers on Form W-2 or another specified information return or statement furnished to both the worker and the IRS.

However, the IRS announced that for the 2025 tax year, there will be no OBBBA-related changes to federal information returns such as Form W-2, Forms 1099 and Form 941. The IRS is providing transition relief for the 2025 tax year and will update forms for the 2026 tax year.

Contact the office for help determining your eligibility for one or both of these deductions.

December 2025 Newsletter

Mon, 01 Dec 2025 01:34:33 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

December 2025: Upcoming Tax Due Dates

Mon, 01 Dec 2025 01:28:27 GMT

December 15

Calendar-year corporations: Pay the fourth installment of 2025 estimated income taxes, completing Form 1120-W for the corporation’s records.

Employers: Deposit Social Security, Medicare and withheld income taxes for November if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for November if the monthly deposit rule applies.

January 12

Individuals: Report December 2025 tip income of $20 or more to employers (Form 4070).

What Are the Tax Consequences of Employee Gifts?

Mon, 01 Dec 2025 01:26:33 GMT

The holidays are a time for gratitude, and many employers show appreciation by giving gifts to their staff. Different types of gifts can have different tax consequences. So whether it’s a gift card, a holiday turkey or a year-end bonus, it’s important to know how the IRS will treat the gift.

“Achievement awards” are deductible by the employer and tax-free to the employee if certain rules are met, including that the gift be of tangible personal property. So are “de minimis” gifts, such as that holiday turkey. But year-end bonuses are taxable. Contact the office if you have questions about the tax implications of employee gifts.

Last-Minute Tax Strategy: Accelerating Deductions

Mon, 01 Dec 2025 01:25:42 GMT

Have you been claiming the standard deduction the last few years? If so, you may want to rethink that for 2025. The expanded state and local tax (SALT) deduction may cause your total itemized deductions to exceed the standard deduction and itemizing to make sense.

In that case, you might benefit from accelerating more SALT expenses and other itemized deductions into 2025. Examples include qualified medical and dental expenses (to the extent that they exceed 7.5% of your adjusted gross income), home mortgage interest (generally on up to $750,000 of home mortgage debt on a principal residence and a second residence) and charitable contributions. Contact the office to discuss whether this strategy may be right for you.

Simplify Expense Reporting With High-Low Travel Per Diem Rates

Mon, 01 Dec 2025 01:25:08 GMT

The “high-low” per diem method is a simplified way to reimburse employees who travel for your business compared to tracking actual lodging, meal and incidental expenses. For most areas within the continental United States, the per diem rate for October 1, 2025, through September 30, 2026, is $225. For “high-cost” locations within the continental United States, the per diem rate is $319. However, certain locations are considered high-cost areas only on a seasonal basis.

Businesses that use per diem rates typically don’t require employees to provide receipts. They must, however, still substantiate the time, place and business purpose of the travel. Reimbursements made on a per diem basis aren’t generally subject to income or payroll tax withholding or reported on the employee’s Form W-2. Note that per diem rates can’t be paid to individuals who own 10% or more of the business.

The Tax Implications of Remote Work

Mon, 01 Dec 2025 01:24:13 GMT

Remote work can offer advantages for both employers and employees. But it’s not without challenges, such as unexpected tax consequences.

State Tax Issues for Employees

Remote work allows employees to live in one state and work for an employer in another, which can create complex tax issues. Each state has the right to tax people based on domicile, which is where they intend to make their permanent home, and residency, where they’re physically present for a significant portion of the year, typically 183 days or more.

It’s possible to be domiciled in one state and a resident of another, which can lead to being taxed by both states on the same income. While some states offer tax credits to prevent double taxation, differences in tax rates could still mean a higher overall tax bill.

Tax and Compliance Burdens for Employers

Allowing employees to work remotely may introduce significant tax and compliance challenges for employers. For example, when employees are located in multiple states, employers may be required to withhold and remit income and payroll taxes in each jurisdiction.

Having employees in another state can also establish what’s known as a “nexus” — a legal connection that subjects the employer to that state’s tax laws. Once nexus is established, the employer may become liable for a range of state-level taxes, including income, franchise, gross receipts, and sales and use taxes.

Managing multistate reporting and compliance can be time-consuming and costly. These added complexities can increase an employer’s overall tax burden and administrative workload, making proactive planning and professional guidance essential.

Job-Related Expenses

Before 2018, employees could claim a home office deduction if they met certain conditions. In most cases, that deduction is no longer available except for self-employed business owners. Employees also generally can’t deduct other unreimbursed job-related expenses under current law.

Employers may reimburse remote workers for their business expenses according to an “accountable plan” that requires employees to substantiate the costs and meet other requirements. Properly reimbursed expenses are deductible by an employer and excludable from an employee’s income. They also generally aren’t subject to payroll taxes.

Know the Consequences

Remote workers and their employers need to understand the tax implications they may face. You may or may not be able to minimize negative tax consequences, but it’s still important to know what to expect.

NOL Deductions Can Ease the Pain of Business Losses

Mon, 01 Dec 2025 01:23:06 GMT

For income tax purposes, a business loss generally occurs when a business’s deductions for the year exceed its revenue. Any business, whether new or established, can face losses. Fortunately, the net operating loss (NOL) deduction can turn the pain of a loss this year into tax savings for next year and, perhaps, beyond.

How to Qualify

Tax inequities can exist between businesses with stable income and those with fluctuating income. The NOL deduction helps address those inequities. It essentially lets the latter average out their income and losses over the years and pay tax accordingly.

For a business to qualify for the NOL deduction, the loss generally must be caused by deductions related to your business (Schedule C and F losses or Schedule K-1 losses from partnerships or S corporations), casualty and theft losses from a federally declared disaster, or rental property (Schedule E).

Determination of an NOL generally doesn’t include:

Capital losses in excess of capital gains,
Exclusion for gains from the sale or exchange of qualified small business stock,
Nonbusiness deductions in excess of nonbusiness income,
The NOL deduction, and
The Section 199A qualified business income deduction.

Individuals and C corporations are eligible for the NOL deduction. While partnerships and S corporations generally aren’t eligible, their partners and shareholders can claim individual NOLs based on their separate shares of business income and deductions.

Limits Apply

NOL deductions can’t offset more than 80% of taxable income for the year. Any excess NOLs can be carried forward indefinitely.

Suppose your NOL carryforward is more than your taxable income for the year you carry it to. If so, you may have an NOL carryover. That’s the excess of the NOL deduction over your modified taxable income for the carry-forward year. If your NOL deduction includes multiple NOLs, you must apply them against your modified taxable income in the same order you incurred them, beginning with the earliest.

“Excess” Business Losses

Under the Tax Cuts and Jobs Act (TCJA), an excess business loss limitation went into effect in 2021. That limitation applies at the partner or shareholder level, for partnerships or S corporations, after applying the outside basis, at-risk and passive activity loss limitations.

Under the excess business loss rule, noncorporate taxpayers’ business losses can offset only business-related income or gain, plus other income (such as salary, self-employment income, interest, dividends and capital gains) up to an inflation-adjusted threshold. For 2025, that threshold is $313,000, or $626,000 for married couples filing jointly. For 2026, the limit is reduced to $256,000 and $512,000, respectively. Any “excess” losses are carried forward and treated as NOLs.

Under the TCJA, the excess business loss limitation had been scheduled to expire after December 31, 2026. However, the Inflation Reduction Act extended it through 2028, and 2025 legislation has made it permanent.

Next Steps

When it comes to business losses, the rules are complex, especially the interaction between NOLs and other potential tax breaks. Contact the office for help charting your best path forward.

How Does the New Tax Deduction for Car Loan Interest Work?

Mon, 01 Dec 2025 01:21:31 GMT

Generally, except for home mortgage interest, personal interest expense isn’t deductible for federal income tax purposes. With the passage of the legislation commonly known as the One Big Beautiful Bill Act (OBBBA), another exception has been added. That is, you might be able to deduct your car loan interest. But various rules and limits apply.

The Specifics

The OBBBA allows eligible individuals, including those who don’t itemize deductions, to deduct some or all the interest on a car loan they take out to purchase a qualifying passenger vehicle. The maximum car loan interest you can deduct is $10,000 per year for 2025 through 2028.

But the deduction is phased out starting at $100,000 of modified adjusted gross income (MAGI) or $200,000 for married couples filing jointly. For an unmarried individual, the deduction is completely phased out when MAGI reaches $150,000, and for married joint filers, the phaseout is complete when MAGI reaches $250,000.

Another limit is that only certain vehicles qualify for the deduction:

The vehicle must be a car, minivan, van, SUV, pickup truck or motorcycle with a gross vehicle weight rating under 14,000 pounds,
The vehicle must have been manufactured primarily for use on public streets, roads and highways,
The vehicle must be new, and
The “final assembly” of the vehicle must have occurred in the United States.
You must report the vehicle identification number (VIN) on your tax return. A car assembled in the United States has a special VIN to signify that it’s American-made.

Loan-Related Requirements

The loan must be taken out after 2024 and must be a first lien secured by a vehicle used for personal purposes. If an original qualified car loan is refinanced, the new loan will be a qualified loan for purposes of the deduction as long as: 1) the new loan is secured by a first lien on the eligible vehicle, and 2) the initial balance of the new loan doesn’t exceed the ending balance of the original loan.

Also be aware that interest on loans from certain related parties doesn’t qualify. And lease financing isn’t eligible.

To claim the deduction, you’ll need to substantiate how much interest you paid during the year. For that, your car loan lender must file an information return with the IRS specifying the amount. (Transitional relief is available for 2025.)

Final Thoughts

The new deduction for auto loan interest can make buying a car less expensive. But you need to consider the eligibility requirements. First, is your income below the phaseout threshold? Second, have you checked that the car you’re considering will qualify?

Also, don’t make a decision based solely on the ability to qualify for the tax deduction. In some cases, buying a used or foreign vehicle or leasing a vehicle might make more sense, even if you won’t be able to claim a tax deduction.

Finally, keep in mind that the deduction will expire after 2028 unless Congress acts to extend it. Have questions about the deduction? Contact the office.

November 2025 Newsletter

Tue, 04 Nov 2025 01:25:43 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

November 2025: Upcoming Tax Due Dates

Tue, 04 Nov 2025 01:21:02 GMT

November 17

Employers: Deposit Social Security, Medicare and withheld income taxes for October if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for October if the monthly deposit rule applies.

Calendar-year exempt organizations: File a 2024 information return (Form 990, Form 990-EZ or Form 990-PF) if a six-month extension was filed. Pay any tax, interest and penalties due.

December 10

Individuals: Report November tip income of $20 or more to employers (Form 4070).

Easier Reporting Rules for Some Forms

Tue, 04 Nov 2025 01:18:14 GMT

A pesky reporting burden for businesses will be eased by legislation signed into law on July 4. Currently, businesses must issue a Form 1099-MISC to any payee (and to the IRS) when transactions reach $600 in a calendar year. And businesses that pay $600 or more for services rendered by an independent contractor must issue a Form 1099-NEC (Nonemployee Compensation).

Beginning with payments made in 2026, the threshold rises from $600 to $2,000 and will be adjusted for inflation in subsequent years. This change simplifies compliance and reduces the risk of penalties for missed 1099 filings. However, businesses must continue to maintain accurate records of all payments.

Making Tax-Free Gift in 2025 and 2026

Tue, 04 Nov 2025 01:17:46 GMT

As the year winds down, you may be hoping to combine smart estate tax planning with tax savings using the annual gift tax exclusion. For 2025 and 2026, this exclusion is $19,000, which you may give in cash or property to any number of family members or friends, without gift tax implications. Married couples may be able to give up to $38,000 to any recipient.

Generally, married taxpayers can also gift an unlimited amount to their spouse without gift tax implications. However, if the spouse isn’t a U.S. citizen, the 2025 gift exclusion is limited to $190,000 (rising to $194,000 for 2026). Gifts exceeding that amount may require filing a federal gift tax return.

Each year you need to use your annual exclusions by Dec. 31. They don’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add this year’s unused exclusion to next year’s exclusion to make a $38,000 tax-free gift to her in 2026. Contact the office with questions.

Make Sure Every Donation Counts

Tue, 04 Nov 2025 01:17:10 GMT

Charities obviously benefit when you donate to them. But you can also benefit by securing a tax deduction on your 2025 income tax return if you donate by Dec. 31, itemize deductions and comply with the tax rules. Here are a few rules to keep in mind:

Ensure you’re donating to a qualified charitable organization. A tool on the IRS website, the Exempt Organizations Select Check, allows users to confirm a charity’s tax-exempt status.
If you receive something in return for your donation, find out its fair market value (FMV). Suppose you donate $500, and, in return, you receive event tickets. You must subtract the FMV of the tickets from the $500 to arrive at your tax deduction.
Substantiation rules apply when deducting charitable gifts, and they vary based on the type and amount of the donation. For example, some types of property donations may require a professional appraisal.

Contact the office with any questions about the charitable deduction rules.

Throwing a Party for Your Workforce? Know the Tax Rules

Tue, 04 Nov 2025 01:15:51 GMT

The holiday season is here once again, and for some workplaces, that means holiday parties. Although the rules for deducting business entertainment expenses changed several years ago, you may still qualify for some holiday party write-offs for this year, possibly even the entire cost. As you plan, understand the rules so you can avoid potentially costly missteps.

The Rules Before and Since the TCJA

Before the Tax Cuts and Jobs Act (TCJA), businesses could deduct 50% of certain entertainment costs, such as tickets for clients after contract negotiations. Although the TCJA permanently eliminated deductions for entertainment expenses starting in 2018, a key exception remains: If your business holds a company-wide party for employees, you may be able to deduct 100% of the cost. Some examples of potentially eligible expenses are:

Food and beverages,
Decorations,
Venue and furniture rentals,
Prizes and giveaways, and
DJ or live band fees

However, for such expenses to be deductible, the party must not be “lavish and extravagant,” and the entire staff must be invited, not just management. Also, if your staff consists only of family members, your party costs aren’t deductible. Under family attribution rules, the IRS views this as an event for owners or officers rather than employees.

Nonemployee Guests

Inviting friends, family, clients or business associates complicates matters. Here’s an example:

In December 2025, a company invites 60 employees and their partners to a holiday party. Forty employees and their plus-ones attend. In addition, the owner invites five friends, three business associates, and two independent contractors, who all attend with their plus-ones. The total party tab is $10,000, or $100 per person, for 100 guests.

On its 2025 corporate return, the company may deduct $8,000 (the $100 cost for each of the 40 employees and their 40 plus-ones). The $2,000 cost for the other 20 guests is considered personal and not deductible. Independent contractors are treated as nonemployees for this purpose, even if they perform similar work.

The takeaway is that the more nonemployees you invite, the less you can deduct.

Safeguarding Your Deductions

As always, keep detailed receipts and records. If the IRS questions your deductions, it may request documentation. Reduce audit risk by keeping expenses reasonable relative to company size and limiting personal guests.

Finally, contact the office with your questions. By seeking professional guidance in advance, you can show your workforce your holiday appreciation while maximizing your deductions and staying compliant with current tax law.

5 Smart Tips for Individual Year-End Tax Planning

Tue, 04 Nov 2025 01:13:59 GMT

Even during the last two months of the year, you can take steps to reduce your 2025 tax liability. Here are five practical strategies to consider.

1. Use Bunching to Maximize Deductions

If your itemized deductions are close to the standard deduction, consider a “bunching" strategy. This means timing certain payments (such as mortgage interest, state and local taxes, charitable gifts and medical expenses) so that they push you above the standard deduction in one year. The following year, you can take the standard deduction and, to the extent possible, defer paying deductible expenses to the following year. This alternating approach helps you capture deductions that might otherwise be lost.

2. Balance Gains and Losses

If you have investments in taxable accounts, keep an eye on both realized and unrealized gains and losses. Selling appreciated securities held for more than a year ensures they’re taxed at your lower long-term capital gains rate (typically 15% or 20%, plus the 3.8% net investment income tax at higher income levels), rather than your higher, ordinary-income rate (which may be as much as 37%). But selling investments at a loss can offset gains. If losses exceed gains, up to $3,000 can offset ordinary income, with the remainder carried forward. This flexibility can reduce taxes this year and in future years.

3. Gift Appreciated Assets to Loved Ones

If you want to support family members while cutting your tax bill, consider giving appreciated investments to adult children or other relatives in lower tax brackets. They can sell the assets at a lower capital gains rate, possibly even 0%. Just be cautious about the “kiddie tax," which generally applies to children under age 19 (24 if they’re full-time students), and potential gift tax implications.

4. Give Wisely to Charities

Instead of donating cash, consider giving highly appreciated stock or mutual fund shares that you’ve held more than one year. You avoid the capital gains tax you’d owe if you sold the shares, and you can deduct the full fair market value if you itemize. Alternatively, selling investments at a loss and donating the proceeds allows you to claim both the capital loss and the charitable deduction. With some tax rules set to tighten in 2026, making larger gifts before year-end could be especially advantageous. (But if you don’t itemize, you can look forward to the limited charitable deduction that will be available to nonitemizers beginning in 2026.)

5. Use Your IRA for Donations

For those age 70½ or older, making charitable donations directly from an IRA, called “qualified charitable distributions" (QCDs), offers unique advantages. You can donate up to $108,000 in 2025 directly to qualified charities, keeping those amounts out of your taxable income. This strategy reduces adjusted gross income, which may help preserve eligibility for other tax breaks.

Final Thought

The best tax strategies depend on your personal situation. Timing, income level and future expectations all matter. Before taking action, contact the office to tailor these approaches to your needs.

Bonus Depreciation and Other Year-End Tax-Saving Tools for Businesses

Tue, 04 Nov 2025 01:12:43 GMT

As this year comes to a close, business owners seeking to reduce their taxes for 2025 have a variety of opportunities. Here’s a look at two tax-saving tools: bonus depreciation and retirement plan contributions.

Assets Eligible for Bonus Depreciation

First-year bonus depreciation has been given new life under the legislation commonly known as the “One Big Beautiful Bill Act" (OBBBA). It had been scheduled to be only 40% for 2025 (60% for certain long-production assets) and to vanish after 2026. The OBBBA permanently reinstates 100% bonus depreciation for eligible assets acquired and placed in service after January 19, 2025. Acquiring eligible assets and placing them in service by Dec. 31, 2025, could significantly reduce your 2025 tax liability.

Eligible assets include most depreciable personal property, such as:

Equipment,
Computer hardware and peripherals,
Certain vehicles, and
Commercially available software.

Also eligible is qualified improvement property (QIP), defined as improvements to the interior of a nonresidential building that was already placed in service. QIP doesn’t include costs to change the building’s internal structural framework (such as enlargement). These costs must generally be depreciated over 39 years.

Unlike Section 179 expensing, which is limited to $2.5 million for 2025 (up from $1.25 million before the OBBBA) and subject to a phaseout, the amount of bonus depreciation a taxpayer can claim is generally unlimited. But there are other tax consequences to consider.

Beware of the Excess Business Loss Rule

Individual taxpayers who have losses as a sole proprietor or as an owner of a pass-through entity (partnerships, S corporations and, generally, limited liability companies) may inadvertently trigger the excess business loss rule when they claim bonus depreciation. The excess business loss rule allows business losses to offset income from other sources (such as salary, self-employment income, interest, dividends and capital gains) only up to an annual limit. Amounts above that limit are excess business losses. For 2025, this is the excess of aggregate business losses over $313,000 ($626,000 for married couples filing jointly).

Excess business losses can’t be deducted in the current year and must be carried forward to the following tax year. Such losses can then be deducted under the rules for net operation loss carryforwards. As a result, an individual taxpayer’s 100% first-year bonus depreciation deduction can effectively be limited by the excess business loss rule.

Save Taxes by Saving for Retirement

Tax-favored retirement plans can provide significant savings for small business owners, both by building retirement security and by reducing taxes. Contributions are tax-deductible (or pre-tax, if you’re contributing as an employee).

One of the simplest options is a Simplified Employee Pension (SEP) IRA. If you’re self-employed, you can contribute up to 20% of your net income to a SEP IRA, with a cap of $70,000 for the 2025 tax year. If your own corporation employs you, the contribution limit is 25% of your salary, also capped at $70,000. The tax savings can be substantial.

Other options include 401(k)s, SIMPLE IRAs and defined benefit plans. Depending on your age and income, some of these options might allow you to make even larger contributions. Ask your tax advisor for details.

Wrapping it Up

The permanent restoration of 100% first-year bonus depreciation creates tax-saving opportunities for taxpayers while they expand their business potential. And a tax-favored retirement plan is beneficial for you, your business and your employees. Every business is different, so it’s essential to consult a tax professional. Contact the office for help tailoring your tax strategies for 2025 and beyond.

October 2025 Newsletter

Fri, 03 Oct 2025 01:25:17 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

October 2025: Upcoming Tax Due Dates

Fri, 03 Oct 2025 01:23:09 GMT

October 15

Individuals: File a 2024 income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico). Pay any tax, interest and penalties due.

Individuals: Make contributions for 2024 to certain existing retirement plans or establish and contribute to a SEP for 2024 if an automatic six-month extension was filed.

Individuals: File a 2024 gift tax return (Form 709) and pay any tax, interest and penalties due if an automatic six-month extension was filed.

Calendar-year bankruptcy estates: File a 2024 income tax return (Form 1041) if an automatic six-month extension was filed. Pay any tax, interest and penalties due.

Calendar-year C corporations: File a 2024 income tax return (Form 1120) if an automatic six-month extension was filed. Pay any tax, interest and penalties due.

Calendar-year C corporations: Make contributions for 2024 to certain employer-sponsored retirement plans if an automatic six-month extension was filed.

Employers: Deposit Social Security, Medicare and withheld income taxes for September if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for September if the monthly deposit rule applies.

October 31

Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) and pay any tax due if all of the associated taxes due weren’t deposited on time and in full.

November 10

Individuals: Report October tip income of $20 or more to employers (Form 4070).

Employers: Report Social Security and Medicare taxes and income tax withholding for third quarter 2025 (Form 941) if all of the associated taxes due were deposited on time and in full.

Dependent Care Flexible Spending Accounts for Your Business

Fri, 03 Oct 2025 01:20:13 GMT

Employers seeking to offer family-friendly benefits may want to consider flexible spending accounts (FSAs) for dependent care. These FSAs let employees make pre-tax contributions through payroll withholding to help cover eligible expenses. Because of the major tax bill enacted on July 4, 2025, the annual contribution limit, currently $5,000, will rise to $7,500 in 2026.

FSA contributions reduce employees’ income tax and payroll tax and employers’ payroll tax. Withdrawals used to pay qualified expenses are tax-free.

These include expenses for care for a child under age 13 or another dependent unable to care for themselves due to physical or mental limitations. Contact the office with questions.

Say Goodbye to Paper Checks

Fri, 03 Oct 2025 01:19:29 GMT

Beginning Sept. 30, 2025, the federal government will generally no longer issue paper checks, including those for tax refunds, Social Security benefits and more. Also, certain federal agencies, such as the IRS and the Dept. of Labor (DOL), will generally stop accepting payments by paper check. This is part of a program to modernize payments, improve efficiency in processing payments and reduce administrative burdens. Historically, the government stated that checks issued by the Dept. of the Treasury are more likely to be lost, stolen or subject to other forms of fraud.

The IRS will publish detailed guidance for 2025 tax returns before the 2026 filing season begins. Until further notice, taxpayers should continue using existing forms and procedures, including those filing their 2024 returns on extension of a due date prior to Dec. 31, 2025. Contact the office with questions.

Can Your Business Benefit from the WOTC?

Fri, 03 Oct 2025 01:18:31 GMT

Employers who hire new workers may qualify for a tax benefit, but they shouldn’t wait too long. The Work Opportunity Tax Credit (WOTC) is a valuable federal tax credit that incentivizes employers to hire from certain targeted groups that face employment barriers. But it will expire after 2025 unless Congress acts to extend it.

Targeted groups include qualified veterans, recipients of certain aid programs, ex-felons and qualified long-term unemployment recipients. Employers must file a form with their state workforce agency to prescreen and certify individuals they wish to hire.

Tax Breaks for Medical Expenses

Fri, 03 Oct 2025 01:17:42 GMT

Depending on your situation, you may be able to claim certain medical expenses as deductions on your tax return. However, you must itemize deductions, and having enough expenses to qualify can be challenging. Here are five tips to keep in mind:

 1. Consider “bunching” expenses. You can only deduct unreimbursed medical costs that exceed 7.5% of your adjusted gross income (AGI). If your 2025 itemized deductions will be higher than your standard deduction, consider moving or “bunching” nonurgent medical procedures and other controllable expenses into the same year. This strategy may help you surpass the 7.5% threshold and maximize your deduction.

2. Include insurance premiums. Premiums can add up to thousands of dollars annually, even if you pay only part of the cost yourself. (But first check that they aren’t already coming out of your paycheck pretax.) Long-term care insurance premiums also qualify, subject to age-based limits.

3. Claim travel costs for medical care. For 2025, you can deduct travel expenses for medical treatment, including taxi fares, public transit, or 21 cents per mile (plus tolls and parking) if driving. Be sure to carefully document your mileage.

4. Time certain medical purchases strategically. Qualifying expenses that you may be able to time include eyeglasses, hearing aids, specific dental work, and prescription drugs (including insulin). However, over-the-counter items, such as aspirin and vitamins and federally illegal treatments (for example, medical marijuana) aren’t deductible, even if allowed by state law.

5. Don’t overlook smoking-cessation and weight-loss programs. You can deduct costs for smoking-cessation programs and prescribed medications to reduce nicotine withdrawal, but not over-the-counter gum or patches. Weight-loss programs qualify if prescribed to treat a physician-diagnosed disease. Deductible costs include program fees and meeting charges, but not the cost of diet food.

If you still have questions, see IRS Publication 502 for complete details, or contact the office for personalized guidance.

2 Important Changes for Businesses under the New Tax Law

Fri, 03 Oct 2025 01:16:52 GMT

The One Big Beautiful Bill Act (OBBBA) introduces a range of tax changes that will impact businesses. Many provisions set to expire this year are now being extended or made permanent. Below is a snapshot of two important changes to help you with tax planning in the fourth quarter of 2025 and going forward.

How the Deduction for R&E Expenses Has Changed

Under the Tax Cuts and Jobs Act (TCJA), businesses had to amortize deductions for Section 174 research and experimentation (R&E) costs over five years for expenses incurred in the United States or 15 years for those incurred abroad. This provision used a mid-year rule that effectively stretched write-offs over six years. The OBBBA changes that by permanently allowing full, immediate deductions for domestic R&E expenses starting in the 2025 tax year. Foreign R&E expenses will still be amortized over 15 years.

In addition, the OBBBA lets “small businesses” (in 2025, those with average annual gross receipts of $31 million or less for the past three years) claim R&E deductions retroactively to 2022. A business of any size with domestic R&E costs from 2022 to 2024 can choose to speed up the remaining deductions for those years over a one- or two-year period.

How the Business Interest Deduction Has Changed

Generally, the TCJA limited business interest deductions to 30% of the taxpayer’s adjusted taxable income (ATI) for the year. Before the OBBBA, ATI generally referred to earnings before interest and taxes. For tax years beginning after December 31, 2024, the OBBBA increases the cap on the business interest deduction by excluding depreciation, amortization and depletion when calculating ATI. This change typically increases ATI, allowing taxpayers to deduct more business interest expense.

But it’s important to note that, in 2025, taxpayers with average annual gross receipts for the last three years that don’t exceed $31 million are exempt from the interest deduction limitation.

Rethink Tax Planning

For business owners, the OBBBA helps resolve tax planning uncertainty. Keep in mind, these are just two of the key changes for businesses in this tax legislation.

Contact the office to discuss the full range of tax provisions covered by the new law. We can help you optimize any extended or new provisions that are relevant to your situation and reduce your tax obligations for 2025 and beyond.

Enhanced SALT Tax Break Will Help Many Homeowners

Fri, 03 Oct 2025 01:15:38 GMT

The One Big Beautiful Bill Act (OBBBA), enacted on July 4, will allow more taxpayers to fully deduct their state and local tax (SALT) expenses (including property tax). Here are the details.

SALT Deduction Expanded

Under the Tax Cuts and Jobs Act, the itemized deduction for SALT was limited to $10,000 ($5,000 for married individuals who file separately) beginning in 2018.

This limitation negatively affected taxpayers living in locations with high state income tax rates and those who pay high property taxes because:

They live in a high-property-tax jurisdiction,
They live in a location with high property values,
They own an expensive home, or
They own both a primary residence and one or more vacation homes.

Under the OBBBA, for 2025 through 2029, the SALT deduction limit increases from $10,000 to $40,000 (or $20,000 for separate filers) with 1% annual inflation adjustments. So, for 2026, the cap will be $40,400 ($20,200 for separate filers).

But unless Congress takes further action, the SALT deduction limit is scheduled to revert to the prior-law limit of $10,000 ($5,000 for separate filers) in 2030.

Note: Several states have established SALT deduction workarounds for pass-through entities. These workarounds aren’t addressed or limited by the OBBBA.

Smaller Benefit for Some Taxpayers

Under the OBBBA, for 2025, the higher SALT limit begins to be reduced for taxpayers with modified adjusted gross income (MAGI) over $500,000 ($250,000 for separate filers). These thresholds will also be increased by 1% annually for 2026 through 2029.

When a taxpayer’s MAGI exceeds the applicable threshold, the otherwise allowable SALT deduction limitation is reduced by 30% of MAGI above the threshold, but not below $10,000 ($5,000 for separate filers). Here’s an example: Greg and Tina are a married couple who file jointly and live in a high-tax state. For 2025, their combined SALT expenses are $60,000. Their MAGI is $550,000 for 2025, which is $50,000 above the applicable threshold. Therefore, their SALT deduction for 2025 is limited to $25,000 [$40,000 minus (30% times $50,000)].

Because of the 30% reduction, the expanded SALT deduction doesn’t benefit taxpayers with MAGI at or above $600,000 ($300,000 for separate filers).

Deducting State and Local Income vs. Sales Tax

The SALT deduction continues to be available for property taxes plus the total state and local income taxes or the total of all sales taxes. Choosing to deduct sales taxes is a helpful option if you owe little or nothing for state and local income taxes or you made a major purchase that causes your sales tax to exceed your state and local income tax.

If you opt to deduct sales tax, you don’t have to save all of your receipts for the year and manually calculate your sales tax; you can use the IRS Sales Tax Calculator on the IRS website to determine the amount of sales tax you can claim. (It includes the ability to add actual sales tax paid on certain big-ticket items, such as a car.)

Start Planning Now

If you have high SALT expenses, to get the maximum benefit from the increased deduction limit, you need to plan carefully between now and year end. For example, you may want to take steps to keep your MAGI under the reduction threshold. Or you might want to accelerate property tax payments into 2025. Contact the office for help determining the right strategy for your specific situation.

September 2025 Newsletter

Tue, 09 Sep 2025 00:44:27 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

September 2025: Upcoming Tax Due Dates

Tue, 09 Sep 2025 00:42:09 GMT

September 15

Individuals: Pay the third installment of 2025 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficient income tax through withholding.
Calendar-year corporations: Pay the third installment of 2025 estimated income taxes, completing Form 1120-W for the corporation’s records.
Calendar-year S corporations: File a 2024 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1 if an automatic six-month extension was filed. Pay any tax, interest and penalties due.
Calendar-year S corporations: Make contributions for 2024 to certain employer-sponsored retirement plans if an automatic six-month extension was filed.
Calendar-year partnerships: File a 2024 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1 if an automatic six-month extension was filed.
Employers: Deposit Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies.
Employers: Deposit nonpayroll withheld income tax for August if the monthly deposit rule applies.

September 30

Calendar-year trusts and estates: File a 2024 income tax return (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due.

October 10

 Individuals: Report September tip income of $20 or more to employers (Form 4070).

An Employee Benefit That Also Saves Tax for Your Business Just Got Better

Tue, 09 Sep 2025 00:40:39 GMT

If a couple gets separated or divorced, it affects tax obligations. The IRS considers couples married for tax purposes until a final decree is issued. After separating or divorcing, update your Form W-4 with your employer and check withholding using the IRS estimator.

Generally, alimony payments and child support payments aren’t deductible by the paying spouse or included in the taxable income of the recipient spouse. (Tax treatment of alimony payments is different if they’re being made under agreements entered into on or before December 31, 2018.) Property transfers due to divorce typically aren’t taxed but may require a gift tax return. Also, be aware that only one parent can claim a child as a dependent.

Separated or Divorced? Know Your Tax Obligations

Tue, 09 Sep 2025 00:40:13 GMT

Seniors May Be Eligible for a New Deduction

Tue, 09 Sep 2025 00:39:47 GMT

For 2025 through 2028, individuals age 65 and older may be able to claim a new senior deduction of up to $6,000, subject to income-based phaseouts. This deduction is available whether or not the taxpayer itemizes. It begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 for married couples filing jointly).

Does this new deduction replace the existing extra standard deduction for those age 65 and up? No. For 2025, single qualifying seniors can take the additional $2,000 standard deduction. Married couples who file jointly can take an extra standard deduction of $1,600 per qualifying spouse. Contact the office with questions.

Before a Weather Emergency Closes Your Business, Make a Plan

Tue, 09 Sep 2025 00:38:59 GMT

The One, Big, Beautiful Bill Act (OBBBA) brings a wide range of tax changes, with several key updates designed to support families. Among the many provisions, here are three with the potential to lower your tax bill.

1. Boosted Child Tax Credit with a New Rule

Beginning in 2025, the Child Tax Credit (CTC) increases to $2,200 per qualifying child under age 17 (up from $2,000). It will be adjusted annually for inflation starting in 2026. The refundable portion (the part you can receive even if you owe no tax) is locked in at $1,700 for 2025 and will also adjust for inflation moving forward.

The modified adjusted gross income (MAGI) thresholds for the phaseout of the CTC remain unchanged and permanent at:

$200,000 for single and head of household taxpayers
$400,000 for married couples filing jointly

Beginning in 2025, you must include valid Social Security numbers (SSNs) for both the child and the taxpayer claiming the credit. For joint filers, at least one spouse must have an SSN to qualify.

2. The $500 Credit for Other Dependents Lives On

Previously set to expire after 2025, the $500 Credit for Other Dependents (COD) is now permanent. The nonrefundable COD applies to dependents who don’t qualify for the child tax credit, such as college-aged children or elderly parents. The dependent must be a U.S. citizen, national or resident alien and must have a valid Social Security number or Individual Taxpayer Identification number.

The income-based phaseouts are the same as those for the CTC.

3. Adoption Credit Gets a Refundable Benefit

For 2025, the maximum credit is $17,280 per adoption. But the credit phases out at higher MAGI levels than the CTC and COD:

Begins phasing out at $259,190
Fully phases out at $299,190

These amounts apply to all filing statuses.

Under the OBBBA, up to $5,000 of the credit is now refundable, offering more immediate financial help to some adoptive parents. The nonrefundable portion can be carried forward; the refundable portion cannot.

Your tax advisor can offer more information about the tax side of adoption.

Questions?

These are just three highlights from the OBBBA’s roughly 870 pages of tax updates. Some families stand to benefit, but as always, contact the office to make the most of what’s available to you.

3 Family-Friendly Tax Benefits in the New Tax Law

Tue, 09 Sep 2025 00:37:55 GMT

1. Boosted Child Tax Credit with a New Rule

The modified adjusted gross income (MAGI) thresholds for the phaseout of the CTC remain unchanged and permanent at:

$200,000 for single and head of household taxpayers
$400,000 for married couples filing jointly

Beginning in 2025, you must include valid Social Security numbers (SSNs) for both the child and the taxpayer claiming the credit. For joint filers, at least one spouse must have an SSN to qualify.

2. The $500 Credit for Other Dependents Lives On

The income-based phaseouts are the same as those for the CTC.

3. Adoption Credit Gets a Refundable Benefit

For 2025, the maximum credit is $17,280 per adoption. But the credit phases out at higher MAGI levels than the CTC and COD:

Begins phasing out at $259,190
Fully phases out at $299,190

These amounts apply to all filing statuses.

Your tax advisor can offer more information about the tax side of adoption.

Questions?

These are just three highlights from the OBBBA’s roughly 870 pages of tax updates. Some families stand to benefit, but as always, contact the office to make the most of what’s available to you.

The QBI Deduction: Good News for Eligible Business Owners

Tue, 09 Sep 2025 00:36:51 GMT

If you’re a small business owner or you’re self-employed, there’s good news on the tax front. The Section 199A qualified business income (QBI) deduction, a powerful tax-saving opportunity since 2018, was initially set to expire in 2025. But thanks to the recent enactment of the One Big Beautiful Bill Act (OBBBA), it’s not only here to stay, it’s also improved.

What Is the QBI Deduction?

This tax break allows eligible business owners to deduct up to 20% of their QBI from their taxable income. It applies to owners of pass-through entities, including S corporations, partnerships and, usually, LLCs, as well as sole proprietors.

QBI typically includes net business income but excludes investment capital gains and losses, dividends, interest income, owner wages, and guaranteed payments to partners or LLC members. And, you don’t need to itemize deductions to claim this deduction.

How Income Affects QBI Eligibility

While the full 20% deduction is available to many, it’s subject to certain limits that phase in based on taxable income and other factors. Your tax advisor can help with this.

If your business is a specified service trade or business (SSTB), your deduction reduces gradually as your income increases beyond the threshold, $197,300 ($394,600 if you’re married filing jointly) for 2025. If your income exceeds the top of the income range, $247,300 ($494,600 if you’re filing jointly) for 2025, you lose the deduction entirely.

SSTBs include professions like law, medicine, accounting, financial planning and consulting, but not engineering or architecture.

Non-SSTBs face other limitations. If their income exceeds the top of the range, their deduction can’t exceed the greater of their share of:

50% of the amount of W-2 wages paid to employees by the qualified business during the tax year, or
The sum of 25% of W-2 wages plus 2.5% of the cost (not reduced by depreciation taken) of qualified property.

If their income falls within the range, these limits apply only partially. If the rules and thresholds seem daunting, lean on us.

Better News for 2026 and Beyond

Here’s what pass-through business owners can look forward to:

The top of the income range for the additional limits increases from $50,000 above the threshold to $75,000 above the threshold (from $100,000 to $150,000 for joint filers).
A new minimum QBI deduction of $400 is introduced for taxpayers earning at least $1,000 in QBI, provided they materially participate in the business.

As a result of these changes, more business owners will be eligible for the deduction in 2026 and beyond, and some owners’ deductions will increase.

Bottom Line

The QBI deduction can significantly reduce your tax bill. With the deduction now made permanent and set to improve in 2026, it’s worth revisiting your tax strategy with the help of a qualified advisor. Contact the office to ensure you’re making the most of this valuable opportunity.

August 2025 Newsletter

Sun, 03 Aug 2025 01:22:52 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

Bonus Depreciation Gets a Reprieve

Sun, 03 Aug 2025 01:13:27 GMT

First-year bonus depreciation had been phasing down 20 percentage points annually since 2023 and was set to drop to 0% in 2027. Businesses have been eager to learn the fate of this popular depreciation-related tax break. The good news is that the One, Big, Beautiful Bill Act makes permanent 100% first-year bonus depreciation for the cost of qualified new and used assets acquired and placed in service after Jan.19, 2025.

If you’d been holding off on investing in qualified assets such as office furniture, equipment and off-the-shelf computer software because 2025 bonus depreciation had been only 40%, you may want to move ahead now. Remember, assets must not just be acquired but also be placed in service by Dec. 31 for you to claim 100% bonus depreciation on your 2025 calendar year tax return. Contact the office to learn about these and other business-related tax provisions in the law.

There's No Advantage to Last-Minute Tax Return Filing

Sun, 03 Aug 2025 01:11:25 GMT

If you requested an extension to file your tax return after the April 15, 2025, due date, the extended deadline is Wednesday, Oct. 15. If you have the information you need, consider filing now. There’s no advantage to waiting, and last-minute filing may lead to stress and worry.

If you’re concerned about paying any tax owed, the IRS offers short- and long-term payment plans, as well as installment agreements, to taxpayers who qualify. It’s important to act quickly if you owe because any amount that was due April 15 accrues interest until the balance is paid. So, as soon as possible, gather your 2024 tax year records and contact the office for a tax preparation appointment or to ask questions you may have.

Timing a Roth IRA Conversion

Sun, 03 Aug 2025 01:10:37 GMT

Now might be a good time for some taxpayers to convert their traditional IRA to a Roth IRA. Traditional IRA withdrawals are taxed and, if taken early, may be subject to penalties. Also, required minimum distributions (RMDs) must be taken starting at age 73 (or 75 if you won’t turn 73 until after 2032). But qualified Roth IRA withdrawals are tax-free, you can access Roth contributions anytime tax- and penalty-free, and there are no RMDs for Roth accounts.

Converting a traditional IRA to a Roth can allow you to turn tax-deferred future growth into tax-free growth and take advantage of a Roth IRA’s other benefits. But, taxes are due on the converted amount. If your traditional IRA’s value has dropped due to market volatility or you’re in a lower-than-usual tax bracket this year, your tax bill on a conversion will be lower.

Ideally, pay taxes with non-IRA funds to preserve future tax-free growth potential. Conversions work best if you don’t need the money soon, giving it time to grow. You can even spread conversions across multiple years to reduce the tax impact. A Roth conversion can be a smart move, but it’s not for everyone. Contact the office to explore your options.

The Quirky Math of Partnership Income

Sun, 03 Aug 2025 01:09:25 GMT

When it comes to taxation, partners in a business may find the math a bit puzzling. You may discover that the amount of partnership income you’re taxed on is more than the amount that was distributed to you. That’s a quirk of taxation that lies in the way partnerships and partners are taxed.

Pass-Through Taxation

Partnerships aren’t subject to income tax at the entity level. Instead, each partner is taxed on the earnings of the partnership, even if the profits aren’t distributed.

Similarly, if a partnership incurs a loss, it’s passed through to the partners. (However, various rules may prevent partners from currently using their shares of the partnership’s losses to offset other income.)

Filing Responsibilities

A partnership must file an information return, IRS Form 1065, “U.S. Return of Partnership Income.” On this form, the partnership separately identifies income, deductions, credits and other items.

This allows partners to properly treat items that are subject to limits or other rules that could affect their treatment at the partner level. Examples of items that may require special treatment include capital gains and losses, interest expense on investment debts, and charitable contributions. Each partner receives a Schedule K-1, showing their share of partnership items for the tax year.

Basis and distribution rules ensure that partners aren’t taxed twice. A partner’s initial basis in his or her partnership interest (which varies depending on how the interest was acquired) is increased by his or her share of partnership taxable income. When that income is paid out to partners in cash, they aren’t taxed on the money if they have sufficient basis. Instead, partners reduce their basis by the amount of the distribution. If a cash distribution exceeds a partner’s basis, then the excess is taxed to the partner as a gain.

Heads Up!

Understanding the ins and outs of partnership taxation can help you avoid surprises come tax time. If you’re unsure how these rules apply to your specific situation, especially with complex items such as losses or special allocations, don’t hesitate to reach out. Contact the office for help with the math and whatever other questions you may have.

Should You Be Making Estimated Payments?

Sun, 03 Aug 2025 01:08:48 GMT

If your federal tax withholding isn’t enough to cover your total tax liability, you may need to make estimated tax payments. This typically applies if you have income from sources such as interest, dividends, capital gains or self-employment. The following rules explain how to make these payments without incurring an underpayment penalty.

How Much to Pay and When

Individuals subject to estimated tax requirements generally must pay 25% of a “required annual payment” by April 15, June 15 and September 15 of the tax year and January 15 of the following year to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day.

So the third installment for 2025 is due on Monday, September 15. Payments are made using Form 1040-ES and may be made electronically or on paper.

Who Must Pay

The general rule is that you may have to pay estimated tax for 2025 if both of these conditions apply:

1. You expect to owe at least $1,000 for 2025, after subtracting your withholding and tax credits, and

2. You expect your withholding and tax credits to be less than the smaller of:

90% of your 2025 tax liability or 100% of your 2024 tax liability (110% if your 2024 adjusted gross income was more than $150,000, or $75,000 if you’re married filing separately in 2025).

Calculating Payments

If you do have to pay estimated taxes, calculating them requires projecting total income, deductions, credits and withholding for the year. After determining the required annual payment, divide that number by four and make four equal payments by the due dates.

But you may be able to use the annualized income method to make smaller payments during part of the year. This method is helpful to people whose income flow isn’t uniform over the year, perhaps because the business is seasonal.

For example, suppose your income comes exclusively from a business operated in a resort area during June, July and August. In that case, you may not have to make an estimated payment, or as large a payment, for the first two installments, and then you’ll need to “catch-up” when you make the third installment payment.

For More Information

If you have questions about the estimated tax rules and how they apply to you, contact the office.

Clean Vehicle Credits Expire September 30

Sun, 03 Aug 2025 01:07:04 GMT

If you’ve been pondering the purchase of a new or used electric vehicle for yourself or your business, you may want to buy sooner rather than later to take advantage of available tax credits. Under the One, Big, Beautiful Bill Act (OBBBA), these credits won’t be available for purchases made after September.

Individual Credits

The Clean Vehicle Credit (Sec. 30D) was scheduled to expire after 2032. Under the OBBBA, the credit is available only through September 30, 2025. In 2022, the Inflation Reduction Act (IRA) significantly expanded the credit for qualifying clean vehicles placed in service after April 17, 2023. For eligible taxpayers, it extended the credit to any “clean vehicle,” including electric vehicles, hydrogen fuel cell cars and plug-in hybrids.

The maximum credit for new vehicles is $7,500, based on meeting certain sourcing requirements for 1) critical minerals and 2) battery components. Clean vehicles that satisfy only one of the two requirements can qualify for a $3,750 credit.

Vans, pickup trucks and SUVs with a manufacturer’s suggested retail price (MSRP) of more than $80,000 don’t qualify for the credit, nor do automobiles with an MSRP higher than $55,000. Qualified vehicles also must undergo final assembly in North America.

The IRA also created a new credit, Sec. 25E, for eligible taxpayers who buy used clean vehicles from dealers. The credit equals the lesser of $4,000 or 30% of the sale price. But the credit can’t be claimed at all if the sale price is over $25,000. The OBBBA also ends this credit after September 30, 2025.

These credits are unavailable to taxpayers with incomes exceeding certain amounts, and additional rules and limits apply.

Business Credit

The OBBBA also eliminates the tax incentive for a business’s use of clean vehicles. The Qualified Commercial Clean Vehicle Credit (Sec. 45W) had been scheduled to expire after 2032. It’s now available only for vehicles acquired on or before September 30, 2025. Depending on vehicle weight, the maximum credit is up to $7,500 or $40,000.

Additional rules and limits also apply to this credit.

Do Your Due Diligence

While these credits can be valuable, don’t rush to purchase a clean vehicle without doing your due diligence. Check whether the vehicle you want to buy is qualified and that you would indeed be eligible to claim the credit. If you have questions regarding any of these clean vehicle credits (or other tax breaks related to purchasing a vehicle) please don’t hesitate to contact the office.

August 2025: Upcoming Tax Due Dates

Sun, 03 Aug 2025 01:03:42 GMT

August 15

Employers: Deposit nonpayroll withheld income tax for July if the monthly deposit rule applies.

Employers: Deposit Social Security, Medicare and withheld income tax for July if the monthly deposit rule applies.

September 10

Individuals: Report August tip income of $20 or more to employers (Form 4070).

July 2025: Upcoming Tax Due Dates

Thu, 03 Jul 2025 01:58:36 GMT

July 10

Individuals - Report June tip income of $20 or more to employers (Form 4070).

July 15

Employers - Deposit nonpayroll withheld income tax for June if the monthly deposit rule applies.

Employers - Deposit Social Security, Medicare and withheld income taxes for June if the monthly deposit rule applies.

July 31

Employers - File a 2024 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

Employers - Report Social Security and Medicare taxes and income tax withholding for second quarter 2025 (Form 941) and pay any tax due if all of the associated taxes due weren’t deposited on time and in full.

July 2025 Newsletter

Thu, 03 Jul 2025 01:55:09 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

10 Small Business Tax Tips from the IRS

Thu, 03 Jul 2025 01:52:13 GMT

To help ensure small businesses take advantage of all potential tax breaks, the IRS Taxpayer Advocate Service (TAS) summarizes the types of tax you may owe and provides a list of 10 federal tax tips.

Among the tips are to separate your business and personal finances, which means establishing business-only bank accounts and credit cards. Another TAS tip, directed at startups in particular, is to correctly classify your business. Choosing the appropriate business structure is important because some enjoy greater tax benefits. But perhaps the most important tips are to know when to get tax assistance from a professional and to choose one who’s knowledgeable and trustworthy.

Read the tips here: https://www.taxpayeradvocate.irs.gov/news/tax-tips/small-business-tax-highlights/2025/04/

What Could Happen if You Don't File a Required Tax Return?

Thu, 03 Jul 2025 01:51:32 GMT

Taxpayers who are required to file a federal tax return but don’t may be in for a costly surprise. If the IRS receives a document like a Form W-2 indicating taxable income, it may file a Substitute for Return (SFR) on your behalf.

Before doing so, the IRS typically will attempt to contact you and encourage voluntary filing. If you fail to file by the deadline, the IRS can move forward with an SFR. The resulting tax bill will likely be higher than necessary because it won’t include deductions or credits you qualify for.

If you receive a Notice of Deficiency with a proposed assessment, don’t delay. Respond within 90 days to avoid further action and additional penalties. Contact the office for help.

The Tax Impact of Business Bartering

Thu, 03 Jul 2025 01:50:59 GMT

Bartering is simply the exchange of services or property, and it’s a taxable event. For example, if a computer consultant trades services with an advertising agency, each must report income equal to the fair market value of the services they received, typically the amount the service provider would normally charge. The rules are similar when property is part of the exchange. For example, if a construction company accepts unsold inventory as payment, it must report income equal to the inventory’s fair market value.

Some businesses participate in barter clubs that manage these exchanges using “credit units.” Members earn credits by providing goods or services and redeem them later. Generally, bartering is taxable in the year it occurs. However, when participating in a barter club, you might owe taxes when credits are added to your account, rather than when they’re used. Barter clubs must send participants IRS Form 1099-B (Proceeds from Broker and Barter Transactions) by January 31 of the following year.

Business bartering transactions may be beneficial as long as you’re aware of the federal and state tax consequences. Contact the office if you need assistance or would like more information.

What Counts as a Business Expense?

Thu, 03 Jul 2025 01:50:14 GMT

If you own a business or work as an independent contractor, knowing what qualifies as a business expense can save you a significant amount of money at tax time. Every dollar you deduct lowers your taxable income, which means you keep more of what you earn. But what exactly counts as a business expense? Getting it right is crucial not only for your finances but also for staying on the IRS’s good side.

Understanding the Basics

At its core, a business expense is any cost that is both ordinary and necessary for operating your business. “Ordinary” means it’s common and accepted in your industry. “Necessary” means it’s helpful and appropriate for your business. That doesn’t mean it has to be indispensable, but it should be justifiable if the IRS ever comes knocking.

It helps to think about the direct connection between the expense and the work you do. If the cost contributes to earning income or running your business more efficiently, there’s a good chance it qualifies.

Common Deductible Expenses

Many business expenses are straightforward. These are the types of costs most business owners encounter, and the IRS generally accepts them without much scrutiny:

Rent or lease payments for business space
Office supplies and equipment
Business-related travel and meals
Professional services such as accounting or legal advice
Marketing and advertising

Keep in mind that even everyday purchases need to be documented clearly. Save your receipts, keep notes on the purpose of the expense, and maintain accurate records.

What About Mixed-Use Items?

Not everything you use for business is exclusively used for business. Items like your cell phone, home office, or vehicle may serve both personal and professional purposes. In these cases, you can still deduct the portion related to business use.

Here are a few examples:

If you use your car 60% of the time for business, you can deduct 60% of the vehicle-related expenses.
If you work from a home office, you may qualify for a home office deduction based on square footage.
If you use your personal cell phone for work calls, the business-use portion of your phone bill may be deductible.

The key is to keep good records and be honest about how much you use each item for business purposes.

Expenses That May Surprise You

Some expenses might not seem obvious at first but could still be deductible. For example, professional development courses, industry publications, or business insurance premiums often qualify. Even a portion of your internet bill might be deductible if it supports your business operations.

Don’t overlook:

Continuing education related to your industry
Fees for software or subscriptions used for business
Bank fees on business accounts
Costs of setting up your business, like licenses or permits

These types of expenses can add up quickly, and they are often missed simply because they don’t feel like traditional business costs.

Be Prepared for Tax Time

When it comes to filing taxes, the more organized you are, the better. Make it a habit to track your expenses regularly. Waiting until the end of the year makes the process more stressful and increases the chances of missing deductions.

Using a digital bookkeeping system or working with a trusted accountant can make this much easier. If you’re unsure whether an expense qualifies, asking a professional can save you time and reduce your risk of an audit.

Your Guide to Smarter Business Finances

Understanding what counts as a business expense puts you in a stronger position to manage your finances effectively. It allows you to plan better, take full advantage of deductions, and reduce your taxable income legally and ethically. With good records and a clear understanding of the rules, you can approach tax season with more confidence and fewer surprises. If you’re ever in doubt, a professional accountant can help you navigate the details so you can focus on growing your business.

The post What Counts as a Business Expense? first appeared on www.financialhotspot.com .

Understanding IRS Penalty Abatement and How to Request It

Thu, 03 Jul 2025 01:48:58 GMT

Getting a notice from the IRS about penalties can be overwhelming. If you’ve been hit with a penalty for filing late, paying late, or failing to deposit taxes properly, you’re not alone. The good news is the IRS offers a relief option called penalty abatement. If you qualify, you could reduce or even eliminate the amount you owe. Knowing your options and how to take action can ease your stress and protect your financial health.

What Is Penalty Abatement?

Penalty abatement is a form of relief the IRS offers to taxpayers who have been assessed certain penalties. It’s not automatic, and it’s not guaranteed, but it’s a legitimate opportunity to request leniency if you meet specific criteria. The IRS may waive penalties related to failure-to-file, failure-to-pay, or failure-to-deposit, depending on your circumstances.

There are several types of penalty relief:

First-Time Penalty Abatement (FTA): For taxpayers with a clean compliance history.
Reasonable Cause Relief: For those who can show they had a valid reason for missing tax deadlines.
Statutory Exception: When incorrect IRS advice contributed to the penalty.

Understanding which option fits your situation is the first step toward a successful request.

Do You Qualify for Relief?

Before you apply, make sure you meet the IRS requirements. Not everyone qualifies, but you may be eligible if you:

Filed all required returns or filed an extension
Paid or arranged to pay any tax due
Have a history of compliance (especially for First-Time Abatement)

If your situation was caused by circumstances beyond your control, such as a serious illness, natural disaster, or unavoidable absence, you may also qualify under the reasonable cause category.

It’s worth reviewing your IRS account or speaking with a tax professional to make sure your records are up to date before submitting a request.

How to Request Penalty Abatement

Once you’ve confirmed that you may qualify, you can begin the request process. The method you use depends on the type of penalty and your situation. Here are the common ways to submit a request:

Call the IRS: In some cases, you can get an immediate decision by calling the number on your IRS notice.
Write a Letter: If your case is more complex or involves reasonable cause, a written statement with supporting documentation may be required.
Use IRS Form 843: This form is often used for requesting abatement or refund of certain penalties.

Be sure to include details that explain why the penalty should be removed. The IRS is more likely to approve your request if you provide clear evidence and keep your tone respectful and factual.

What Happens After You Apply?

After your request is submitted, it may take several weeks for the IRS to respond. If your request is approved, the penalties will be reduced or removed. If it’s denied, you still have the option to appeal the decision.

During this time, it’s important to continue making any agreed-upon payments. This shows good faith and can support your appeal if necessary. If you’re unsure how to handle the follow-up or want to avoid complications, working with a tax professional can be a smart move.

Your Next Step Toward Peace of Mind

Tax penalties can feel like a burden, but they don’t have to derail your finances. By understanding how IRS penalty abatement works and taking the right steps to apply, you may find welcome relief from some of the pressure. Remember, you don’t have to tackle this alone. A trusted accountant or tax advisor can help you determine your eligibility, gather the necessary documentation, and guide you through the process with confidence.

The post Understanding IRS Penalty Abatement and How to Request It first appeared on www.financialhotspot.com .

Steps to Take Financially After Losing a Job

Thu, 03 Jul 2025 01:47:47 GMT

Losing your job can feel like the rug has been pulled out from under you. Whether it was expected or not, a sudden loss of income can stir up anxiety and uncertainty. While this is no doubt a stressful time, you do have control over your next steps. Acting quickly and strategically can protect your financial future and help you regain your footing with confidence.

Assess Your Immediate Financial Needs

The first thing you should do is take stock of your current financial situation. This isn’t the time to avoid your bank statements. Sit down and review your income (if any), monthly expenses, and savings. Identify what must be paid to maintain essentials like housing, food, utilities, and insurance.

Your goal here is to understand how long your money will last. Once you know your “runway,” you can make more informed decisions. You may not have control over how fast you find a new job, but you can control how you manage your resources in the meantime.

Cut Back on Non-Essential Spending

Now is the time to trim the fat. While it may not be fun to cut back, doing so early can help your savings stretch further. Start by eliminating unnecessary subscriptions, reducing dining out, and postponing major purchases. Every little bit saved extends your financial cushion.

You might be surprised how much you can reduce your spending without sacrificing too much comfort. Think of this as a temporary adjustment, not a permanent lifestyle change.

Apply for Unemployment Benefits and Assistance

If you lost your job through no fault of your own, you may qualify for unemployment benefits. File for these as soon as possible, as processing can take time. These payments won’t replace your full income, but they can help you cover basic expenses.

In addition to unemployment, look into other forms of assistance. This might include:

Health insurance subsidies through the Marketplace
SNAP (food assistance) benefits
Local utility or rent relief programs

Don’t hesitate to use these resources. They exist to help people in exactly your position.

Reevaluate Your Budget

With your new income and spending realities in mind, update your budget. This isn’t just about cutting back. It’s about redirecting your money where it matters most. Keep essentials funded and avoid high-interest debt like credit cards whenever possible.

Your budget should include:

A list of essential expenses
Any sources of income (unemployment, side gigs, severance)
A plan to cover shortfalls, if any

Using a simple spreadsheet or a free budgeting app can make this process easier to manage and adjust.

Stay on Top of Your Bills

It’s easy to feel overwhelmed when the bills keep coming, but communication is key. If you anticipate missing payments, reach out to creditors and service providers early. Many have hardship programs or forbearance options available for people who are temporarily out of work.

Being proactive shows responsibility and can help you avoid penalties, fees, or damage to your credit. Keeping your credit in good shape now will give you more options down the road.

Explore New Income Sources

While searching for your next full-time role, consider tapping into temporary or freelance work. Remote gigs, part-time jobs, and contract opportunities can bring in enough to keep you afloat and reduce your reliance on savings.

This can also be a chance to explore skills you haven’t used before or even start something you’ve always wanted to try. Diversifying your income can increase your resilience and build confidence while you job hunt.

Focus on Your Financial Wellness and Mental Health

Being unemployed can take a toll on your mental well-being. Try to maintain a routine, set daily goals, and celebrate small wins. Staying engaged in your life will help you feel more in control and reduce anxiety.

Keep in mind that this is a season, not a sentence. With the right financial steps, support system, and mindset, you’ll get through this time stronger and more prepared than ever. Reach out to a financial advisor or accountant if you need help making a long-term plan. You don’t have to navigate this alone.

The post Steps to Take Financially After Losing a Job first appeared on www.financialhotspot.com .

What to Do When You Receive an Audit Notice

Thu, 03 Jul 2025 01:46:15 GMT

Receiving an audit notice can be an anxiety-inducing experience for anyone, whether it’s from the IRS, a regulatory body, or an internal audit within your organization. However, it’s crucial to remain calm and approach the situation methodically. In this guide, we’ll outline steps you can take when you receive an audit notice, helping you navigate the process with confidence and efficiency.

Review the Notice Carefully

The first step is to carefully read the audit notice. Pay close attention to the timeframe within which you’re required to respond and any specific instructions provided. Understanding the scope and purpose of the audit will help you prepare adequately and respond effectively.

Gather Relevant Documents

Once you understand the nature of the audit, gather all relevant documents and records pertaining to the areas under scrutiny. This may include financial statements, tax returns, receipts, invoices, and any other documentation that supports your reported information. Organize these documents systematically to streamline the audit process.

Some of the documents that can be relevant to the audit include:

W-2 Forms: These forms are issued by employers to report an employee’s annual wages and the amount of taxes withheld. They are essential for verifying the income you’ve reported on your tax return and ensuring that your employer has correctly reported your earnings to the IRS.
1099 Forms: Various types of 1099 forms document income received outside of regular employment, such as freelance work, interest, dividends, and other non-employee compensation. These forms are crucial for proving additional sources of income that need to be reported on your tax return.
Bank Statements: These provide a comprehensive record of all your financial transactions, including income deposits, expenses, and other transfers. Bank statements help to verify your reported income and deductions, ensuring all transactions align with the information on your tax return.
Receipts for Charitable Contributions: If you claim deductions for donations to charities, you’ll need receipts or written acknowledgments from the organizations. These documents substantiate your charitable contributions and verify that they meet the IRS requirements for tax deductions.
Mortgage Interest Statements (Form 1098): This form is provided by your mortgage lender and reports the amount of mortgage interest you paid during the year. It’s important for substantiating the mortgage interest deduction you claim on your tax return, which can significantly reduce your taxable income.

Seek Professional Advice

If the audit involves complex financial or legal matters, consider seeking professional advice from a tax attorney, accountant, or other relevant expert. They can provide valuable guidance on how to navigate the audit, ensure compliance with regulations, and protect your rights throughout the process.

Prepare Your Responses

Take the time to prepare clear and concise responses to the audit findings. Address any discrepancies or concerns raised in the audit notice with factual information and supporting evidence. Be transparent and cooperative in your communication with the auditors, as this can help facilitate a smoother resolution.

Maintain Open Communication

Maintaining open and transparent communication with the auditors is essential throughout the audit process. Respond promptly to any requests for additional information or clarification, and keep the lines of communication open to address any questions or concerns that may arise.

Cooperate Fully

Cooperate fully with the auditors and provide access to the necessary information and personnel as requested. Attempting to obstruct or delay the audit process can lead to further complications and potential penalties. By demonstrating cooperation and goodwill, you can help expedite the audit and achieve a favorable outcome.

Review the Audit Report

Once the audit is complete, carefully review the audit report provided by the auditors. Take note of any findings or recommendations and assess their implications for your business or personal finances. If you disagree with any aspects of the audit report, you have the right to appeal the findings through the appropriate channels.

Taking the Anxiety Out of Audits

Receiving an audit notice can be a daunting experience, but with the right approach, you can navigate the process effectively and minimize any potential negative consequences. By reviewing the notice carefully, gathering relevant documents, seeking professional advice, and maintaining open communication with the auditors, you can ensure a smoother audit experience. Remember to cooperate fully with the auditors and review the audit report carefully before taking any further action. With careful preparation and proactive engagement, you can address the audit findings confidently and protect your interests.

The post What to Do When You Receive an Audit Notice first appeared on www.financialhotspot.com .

5 Signs It’s Time to Outsource Your Bookkeeping

Thu, 03 Jul 2025 01:44:47 GMT

Bookkeeping is the foundation of every well-run business. It tracks your income, expenses, and cash flow, helping you make informed decisions and stay compliant with tax laws. But as your business grows, handling the books in-house can start to feel overwhelming. If managing the numbers is taking up too much of your time or causing unnecessary stress, it might be time to bring in a professional.

Outsourcing your bookkeeping can give you back valuable hours, reduce costly errors, and provide peace of mind. Not sure if you’re ready to make the switch? Here are five signs it may be time to hand over your bookkeeping to an expert.

1. You’re Spending Too Much Time on Your Books

If bookkeeping is eating into time you would rather spend on growing your business, serving clients, or developing your team, that is a clear sign of imbalance. Business owners often start by handling their own books, but what worked early on may not be sustainable long term.

Time is one of your most valuable resources. If keeping your records up to date has become a weekly chore or a source of late nights, outsourcing can free you to focus on the areas where your energy is better spent.

2. Your Financial Reports Are Incomplete or Inaccurate

Accurate financial records are essential for making smart business decisions. If your profit and loss statements never seem to add up, or if you’re unsure how much money is truly available, your business is operating without a clear view of its financial health.

Bookkeeping errors can lead to missed payments, cash flow issues, or trouble at tax time. An outsourced professional brings precision, experience, and consistency to your books. With clean, reliable reports, you can make better decisions with confidence.

3. You’re Behind on Tax Filings or Deadlines

If you dread tax season or have missed filing deadlines in the past, you’re not alone. But falling behind on taxes can lead to penalties, interest, or unnecessary stress. A bookkeeper helps ensure your records are accurate and organized throughout the year, not just at tax time.

By outsourcing, you gain a partner who understands tax requirements and works to keep everything in order. They can also collaborate with your accountant to make the filing process easier and more efficient.

4. Your Business Is Growing Faster Than Your Systems

Growth is exciting, but it can also expose the limitations of your current systems. If your bookkeeping software is no longer meeting your needs or if transactions are becoming too complex to track manually, it’s a good time to consider outside help.

A professional bookkeeper can help you implement better tools, streamline your processes, and stay on top of increasing activity. Their support can also give you insights into cash flow patterns, profit margins, and budgeting strategies.

5. You Worry About Making Mistakes

When it comes to financial records, even small mistakes can cause big headaches. If you often second-guess your entries or feel unsure about how to categorize certain expenses, that uncertainty may be costing you more than you realize.

Outsourced bookkeepers bring training and up-to-date knowledge of best practices, accounting standards, and regulatory requirements. Handing off this responsibility can reduce your stress and lower the risk of costly errors.

Making the Shift to Professional Support

Outsourcing your bookkeeping does not mean giving up control of your business. It means choosing to work smarter by delegating a time-consuming task to someone with the expertise to do it well. In return, you gain clarity, confidence, and more freedom to focus on what you do best.

If any of these signs sound familiar, it might be time to explore your options. With the right bookkeeper on your side, your financial foundation will be stronger, your operations smoother, and your mind more at ease.

The post 5 Signs It’s Time to Outsource Your Bookkeeping first appeared on www.financialhotspot.com .

Understanding Tariffs and Their Impact

Thu, 03 Jul 2025 01:43:33 GMT

Tariffs are a key part of global trade policy, and they affect more than just governments and multinational corporations. If you run a business, work in logistics, or even shop online, you are likely influenced by tariffs in ways you may not realize. While the term may sound complex, the concept is straightforward: tariffs are taxes placed on imported goods. Understanding how they work and what they mean for your bottom line can help you make smarter financial and business decisions.

What Are Tariffs?

A tariff is a tax imposed by a government on goods imported from other countries. The goal is often to raise revenue, protect domestic industries, or encourage trade negotiations. For example, a country might place a tariff on imported steel to make local steel more competitive in price.

Tariffs are usually applied as a percentage of the total value of the imported item. Some are small and barely noticeable, while others can significantly increase the cost of a product. In some cases, tariffs are used strategically during trade disputes to apply economic pressure.

Types of Tariffs

Not all tariffs are the same. The most common types include:

Ad valorem tariffs: A percentage-based tax on the total value of the product.
Specific tariffs: A fixed fee charged per unit, such as $2 per item.
Compound tariffs: A combination of both ad valorem and specific tariffs.

Each type can influence pricing and trade flow in different ways. Knowing the kind of tariff being applied helps you calculate actual costs and make informed purchasing or pricing decisions.

How Tariffs Affect Businesses

For businesses that rely on imported goods or raw materials, tariffs can increase costs quickly. A tariff may cause a supplier to raise prices, which often leads businesses to either absorb the additional expense or pass it on to customers.

Tariffs can also create uncertainty. When governments change trade policies, businesses may struggle to plan for future costs or supply chain decisions. This unpredictability can make budgeting and inventory management more difficult.

You can lessen the impact of tariffs by diversifying your supply chain, negotiating with vendors, or sourcing materials from domestic suppliers when possible. Some companies also adjust their pricing structures or explore tariff-exempt trade agreements to manage costs more effectively.

Consumer Impact

Tariffs are not just a business issue. They can also affect everyday consumers. When tariffs raise the cost of imported goods, retailers may pass those costs along to shoppers. This can be seen in higher prices on electronics, clothing, vehicles, and food items that come from other countries.

Over time, widespread tariff increases can contribute to inflation, especially if they affect a large category of consumer goods. While tariffs are often meant to support domestic industries, the added expense can impact household budgets and buying habits.

Tariffs and Trade Relationships

Tariffs also play a role in international diplomacy. They are often used during trade negotiations to create leverage or respond to trade imbalances. When countries impose tariffs on each other’s goods, it can lead to a trade war, where both sides escalate tariffs in response to one another.

This back-and-forth can affect a wide range of industries and introduce more volatility into global markets. Businesses that operate internationally or rely on cross-border partnerships should monitor trade developments closely to stay prepared for sudden changes.

Navigating a Tariff-Driven Landscape

Whether you are a business owner, a manager, or a curious consumer, understanding tariffs helps you anticipate changes in pricing, sourcing, and product availability. Staying informed about trade policies and consulting with financial or supply chain experts can help you adapt to the evolving landscape.

Tariffs are a powerful tool in global economics. While they can pose challenges, they also create opportunities for innovation, domestic investment, and strategic planning. By taking a proactive approach, you can navigate tariff-related changes with greater confidence and flexibility.

The post Understanding Tariffs and Their Impact first appeared on www.financialhotspot.com .

Reasons and Rules for Filing an Amended Return

Thu, 03 Jul 2025 01:42:07 GMT

Once a tax return is filed, most people breathe a little easier. But it’s not uncommon to realize too late that something was left off a return, figures were misreported or some other error was made. Accuracy is essential, but, depending on the type of error, an amendment may not be required.

Reasons to Amend

Generally, you should amend only to correct reported items such as filing status, dependents, income, deductions or credits.

For example, you should file an amended return if:

You would have benefited from filing as head of household instead of single,
You incorrectly reported your number of dependents,
You received additional or corrected W-2s or 1099s after filing, or
You realized you qualified for a deduction or credit you didn’t claim.

Filing an amended return may also be beneficial if Congress passes retroactive tax law changes that affect your return.

Errors That Don’t Call for an Amendment

You don’t need to amend your return for math errors. The IRS will correct them. Also, if you forgot to attach a W-2 or schedule, the IRS will request the missing documents directly.

If you get a CP2000 notice (noting underreported income based on discrepancies between what the IRS has on file and what you reported), you shouldn’t need to file an amended return to report that income, even if there are corrections to the adjustments proposed by the IRS.

What and When to File

In general, you can file an amended tax return (Form 1040x) and claim a refund within three years from the date you filed your original return or within two years of paying the tax, whichever is later. For example, if you filed your 2024 tax return on April 15, 2025, you’ll have until April 15, 2028, to file an amendment.

Some exceptions allow more time. For instance, if you’re claiming a bad debt, the statute of limitations is seven years from the tax return’s due date for the year the debt became worthless.

You also may have an extended deadline if you were affected by a federally declared disaster or are eligible for other exceptions.

File a separate form for each year you’re amending and include all relevant forms and schedules. You can amend a return more than once.

Have Questions?

Amending your federal return may also require amending your state return(s). Other tax implications may apply. Contact the office for answers to your questions.

Closing a Business? Here's How to Stay on Top of Your Tax Duties

Thu, 03 Jul 2025 01:40:46 GMT

Businesses close for various reasons. Perhaps you’re ready to embark on a welcome change such as retirement or launching a new venture. Or maybe it just no longer makes financial sense to continue operating your current business. Whatever the reason, closing your business is a significant milestone, and part of wrapping things up means taking care of a few tax responsibilities.

Final Income Tax Returns

You’ll need to file a final income tax return and other required forms for your last year of operation. The specific forms you’ll file depend on your business structure:

Sole proprietorships: File Schedule C, Profit or Loss from Business, with your individual return for the year you close. You may also need to report self-employment tax.

Partnerships: File Form 1065, U.S. Return of Partnership Income, and report capital gains/losses on Schedule D. Mark the return and each Schedule K-1 as “final.”

All corporations: File Form 966, Corporate Dissolution or Liquidation, if you adopt a resolution to dissolve the corporation or liquidate stock.

C corporations: File Form 1120, U.S. Corporation Income Tax Return, for the closing year and report capital gains/losses on Schedule D. Check the “final return” box.

S corporations: File Form 1120-S, U.S. Income Tax Return for an S Corporation, for the year of closure and report gains/losses on Schedule D. Mark the return and each Schedule K-1 as “final.”

Regardless of business structure, additional forms may be required if you sell the business, report the sale of business property or record asset acquisitions.

Final Payments to All Workers

If you have employees, you must pay them whatever final wages and compensation are owed, make final federal tax deposits and report employment taxes. Don’t neglect to withhold all income, Social Security and Medicare taxes due and pay these taxes over to the IRS. Overlooking that requirement can result in full personal liability for what’s known as the Trust Fund Recovery Penalty. That’s an outcome to avoid.

Did you pay any independent contractors at least $600 during the calendar year you’re closing your business? If so, you must report those payments on Form 1099-NEC, “Nonemployee Compensation.”

More Loose Ends to Be Tied

If your business has an employee retirement plan, it’s essential to properly terminate it and distribute any remaining benefits. That process comes with its own checklist, including specific notice, funding and filing requirements. The same is true for employee benefit accounts such as Flexible Spending Accounts, Health Savings Accounts and other programs for your employees.

There are additional complex tax matters that may come into play, such as cancellation of debt, using up net operating losses, unlocking passive activity losses, depreciation recapture and even bankruptcy-related considerations. Addressing them can feel overwhelming, but you don’t have to do it alone. Contact the office for help.

Don’t forget about your business records. Depending on the type of records, there are specific rules for how long to retain them. When everything is squared away, you’ll also need to close your IRS business account. Note that while the Employer Identification Number itself is permanent, after receiving confirmation that the business has closed and verifying that there are no outstanding taxes or other issues, the IRS will make the account inactive.

What Else?

If your business is unable to pay all the taxes it owes, there are payment options available. To learn about these options, to ask about specific record retention rules or for any other issues, contact the office.

Key Tax Law Changes for Individuals and Businesses Under the OBBBA

Thu, 03 Jul 2025 01:37:31 GMT

On July 4, President Trump signed into law the far-reaching legislation known as the One, Big, Beautiful Bill Act (OBBBA). As expected, it extends and enhances many of the tax breaks from the Tax Cuts and Jobs Act (TCJA). It also includes several of Trump's campaign promises — though many are only temporary — and eliminates tax breaks related to clean energy. Here's a rundown of some of the main tax law changes to be aware of as you plan for the 2025 tax year.

Highlights for Individuals

Makes permanent the TCJA's individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%,
Makes permanent the near doubling of the standard deduction, plus for 2025 increases it to $15,750 for single filers, $23,625 for heads of households and $31,500 for joint filers, with annual inflation adjustments going forward,
Makes permanent the higher child tax credit, plus for 2025 increases it to $2,200, with annual inflation adjustments going forward,
Temporarily increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000 for 2025, with a 1% increase each year through 2029, after which the $10,000 limit will return,
Expands the allowable education expenses that can be paid with tax-free Section 529 plan distributions, beginning July 5, 2025, or Jan. 1, 2026, depending on the type of expense,
Permanently increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, with annual inflation adjustments going forward,
For 2025–2028, creates a new deduction of up to $25,000 for tip income in certain industries, subject to income-based phaseouts,
For 2025–2028, creates a new deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, subject to income-based phaseouts,
For 2025–2028, creates an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain American-made vehicles, subject to income-based phaseouts,
For 2025–2028, creates an additional deduction of up to $6,000 for taxpayers age 65 or older, subject to income-based phaseouts, and
Eliminates clean energy tax credits, generally after 2025, such as the energy-efficient home improvement and residential clean energy credits — but eliminates the clean vehicle credits for both new and used vehicles after Sept. 30, 2025.

Highlights for Businesses

Makes permanent and expands the 20% Sec. 199A qualified business income (QBI) deduction for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships,
Makes bonus depreciation permanent and increases it to 100% for qualified new and used assets acquired after January 19, 2025,
Increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with annual inflation adjustments going forward,
Permanently allows the immediate deduction of domestic research and experimentation expenses (retroactive to 2022 for eligible small businesses), and
Eliminates clean energy tax incentives, such as the alternative fuel vehicle refueling property credit and the Sec. 179D deduction for energy-efficient commercial buildings after June 30, 2026 — but eliminates the qualified commercial clean vehicle credit after Sept. 30, 2025.

How Will You Be Affected?

While this list may seem extensive, it represents just a sampling of the tax changes included in the 870-page OBBBA. Contact the office with questions about how the new law will affect you.

June 2025 Newsletter

Tue, 03 Jun 2025 01:10:44 GMT

Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often.

Feature Articles

Tax Tips

June 2025: Upcoming Tax Due Dates

Tue, 03 Jun 2025 01:07:28 GMT

July 10

Individuals - Report May tip income of $20 or more to employers (Form 4070).

June 16

Employers - Deposit nonpayroll withheld income tax for May if the monthly deposit rule applies.

Employers - Deposit Social Security, Medicare and withheld income taxes for May if the monthly deposit rule applies.

Calendar-year corporations - Pay the second installment of 2025 estimated income taxes, completing Form 1120-W for the corporation’s records.

Individuals - Pay the second installment of 2025 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding.

Individuals - File a 2024 individual income tax return (Form 1040 or Form 1040-SR) or file for a four-month extension (Form 4868) if you live outside the United States and Puerto Rico or you serve in the military outside those two locations. Pay any tax, interest and penalties due.

Common Mistakes in Estate Accounting and How to Avoid Them

Tue, 03 Jun 2025 01:04:25 GMT

Estate accounting is one of the most important responsibilities when managing a trust or estate. Whether you are acting as an executor, trustee, or personal representative, your role includes keeping clear and accurate records of the estate’s financial activity. This includes tracking income, expenses, assets, liabilities, and distributions.

Because estate accounting is often reviewed by beneficiaries and may be subject to court oversight, errors can lead to delays, disputes, or even legal consequences. By understanding where mistakes typically happen and how to manage them, you can reduce stress and help the process go more smoothly.

Overlooking the Importance of Documentation

One of the most common oversights is a lack of detailed recordkeeping. Every financial activity involving the estate should be documented, including payments to creditors, reimbursements, professional fees, and income earned during the administration period. Without accurate records, it becomes difficult to complete a final accounting or justify distributions.

You can lessen the risk of errors by consistently keeping receipts, invoices, and financial statements in one place. Using a spreadsheet or estate-specific accounting software can also help you stay organized and ready to generate reports when needed.

Commingling Estate Funds

Combining estate funds with your personal bank account, even temporarily, can create serious legal problems. Doing so may be viewed as a breach of fiduciary duty and can lead to penalties or personal liability if the estate’s assets are misused or unaccounted for.

This risk is reduced by opening a dedicated estate bank account and making sure that all income, expenses, and disbursements are handled separately. Keeping personal and estate finances distinct makes it easier to track transactions and provide clean records to beneficiaries or the court.

Failing to Properly Value Assets

Accurately valuing assets is essential for tax filings, court reports, and fair distribution. Mistakes in valuation can lead to incorrect tax payments or disagreements among beneficiaries. In some cases, underestimating an asset’s worth can create problems if it results in unequal distributions.

You can lessen these risks by working with professionals when needed. Appraisals are especially helpful for items like real estate, collectibles, and business interests. For publicly traded investments, be sure to use the appropriate market values as of the date of death.

Missing Tax Deadlines

The estate may be responsible for filing federal and state income tax returns, estate tax returns, and possibly other financial reports. These requirements come with specific deadlines, and missing them can result in penalties, interest, or legal complications.

Staying aware of key tax deadlines and consulting with a tax advisor familiar with estate matters can help keep things on track. Having a timeline prepared early in the process may reduce the risk of missed filings and ensure all necessary documents are submitted on time.

Distributing Assets Too Soon

One of the more serious mistakes occurs when executors distribute funds or property before all debts and taxes are paid. If new liabilities appear after distributions are made, the executor may be held personally responsible for covering the shortfall.

To reduce this risk, it is best to wait until the estate’s obligations have been clearly identified and addressed. Preparing a final accounting and, when applicable, securing court approval before distributing remaining assets can help protect both the estate and the person managing it.

Not Seeking Professional Help When Needed

Some executors assume they must handle every detail on their own. However, estate administration can be complex, especially when dealing with large estates, blended families, or tax-related questions. Trying to manage these challenges without guidance can lead to unintended mistakes.

Working with an estate attorney or accountant can offer clarity and support. Their experience allows you to anticipate potential problems, make informed decisions, and meet legal obligations with greater confidence.

Protecting the Estate and Yourself

Estate accounting does not need to be overwhelming. With the right approach, you can manage your responsibilities effectively and help close out the estate with clarity. The key is to stay organized, keep thorough records, and know when to ask for assistance.

Mistakes can happen, but being aware of where they tend to occur gives you the tools to manage them more effectively. With care and consistency, you can help create a smoother experience for everyone involved in the estate process.

The post Common Mistakes in Estate Accounting and How to Avoid Them first appeared on www.financialhotspot.com .

How to Navigate Regulatory Changes With a Business Consultant

Tue, 03 Jun 2025 01:03:08 GMT

Running a business comes with plenty of challenges, and one of the most complex areas to manage is compliance with changing regulations. Laws and industry standards evolve often, and failing to keep up can lead to fines, legal issues, or setbacks in your growth. This is where a business consultant can provide critical support.

By partnering with an experienced consultant, you can stay ahead of regulatory shifts, reduce risk, and maintain a smooth path forward. Whether you’re a startup or a long-standing company, understanding how to respond to change is essential for long-term success.

Why Regulatory Changes Matter

Regulations affect nearly every aspect of business operations. From tax codes and labor laws to industry-specific standards and data privacy rules, there are constant updates that require your attention. In some cases, these changes are minor. In others, they may involve new reporting requirements, licensing updates, or operational adjustments.

Without proper guidance, it can be easy to overlook key changes or misunderstand how they apply to your business. Even unintentional noncompliance can lead to penalties or reputational damage. This is why having a knowledgeable advisor on your side can make all the difference.

The Role of a Business Consultant

Business consultants are not just problem-solvers. They are strategic partners who help you interpret new regulations, identify how they impact your operations, and create a plan to adjust accordingly. Their goal is to help you remain compliant while also protecting your time and resources.

A qualified consultant will:

Monitor regulatory developments at local, state, and federal levels
Analyze how new rules affect your industry or business model
Assist with documentation, reporting, or policy updates
Recommend process changes that support ongoing compliance

Their outside perspective allows them to see gaps you might miss internally. By working proactively, they help prevent compliance issues before they arise.

Steps for Staying Ahead of Change

With the help of a consultant, you can develop a clear and effective plan for navigating regulatory shifts. Here are some of the most important steps in that process:

Conduct a Compliance Audit: Identify areas of risk and review your current policies.
Stay Informed: Create a system for tracking legal and regulatory updates relevant to your field.
Document Procedures: Make sure your internal processes are well-documented and easy to follow.
Train Your Team: Educate employees on new requirements and their responsibilities.
Schedule Regular Check-Ins: Work with your consultant to revisit compliance needs on a recurring basis.

These actions build a strong foundation for long-term stability, especially as your business grows or enters new markets.

Benefits Beyond Compliance

While avoiding fines and legal trouble is reason enough to stay compliant, the benefits of working with a consultant extend further. Businesses that adapt quickly to regulatory changes often build a stronger reputation with customers, investors, and partners.

A consultant can also help you spot opportunities in regulatory updates, such as new tax credits, incentives, or industry certifications that give your business a competitive edge. Rather than viewing compliance as a burden, you begin to see it as a tool for growth and innovation.

Partnering for Peace of Mind

Regulatory change is a constant in business, but it does not have to be overwhelming. With the right consultant by your side, you can confidently navigate shifting rules and focus on what matters most: growing your business.

If staying compliant has started to feel like a full-time job, it might be time to bring in a professional who knows how to manage the details and help you prepare for what’s next. With expert guidance and a proactive approach, your business can adapt with confidence and move forward with clarity.

The post How to Navigate Regulatory Changes With a Business Consultant first appeared on www.financialhotspot.com .

IRS Audit Triggers Small Business Owners Should Avoid

Tue, 03 Jun 2025 01:01:47 GMT

If you run a small business, the word “audit” probably sends a chill down your spine. No one wants the IRS taking a closer look at their books. While being audited doesn’t automatically mean you did something wrong, it does mean time, paperwork, and added stress. The good news is that many audits are avoidable. By understanding common IRS audit triggers, you can take steps to stay under the radar and maintain peace of mind.

Failing to Accurately Report Income

The IRS gets copies of the 1099 forms sent to you. If your reported income doesn’t match what they receive, that’s an immediate red flag. Underreporting income is one of the fastest ways to attract attention.

Even if the mistake was unintentional, it could still prompt an audit. To avoid issues, keep detailed records of all payments and compare them against your 1099s before filing. If you receive income that isn’t reported on a 1099, like cash or app-based payments, make sure you include that, too. Consistent and honest reporting helps you stay compliant and avoid unwanted scrutiny.

Mixing Business and Personal Finances

Mixing your personal and business finances can lead to messy records and questionable deductions. It’s tempting to use your business account for a personal expense or vice versa, especially when you’re in a hurry. But doing so increases the chance of errors and can raise red flags during tax season.

Make it a habit to:

Use separate bank accounts and credit cards for business and personal transactions
Reimburse yourself for business expenses paid personally, with documentation
Keep detailed notes about each expense and why it qualifies as business-related

A clean financial separation shows the IRS that you take your responsibilities seriously and that your records are accurate and trustworthy.

Excessive Deductions

Deductions are a great way to reduce your taxable income, but they need to be reasonable and well-documented. If your deductions seem unusually high for your type of business, the IRS may want to take a closer look.

Home office, vehicle use, travel, and meals are common deductions that often get misused. Make sure your deductions are truly related to the business and backed by receipts or logs. If you’re unsure, it’s worth talking to a tax professional to confirm what qualifies.

Claiming a home office deduction? Ensure the space is used exclusively and regularly for your business. Using your personal car? Keep a mileage log that clearly separates business and personal trips. These details can make all the difference if you’re ever asked to prove your claims.

Payroll and Contractor Errors

If you have employees or work with contractors, payroll and tax reporting can be another audit risk. Misclassifying a worker as an independent contractor when they function more like an employee is a common mistake that can cost you.

Make sure you:

Use the correct forms (W-2 for employees, 1099-NEC for contractors)
Withhold and pay employment taxes properly
Understand the legal distinctions between employee and contractor status

Payroll compliance is a complex area. Consider using a payroll service or consulting with an accountant to avoid making costly errors.

Confidence Starts With Compliance

Audits may never be entirely avoidable, but many of the most common triggers can be managed with good habits and attention to detail. When you keep clean records, follow IRS guidelines, and approach your business finances with care, you’re doing more than just avoiding penalties. You’re building a business rooted in integrity.

If you’re ever unsure, don’t guess. Reach out to a trusted accounting professional who can help you understand what the IRS expects and how to stay in compliance. A little support goes a long way in keeping your small business audit-ready and focused on growth.

The post IRS Audit Triggers Small Business Owners Should Avoid first appeared on www.financialhotspot.com .

Maximizing Deductions with Charitable Contributions

Tue, 03 Jun 2025 01:00:22 GMT

Giving to causes you care about feels good. But did you know it can also make a positive impact on your taxes? Charitable contributions are one of the most effective ways to reduce your taxable income while supporting the nonprofits and missions that matter most to you. If you want to get the most from your generosity, it helps to understand how deductions work and how to document them properly.

Know What Qualifies as a Charitable Contribution

Before you start totaling up your donations, it’s important to know what actually counts. Not all giving is tax-deductible. To qualify, your donation must go to a registered 501(c)(3) nonprofit organization. This includes many churches, educational institutions, and public charities.

Qualifying donations can include:

Cash donations: These are the most straightforward. Whether you give online, write a check, or drop money into a collection box, it counts as long as it’s to a qualified nonprofit.
Non-cash donations: Items like clothing, furniture, or vehicles can also qualify. Be sure to estimate their fair market value and keep receipts or documentation.

Time or services you volunteer are not deductible, but out-of-pocket expenses related to volunteering (like mileage or supplies) might be.

Keep Good Records to Back Up Your Giving

The IRS expects documentation, especially if you’re claiming a sizable deduction. Even small donations should have some form of proof. For cash donations under $250, a bank record or receipt from the organization will do. For amounts over $250, you’ll need a written acknowledgment that includes the donation amount and a statement confirming that no goods or services were received in return.

For non-cash contributions, keep detailed descriptions, photographs, and valuations. If the donation exceeds $500, you’ll need to complete Form 8283 with your tax return. Appraisals may be required for high-value items. Staying organized throughout the year can save you a lot of time and stress when tax season arrives.

Strategize Your Giving for Maximum Impact

Giving with intention can boost both your charitable impact and your tax benefit. Instead of giving randomly throughout the year, consider timing and grouping your donations. This is especially useful if you don’t typically itemize deductions.

Bunching contributions into a single tax year might allow you to exceed the standard deduction threshold. You can then take the itemized deduction that year and use the standard deduction the following year.

Donor-advised funds (DAFs) are another strategic option. They allow you to make a large donation now, claim the deduction right away, and distribute the funds to various charities over time.

You might also consider donating appreciated assets like stocks instead of cash. This lets you avoid paying capital gains tax while still claiming a deduction for the full market value.

Watch Out for Subscription-Based Giving

Many nonprofits offer recurring donation programs that function like subscriptions. These monthly contributions are convenient, but you still need to track them for deduction purposes. It’s easy to lose track of these smaller amounts if you’re not reviewing your statements.

To stay on top of it:

Set up a monthly review of your bank or credit card activity
Download annual summaries from the charities when available
Note any donations that include perks or gifts, since these may reduce the deductible amount

This extra awareness helps you claim the full amount you’re entitled to without any surprises.

Giving That Goes Further

Charitable giving is more than just a tax strategy. It’s a reflection of your values and a way to make a difference. By understanding how to align your generosity with smart tax planning, you can make your donations stretch even further.

The key is to be proactive. Keep records, know the rules, and consider speaking with a tax professional who can help you make the most of your contributions. With the right planning, you’re not only supporting the causes you believe in, but also growing your financial confidence at the same time.

The post Maximizing Deductions with Charitable Contributions first appeared on www.financialhotspot.com .

Invest in Your Kids' or Grandkids' Future with Help from the Tax Code

Tue, 03 Jun 2025 00:59:11 GMT

If you’re thinking about helping a child or grandchild pay for school, you’re not alone, and you’re not without help. While families have always saved for education, Section 529 plans have made it easier and more tax-efficient.

Tax Advantages

With a 529 plan, your contributions grow tax-deferred, and no taxes are due when the money is used for qualified education expenses. These include postsecondary school expenses such as tuition, mandatory fees, books, supplies, computer equipment, software, internet service and, generally, room and board (for students enrolled at least half-time). Contributions aren’t deductible for federal purposes, but many states offer tax breaks or matching grants for contributions.

Contributions to a 529 plan may be shielded from gift tax by the annual gift tax exclusion, which for 2025 is $19,000 per recipient ($38,000 for joint gifts by a married couple). You can even choose to front-load five years’ worth of annual exclusion gifts into a 529 plan contribution in a single year. For instance, you and your spouse can contribute up to $190,000 per recipient in 2025, exempt from gift tax. Any excess contributions can potentially be made gift-tax-free under the federal gift and estate tax exemption ($13.99 million in 2025).

529 Plans Gain Flexibility

Before the Tax Cuts and Jobs Act (TCJA), the tax exclusion for qualified expenses was strictly limited to postsecondary education. The TCJA expanded this tax break to $10,000 of tuition per year at an elementary or secondary public, private, or religious school.

More recently, thanks to the SECURE Act, you may use up to $10,000 in a 529 plan to repay the beneficiary’s student loans, plus another $10,000 to repay student loans held by the beneficiary’s siblings. It also allows 529 funds to pay for apprenticeships (for example, classroom instruction at a community college).

In addition, under SECURE 2.0, from 2024 forward, up to $35,000 (lifetime limit) in unused 529 plan funds can be rolled into a Roth IRA for the beneficiary, subject to various rules.

Also, changing how financial aid is calculated on the Free Application for Federal Student Aid (FAFSA) form may help grandchildren. Gifts from grandparents to 529 accounts no longer affect the allowable aid.

Finally, legislation has been proposed that would allow tax-free 529 plan distributions for even more types of education-related expenses. Contact the office for the latest information.

Build Security for Future Generations

Given the high costs of higher education and many private elementary and secondary schools, planning is more important than ever. A 529 plan can be a powerful, tax-efficient tool to help you save for education expenses. Contact the office with questions about 529 plans.

What's Your Business Exit Strategy?

Tue, 03 Jun 2025 00:58:23 GMT

Ever since you became a business owner, you’ve focused on growing revenue, managing expenses and leveraging tax advantages. But don’t overlook a critical element of your long-term financial well-being, that is, a business exit strategy. Ideally, your exit strategy will help you meet your retirement and estate planning goals.

Multiple-Owner Businesses

A buy-sell agreement is a powerful tool for businesses with multiple owners. A well-drafted agreement outlines what happens if specified events occur, such as the owner’s retirement, disability or death. The agreement should:

Create a ready market for the departing owner’s interest,
Establish a valuation method, and
Help prevent disputes by keeping ownership transitions clear.

Life or disability insurance can help fund the buyout and can give rise to several tax issues and opportunities. Life insurance proceeds are generally tax-free to the beneficiary, provided certain conditions are met, making this a tax-efficient strategy.

Family Ownership

If you have family members who are willing and able to fill ownership roles in the business, you can pass your business on by giving them interests, selling them interests or doing some of each. Consider your income needs, the tax consequences, and how family members will feel about your choice.

Under the annual gift tax exclusion, in 2025, you can gift up to $19,000 of ownership interests without using up any of your lifetime gift and estate tax exemption. Valuation discounts may further reduce the taxable value of the gift.

With the gift and estate tax exemption for 2025 at $13.99 million, gift and estate taxes may be less of a concern for some business owners. However, others may want to make substantial transfers now to take maximum advantage of the high exemption. What’s right for you will depend on the value of your business and your timeline for transferring ownership.

Outside the Family

If family succession isn’t the right fit, you might consider selling the business to key employees. This requires significant planning, including executive compensation plans, loans and possibly “key person” life insurance. So you’ll need plenty of time and professional guidance to put the elements in place.

Another option is a leveraged Employee Stock Ownership Plan (ESOP), under which an ESOP trust borrows funds to buy the company. Then stock units are periodically awarded to eligible employees and are eventually vested.

Finally, there’s the option to sell to an outsider. If you can find the right buyer, you may be able to sell the business at a premium. Putting your business into a sale-ready state can help you get the best price. This generally means transparent operations, assets in good working condition and minimal reliance on key people.

For the Best Chance of Success, Start Early

Whatever path you pursue, you want your business to be in good hands in the future. Your exit strategy will require planning well in advance of retirement or any other reason for an ownership transition. Contact the office for assistance.

Choosing the Optimal Accounting Method for Tax Savings

Tue, 03 Jun 2025 00:57:28 GMT

The accounting method your business uses to report income for tax purposes, either cash or accrual, can significantly impact your tax bill. While the cash method can offer tax-saving opportunities, the accrual method may in some cases be more appropriate or even required. So review your current method to help ensure you’re using the best method for your business.

Who Can Use Cash Accounting?

The Tax Cuts and Jobs Act made the cash method more accessible to businesses than in the past and simplified the associated requirements. In 2025, a “small business” is defined as one with average annual gross receipts of $31 million or less over the prior three years. This higher threshold allows more businesses to take advantage of the cash method, along with associated benefits such as:

Simplified inventory accounting,
Exemption from the uniform capitalization rules, and
Exemption from the business interest deduction limitation.

Legislation has been proposed that would further increase the gross receipts threshold for eligible manufacturers. Contact the office for the latest information.

Some businesses are eligible for cash accounting even if their gross receipts exceed the threshold. This includes S corporations, partnerships without C corporation partners, farming businesses, and certain personal service corporations. But tax shelters of any size are ineligible for the cash method.

Why Does the Method Matter?

For most businesses, the cash method provides significant tax advantages. Because cash-basis businesses recognize income when received and deduct expenses when paid, they have greater control over the timing of income and deductions. For example, toward the end of the year, they can defer income by delaying invoices until the following tax year or shift deductions into the current year by accelerating payment of expenses.

In contrast, accrual-basis businesses recognize income when earned and deduct expenses when incurred, without regard to the timing of cash receipts or payments. Therefore, they have little flexibility in recognizing income or expenses for tax purposes.

The cash method also provides cash flow benefits. Because income is taxed in the year received, it helps ensure that a business has the funds needed to pay its tax bill.

However, for some businesses, the accrual method may be preferable. For instance, if a company’s accrued income tends to be lower than its accrued expenses, the accrual method may result in lower tax liability. Other potential advantages of the accrual method include the ability to deduct year-end bonuses paid within the first 2½ months of the following tax year and the option to defer taxes on certain advance payments.

Is This Change Worthwhile?

Even if your business would save taxes by changing its accounting method, be mindful of other possible consequences. For example, if your business prepares its financial statements in accordance with U.S. Generally Accepted Accounting Principles, it’s required to use the accrual method for financial reporting purposes. So, using cash accounting for tax purposes would mean keeping two sets of books, which can be burdensome.

Also, before you make a change, you’ll need consent from the IRS.

What Should You Do?

Evaluating accounting methods can be complex. Contact the office for help weighing all the relevant factors and choosing the best accounting method for your company.

Combine a Business Outing with Tax Breaks

Tue, 03 Jun 2025 00:55:18 GMT

Summer is here, and you may be planning a picnic or other outing for your employees. When doing so, keep tax deductions in mind. Most entertainment expenses aren’t deductible, and business meals are generally subject to a 50% deduction limit. But, you may be able to deduct 100% of employee party costs. The event must be for your entire staff and not be “lavish or extravagant.” Deductible costs include food, beverages, live music and venue rentals.

Detailed invoicing and recordkeeping are a must. Before sending out invitations, contact the office about maximizing your tax deduction.

Sending the Kids to Day Camp this Summer?

Tue, 03 Jun 2025 00:54:33 GMT

If your child is going to a summer day camp while you work, it may count as an expense toward the federal Child and Dependent Care Credit. For one qualifying child under age 13, you may annually use up to $3,000 of eligible child care expenses, including day camp expenses, to claim the credit for one child, or $6,000 for two or more children. Under current law, the credit ranges in value from 20% to 35% of the expenses up to those limits, depending on the taxpayer’s income.

Note, overnight camp costs don’t qualify for the credit and aren’t deductible. Contact the office with your questions.

Marriage and Taxes: Key Changes After Saying 'I Do'

Tue, 03 Jun 2025 00:53:48 GMT

It may not be as fun to plan as the wedding venue, invitations and attire, but marriage can result in changes affecting essential tax issues that need prompt attention following the wedding:

Name. If your name has changed, report it to the Social Security Administration (SSA) so that the name on your Social Security card matches the name on your tax return. To make this change, file Form SS-5, “Application for a Social Security Card,” available from www.ssa.gov .

Tax withholding. Both spouses must furnish their employer(s) with new Forms W-4, “Employee’s Withholding Allowance Certificate.” This is because combined incomes may move taxpayers into a different bracket. Search www.irs.gov for the IRS Withholding Calculator tool to help you complete the new Form W-4.

 Filing status. Marital status is determined as of December 31 each year. Spouses can choose to file jointly or separately each year. Contact the office and ask to have your tax liability calculated both ways.

November 2024: Upcoming Tax Due Dates

Sat, 16 Nov 2024 03:47:29 GMT

November 15

Employers: Deposit Social Security, Medicare and withheld income taxes for October if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for October if the monthly deposit rule applies.

Calendar-year exempt organizations: File a 2023 information return (Form 990, Form 990-EZ or Form 990-PF) if a six-month extension was filed. Pay any tax, interest and penalties due.

December 10

Individuals: Report November tip income of $20 or more to employers (Form 4070).

Recovering Lost Documents and Receiving Tax Relief After a Natural Disaster

Sat, 16 Nov 2024 03:46:02 GMT

It’s common for individual and business taxpayers to lose financial records during a natural disaster. Unfortunately, you usually need such records to document losses for your insurance company and to qualify for federal assistance. But if you visit the IRS website (https://www.irs.gov/individuals/get-transcript), you can view or obtain copies of your historical tax returns, wage and income statements, and other tax account information.

Requesting online access to your records is the fastest method, but even physical transcripts can be expected to arrive in the mail within 10 calendar days. Call your bank, credit card issuers and other financial service providers for copies of other needed documents.

If you were the victim of a natural disaster this year, you also may be eligible for filing extensions and other tax relief. Visit the IRS website for more information: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

Use It or Lose It: Your 2024 Gift Tax Annual Exclusion

Sat, 16 Nov 2024 03:44:49 GMT

As the year winds down, you may want to combine estate planning with tax savings by taking advantage of the gift tax annual exclusion. It allows you to give cash or property up to a specified amount to an unlimited number of family members and friends each year without gift tax implications.

That specified amount is subject to annual inflation adjustments. For 2024, the amount per recipient is $18,000. Notably, in 2025, this amount will increase to $19,000 per recipient. Why is this significant? The amount was stagnant at $15,000 for several years (2018 to 2021). Beginning in 2022, the amount has increased by $1,000 annually due to inflation.

Each year you need to use your annual exclusion by December 31. The exclusion doesn’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add the $18,000 unused 2024 exclusion to next year’s $19,000 exclusion to make a $37,000 tax-free gift to her next year. Contact the office with any questions.

Seniors: A Tax-Wise Alternative to Selling Your Appreciated Home

Sat, 16 Nov 2024 03:42:43 GMT

In recent years, the residential real estate market has surged in many areas. That means many homes have greatly appreciated, and the $250,000 home sale gain exclusion ($500,000 for joint filers) isn’t always sufficient to protect a home sale from federal income taxes. If you’re a senior thinking about selling your highly appreciated home, the transaction may bring a painful tax bill. One alternative to consider is aging in place.

If you remain in your home until your death, the tax basis generally will be adjusted to your home’s fair market value as of your date of death. When your heirs sell the home, they’ll owe federal capital gains tax only on appreciation that occurs after this date. The rules are a little more complicated for married couples, but ample tax savings can still be reaped from aging in place.

Tax planning usually calls for action. But this is one situation where it might make sense to hang tight. Contact the office to determine if this strategy is right for you and your family.

Want to Find Out What IRS Auditors Know About Your Industry?

Sat, 16 Nov 2024 03:41:07 GMT

To prepare for a business audit, an IRS examiner generally researches the specific industry and issues on the taxpayer’s return. Examiners may use IRS Audit Techniques Guides (ATGs). A little-known secret is that these guides are available to the public on the IRS website. In other words, your business can use the same guides to gain insight into what the IRS is looking for in terms of compliance with tax laws and regulations.

Many ATGs target specific industries or businesses, such as construction, aerospace, art galleries, architecture and veterinary medicine. Others address issues that frequently arise in audits, such as executive compensation, passive activity losses and capitalization of tangible property.

Unique Issues

IRS auditors examine different types of businesses, as well as individual taxpayers and tax-exempt organizations. Each type of return might have unique industry issues, business practices and terminology. Before meeting with taxpayers and their advisors, auditors do their homework to understand the industry and its typical issues, the accounting methods commonly used, how income is received, and areas where taxpayers might not be in compliance.

By using a specific ATG, an auditor may be able to reconcile discrepancies when reported income or expenses aren’t consistent with what’s typical for the industry. The auditor also might identify anomalies within the geographic area in which the business is located.

Although ATGs were created to help IRS examiners uncover common methods of hiding income and inflating deductions, they also can help businesses ensure they aren’t engaging in practices that could raise audit red flags.

Updates and Revisions

Some guides were written several years ago and others are relatively new. There isn’t a guide for every industry. Here are some of the guides that have been revised or added recently:

Child Care Provider (January 2022),
Construction Industry (April 2021),
Entertainment (March 2023) and,
Equity (Stock)-Based Compensation (June 2024).

For a complete list of ATGs, visit the IRS website here: https://www.irs.gov/businesses/small-businesses-self-employed/audit-techniques-guides-atgs

Tax-Saving Moves Businesses Should Consider Before Year End

Sat, 16 Nov 2024 03:38:27 GMT

Now is a good time to consider year-end moves that can help reduce your business’s 2024 taxes. The effectiveness of a particular action depends on the circumstances of your business. Here are several possibilities.

Time Income and Deductions

A tried-and-true tactic for minimizing your tax bill is to defer income to next year and accelerate deductible expenses into this year. For example, if your business uses the cash method of accounting, consider deferring income by postponing invoices until late in the year or accelerating deductions by paying certain expenses before year end.

If your business uses the accrual method of accounting, you have less flexibility to control the timing of income and expenses, but there are still some things you can do. For example, you may be able to deduct year-end bonuses accrued this year even if they aren’t paid until next year (if they’re paid by March 15, 2025).

Accrual-basis businesses may also be able to defer income from certain advance payments (such as licensing fees, subscriptions, membership dues, and payments under guaranty or warranty contracts) until next year. These payments may be deferred to the extent they’re recorded as deferred revenue on an “applicable financial statement” of the business, for example, an audited financial statement or a financial statement filed with the Securities and Exchange Commission.

Deferring income and accelerating deductions isn’t right for every business. In some cases, it may be advantageous to do the opposite, that is, to accelerate income and defer deductions. This may be the case if, for example, you believe your business will be in a higher tax bracket next year.

Buy Equipment and Other Fixed Assets

One of the most effective ways to generate tax deductions is to buy equipment, machinery and other fixed assets and place them in service by Dec. 31. Ordinarily these assets are capitalized and depreciated over several years, but there are a few options for deducting some or all of these expenses immediately, including:

Section 179 expensing. This break allows you to deduct up to $1.22 million in expenses for qualifying tangible property and certain computer software placed in service in 2024. It’s phased out on a dollar-for-dollar basis to the extent Sec. 179 expenditures exceed $3.05 million for 2024.
Bonus depreciation. This year, you can deduct up to 60% of the cost of eligible tangible property, which includes most equipment and machinery, as well as off-the-shelf computer software and certain improvements to nonresidential building interiors. Now’s the time to take advantage of bonus depreciation, since the deduction limit is scheduled to drop to 40% next year and 20% in 2026 and to be eliminated after that, unless Congress passes new legislation.
De minimis safe harbor. This provision allows you to expense certain low-cost items used in your business, even if they’d ordinarily be treated as fixed assets that are capitalized and depreciated. If your business has applicable financial statements, you can deduct up to $5,000 per purchase or invoice for these items to the extent that you deduct them for accounting purposes. If you don’t have applicable financial statements, then the limit is $2,500.

Despite the term “de minimis,” the safe harbor makes it possible to immediately deduct a significant amount of property. For example, if you buy 10 computers for your business for $2,500 each, you can deduct as much as $25,000 up front.

Each of these options has advantages and disadvantages and is subject to various rules and limitations. Contact the office for help choosing the most effective strategies for your business.

Fund a Retirement Plan

If you don’t have a retirement plan, establishing one can be a great way to generate tax benefits. It can also improve employee recruitment and retention efforts. Certain employers are entitled to tax credits for starting a new plan.

Whether you start a new plan now or already had one in place, depending on the type of plan, you may be able to take 2024 deductions for contributions you make after year end. Some plans, including simplified employee pensions (SEPs), can be adopted and funded after year end and still create deductions for this year.

Be Prepared to Write Off Bad Debts

Year end is a good time to review your receivables and determine whether any business debts have become worthless or uncollectible. If they have, you may be able to reduce 2024 taxes by claiming a bad debt deduction.

To qualify for the deduction, you’ll need documentation or other evidence that the debt is bona fide. You’ll also need evidence that there’s no reasonable expectation of payment (such as the debtor’s insolvency or bankruptcy) or documentation that you’ve taken reasonable steps to collect the debt. You should also have documentation that the debt was charged off this year, which is required for partially worthless debts and a best practice for totally worthless debts.

Finally, to deduct a bad debt you must have previously included the receivable in your taxable income. Thus, an accrual-basis business can deduct an otherwise eligible bad debt if it’s already accrued the receivable, but a cash-basis business can’t.

Find the Optimal Combination

Whichever year-end tax strategies you explore, it’s critical to understand how they interact with other provisions of the tax code. For example, if you have a pass-through business, claiming significant amounts of bonus depreciation can reduce your Section 199A deduction for qualified business income (QBI). That’s because first-year depreciation deductions reduce your taxable income and your QBI. Contact the office for help selecting the optimal combination of year-end planning strategies for your business.

7 Year-End Tax Planning Tips for Individuals

Sat, 16 Nov 2024 03:34:30 GMT

As the holidays approach, it’s time to consider tax planning moves that will help lower your 2024 taxes, as well as set you up for tax savings in future years. Here are seven year-end tax planning ideas to consider.

1. Strategize on the Standard Deduction vs. Itemizing

This is a tried-and-true year-end tax planning strategy. If your total itemizable deductions for 2024 will be close to your standard deduction, consider making additional expenditures for itemized deduction items between now and year end to surpass your standard deduction. Those extra expenditures will allow you to itemize and reduce your 2024 federal income taxes. The 2024 standard deduction is $29,200 for married couples filing jointly, $29,200 for heads of household and $14,600 for singles and married couples filing separately.

Note: Slightly higher standard deductions are allowed to those who are 65 or older or blind.

The easiest itemizable expense to prepay is your mortgage payment due in January. Accelerating that payment into this year will give you 13 months’ worth of itemized home mortgage interest deductions in 2024. Contact the office to determine whether you’re affected by limits on mortgage interest deductions under current law.

Next, look at state and local income and property taxes that are due early next year. Prepaying those bills between now and year end might lower this year’s federal income tax liability, because your total itemized deductions will be that much higher. However, under current law, the amount you can deduct for all state and local taxes is limited to a maximum of $10,000 ($5,000 if you use married filing separate status).

Also keep in mind that prepaying state and local taxes can be unhelpful if you’ll owe the alternative minimum tax (AMT) for 2024. Under the AMT rules, no deductions are allowed for state and local taxes. So, prepaying these taxes before year end may do little or no tax-saving good for people who are subject to the AMT. While the Tax Cuts and Jobs Act (TCJA) eased the AMT rules so that most people are no longer at risk, take nothing for granted. Contact the office to check on possible exposure.

Other ways to increase your itemized deductions for 2024 include:

Making bigger charitable donations to IRS-approved charities this year and smaller donations next year to compensate, and
Accelerating elective medical procedures, dental work and expenditures for vision care if you think you can qualify for a medical expense deduction. You can claim an itemized deduction for medical expenses to the extent they exceed 7.5% of your adjusted gross income (AGI).

2. Manage Gains and Losses in Your Taxable Investment Accounts

The stock market has experienced plenty of ups and downs this year. You might have already collected some gains and suffered some losses. And you might have some unrecognized gains and losses from stock and mutual funds that you still hold.

If you hold investments in taxable brokerage firm accounts, consider the tax-saving advantage of selling appreciated securities that have been held for over 12 months. The federal income tax rate on net long-term capital gains recognized this year is 15% for most taxpayers, although it can reach the maximum 20% rate at high income levels.

An additional 3.8% net investment income tax (NIIT) can also kick in for higher-income taxpayers. So, the actual federal tax rate on long-term capital gains can be 18.8% (15% plus 3.8%), or 23.8% (20% plus 3.8%) at higher income levels. However, that’s significantly lower than the 40.8% maximum rate that can potentially apply to short-term capital gains (37% plus 3.8%).

If you’re holding some investments that are currently worth less than you paid for them, consider harvesting those capital losses between now and year end by selling those investments. Harvested losses can shelter capital gains from the sale of appreciated stocks this year. Sheltering short-term capital gains with harvested losses is an especially tax-smart move because net short-term gains are taxed at higher income tax rates that can reach 37%, plus another 3.8% if the NIIT applies.

If harvesting losing stocks would cause your 2024 capital losses to exceed your 2024 capital gains, the result would be a net capital loss for the year. The net capital loss can be used to shelter up to $3,000 of 2024 higher-taxed ordinary income ($1,500 if you’re married and file separately). Ordinary income can include salaries, bonuses, self-employment income, interest income and royalties. Any excess net capital loss is carried forward to next year — and beyond, if you don’t use it up next year.

In fact, having a capital loss carryover to next year and beyond could turn out to be beneficial. The carryover can be used to shelter future capital gains (both short-term and long-term) next year and beyond. That can give you extra investing flexibility in those years because you won’t have to hold appreciated securities for over a year to get a lower tax rate. You’ll pay 0% to the extent you can shelter gains with your loss carryover.

Important: If you sold a home earlier this year for a taxable gain, you may be able to offset some or all of that taxable gain with harvested capital losses from the sale of losing securities.

3. Donate Stock to Charity

If you itemize deductions and want to donate to IRS-approved public charities, you can combine your generosity with an overall revamping of your taxable investment portfolio of stock and/or mutual funds:

Underperforming stocks. Sell taxable investments that are worth less than they cost and claim the tax-saving capital loss. Then give the sales proceeds to a charity and deduct your donation.

Appreciated stocks. Donate directly to charity publicly traded securities that are currently worth more than they cost. As long as you’ve owned them for more than one year, you can claim a charitable deduction equal to the market value of the shares at the time of the gift. Plus, you escape any capital gains taxes you’d pay on those shares if you sold them.

4. Give Wisely to Loved Ones

The principles behind donating tax-smart gifts to charities also apply to making gifts to relatives and other loved ones. That is, don’t give underperforming taxable investments directly to your loved ones. Instead sell the stock or mutual fund shares and claim the tax-saving capital losses. Then give the cash proceeds to loved ones.

On the other hand, do give appreciated investments directly to loved ones in lower tax brackets. When they sell the shares, they’ll probably pay a lower tax rate than you would.

Before making gifts, however, be sure to consider any gift tax consequences. Also, if any potential recipients are children or young adults, check whether they’d be subject to the “kiddie tax.”

5. Make Charitable Donations from Your IRA

In 2024, IRA owners and beneficiaries who’ve reached age 70½ are permitted to make cash donations totaling up to $105,000 to IRS-approved public charities directly out of their IRAs. The SECURE 2.0 Act now allows eligible taxpayers to also make a one-time QCD of up to a limit that’s annually indexed for inflation ($53,000 for 2025) through a charitable gift annuity or charitable remainder trust. Additional rules apply to such QCDs.

You don’t owe income tax on these qualified charitable distributions (QCDs), but you also don’t receive an itemized charitable contribution deduction. The upside is that the tax-free treatment of QCDs means you can enjoy a tax benefit even if you don’t itemize deductions or if your charitable deduction would be reduced because of AGI-based limits. Also, QCDs can count toward your required minimum distribution, if applicable.

If you’re interested in taking advantage of this strategy for 2024, you’ll need to arrange with your IRA trustee or custodian for money to be paid out to one or more qualifying charities before year end.

6. Prepay College Bills

If you paid higher education expenses for yourself, your spouse or a dependent, you may qualify for one of the following tax credits:

The American Opportunity credit. This credit equals 100% of the first $2,000 of qualified postsecondary education expenses, plus 25% of the next $2,000, for the first four years of postsecondary education in pursuit of a degree or recognized credential. So, the maximum annual credit is $2,500 per qualified student per year.

The Lifetime Learning credit. This credit equals 20% of up to $10,000 of qualified education expenses. The maximum credit is $2,000 per tax return.

For 2024, both higher education credits are phased out if your modified AGI (MAGI) is between:

$80,000 and $90,000 for unmarried taxpayers, or
$160,000 and $180,000 for married couples filing jointly.

Numerous rules and restrictions apply. If you’re eligible for either credit and your expenses don’t already exceed the applicable limit, consider prepaying college tuition bills that aren’t due until early 2025. Specifically, you can claim a 2024 credit based on prepaying tuition for academic periods that begin in January through March of next year.

If your credit will be partially or fully phased out because of your MAGI, consider whether there’s anything you could do to reduce your MAGI so you could maximize your 2024 education credit. (Reducing your MAGI could also increase the benefit of certain other tax breaks.) If that’s not possible and your child is the student, see if he or she might qualify to claim the credit.

7. Convert a Traditional IRA into a Roth IRA

If you anticipate being in a higher tax bracket during retirement than you are now and have a traditional IRA, consider a Roth conversion. The downside is that there’s a current tax cost for converting. That’s because a conversion is treated as a taxable liquidation of your traditional IRA followed by a nondeductible contribution to the new Roth account.

While the current tax cost from a Roth conversion is unwelcome, it could turn out to be a relatively small price to pay to hedge against higher future tax rates. If you delay converting your account until a future year and you end up being subject to a higher tax rate — whether because tax rates increase or you move into a higher tax bracket — the tax cost will be larger.

After the Roth conversion, all qualified withdrawals from the account will be federal-income-tax-free. In general, qualified withdrawals are those taken after:

You’ve had at least one Roth account open for more than five years, and
You’ve reached age 59½, become disabled or died (i.e., distributions made to a beneficiary).

A Roth conversion makes it possible to avoid potentially higher future tax rates, because you’ve already paid the tax.

For More Ideas

Federal tax law may be uncertain for the next year or so because many of the TCJA provisions are scheduled to expire at the end of 2025 but could be extended. There also could be other tax law changes as a result of the election. Contact the office to discuss these and other federal (and state) tax planning moves that may apply to your current situation.

An Employee Benefit with Possible Magnetic Power

Tue, 03 Sep 2024 01:05:09 GMT

Employers seeking to attract new recruits and retain talent should consider offering educational assistance programs to their employees. The plans aren’t new, but they temporarily offer greater flexibility in how they work.

Through Dec. 31, 2025, the funds can be used to help employees pay their federal student loan debts. According to the U.S. Dept. of Education, the average borrower in 2024 has federal student loan debt of $37,850. Student loan payments can be made directly to employees or lenders. These tax-free benefits are limited to $5,250 per employee, per year. Benefits that exceed that amount are taxable as wages.

If your company doesn’t offer an educational assistance program, it might be a good idea to consider establishing one while this additional feature is still in force. In today’s tight labor market, fringe benefits like this one may be a magnet that gives your company an advantage. To learn more about adding this program to your benefit package: https://www.irs.gov/newsroom/employer-offered-educational-assistance-programs-can-help-pay-for-college

Don't Wait Until the Last Minute to File Your Extended Return!

Tue, 03 Sep 2024 01:03:13 GMT

If you requested an extension to file your 2023 tax return, you probably know that the extended deadline is coming up soon, on Oct. 15. If you have the information you need, consider filing now.

There’s no advantage to waiting, and last-minute filing may lead to worry. If you’re concerned about paying any tax owed, the IRS offers short- and long-term payment plans, as well as installment agreements, to taxpayers who qualify. It’s important to act quickly if you owe because any amount that was due April 15 accrues interest until the b

Medicare Premiums may Lead to Tax Savings

Tue, 03 Sep 2024 01:00:49 GMT

If you pay premiums for Medicare health insurance, you may be able to combine them with other qualifying expenses and claim them as an itemized deduction for medical expenses on your tax return. This includes amounts for “Medigap” insurance and Medicare Advantage plans, which cover some costs that Medicare Parts A and B don’t cover.

Generally, you can deduct medical expenses only if you itemize deductions and only to the extent that total qualifying health care expenses exceeded 7.5% of your adjusted gross income. But, if you’re self-employed people or a shareholder-employees of an S corporation, you can generally claim an above-the-line deduction for your health insurance premiums, including Medicare premiums. That means it’s not necessary for you to itemize deductions to get the tax savings.

Contact the office with questions about claiming medical expense deductions on your personal tax return. Also, be sure to ask for help identifying an optimal overall tax-planning strategy based on your personal circumstances.

Home Sale: Failure to Plan may Raise Your Tax Bill

Tue, 03 Sep 2024 00:58:30 GMT

As the saying goes, there’s nothing certain in life except for death and taxes. But when it comes to selling your home, proactive tax planning can help you reduce your federal income tax bill.

A Costly Mistake to Avoid

Let’s say Tom is a soon-to-be married homeowner who’s looking to sell his principal residence. If certain tests are met, an unmarried individual may be able to exclude up to $250,000 of taxable gain.

Just before the wedding, Tom sells the home he’d purchased 20 years earlier. The home had appreciated by $500,000. He and his future wife, Stacy, plan to move into her much smaller fixer-upper home after the wedding.

As an unmarried taxpayer, Tom can exclude $250,000 of the gain from the sale of his home, leaving a taxable gain of $250,000 ($500,000 minus the $250,000 federal home sale gain exclusion). He owes 15% federal income tax on the gain, plus the 3.8% net investment income tax and state income tax.

Instead, suppose that Tom and Stacy had taken the time to seek tax planning advice. Their tax advisor would have let them know that the home sale gain exclusion for married couples is $500,000 if various tests are met, including that both spouses have resided in the home as their principal residence for at least two years.

Rather than sell Tom’s house before the wedding, they might have kept it and lived in it as a married couple for two years. That would have allowed them to avoid the full $500,000 in taxable gain and the resulting taxes when they later sold it. Even if Stacy had sold her fixer-upper home before the wedding, the gain would likely have been much smaller and may have been fully sheltered with her $250,000 home sale gain exclusion.

Slow Down and Seek Advice

Proactive tax planning is generally worth the effort, especially if you have a lot at stake and/or tax rates increase. Even if you don’t need advice on the subject of home sales, other issues may be much more complicated and a lack of knowledge could lead to costly mistakes. Contact the office to get the best tax planning results for your circumstances.

Business Succession and Estate Planning Should Be Inseparable

Tue, 03 Sep 2024 00:55:23 GMT

If you’re a business owner, your company is likely your most valuable asset. To ensure it survives after you’re gone, you first need a succession plan that will provide a smooth transition of the business to one or more of your children (assuming you want to keep it in the family). In addition, you need an estate plan that effectively addresses the tax impact of transferring your ownership interests to the next generation.

Consider Who’ll Take the Reins

If you’re like many business owners, you may dream of the day you can transfer ownership to your children. A succession plan can provide a smooth transition of power when you retire and be used in the event of unexpected death before retirement.

Typically, a succession plan will outline the structure going forward and prepare for the eventual transfer of ownership interests in the business, whether through selling, gifting or a combination of the two. Make sure the plan is in writing. Identify training opportunities and special compensation arrangements for your successors. Include in the plan financial details reflecting assets, liabilities and current value, and update the plan periodically. Also, coordinate your succession plan with your estate plan.

Ensure Key Estate Planning Documents Are in Place

A comprehensive estate plan should be supported by several key documents, starting with a basic will. A will specifies how your assets will be distributed to designated beneficiaries and meets other objectives. Without a will or having assets otherwise titled, your business and other assets will be distributed under the prevailing state law, regardless of your wishes.

A financial power of attorney (POA) appoints someone to manage your affairs in case you become incapacitated and allows this “attorney-in-fact” to conduct business transactions. (Other important documents include health care powers of attorney and advanced directives.)

Make Use of Tax Breaks

If you own significant business assets, consider taking maximum advantage of currently available federal estate tax breaks. These include the unlimited marital deduction and the federal gift and estate tax exemption, which in 2024 shields up to $13.61 million. Some states also impose their own state estate or inheritance taxes.

You may be able to minimize federal and state taxes by using trusts or setting up a family limited partnership (FLP). With a tax-favored FLP, assets are removed from your taxable estate and limited partner interests can be gifted to loved ones, often at a discounted value.

Bypass Potential Family Conflicts

As you develop your succession and estate plans, you may face family challenges. Unfortunately, elevating one child to run the business and leaving another out, or giving someone a secondary role, may create hard feelings.

One estate planning strategy is to attempt to even things out. For example, let’s say that you own a business valued at $5 million and you have $5 million in other assets. You might give $5 million in business assets to the child who’s taking the helm of your business and give other assets worth $5 million to the child who isn’t active (or is less active) in the business.

Relax and Enjoy a Smooth Transition

There’s no universal plan for family business succession. What’s right depends on your circumstances and goals. Contact the office for help.

Are You Aware of the Business Credits and Other Tax Benefits Available?

Tue, 03 Sep 2024 00:49:49 GMT

It’s a challenging time for many businesses. Therefore, any help you can get, such as tax incentives and sales tax exemptions, can make a big difference. Unfortunately, these benefits often go unclaimed because businesses don’t know about them or erroneously think they’re ineligible.

1. Statutory Incentives

Some credits are available “as of right.” That is, if your business meets the specified requirements, you just need to claim the benefit on a timely filed tax return to receive it.

State and federal tax credits and exemptions are designed as incentives for businesses to engage in certain activities or invest in specific economically distressed areas.

Here are a few:

Work Opportunity Tax Credit (WOTC). The WOTC is a federal credit ranging from $2,400 to $9,600 per eligible new hire from certain disadvantaged groups. Examples include convicted felons, welfare recipients, veterans and workers with disabilities. Other steps must also be taken, such as completing paperwork.

State and federal research and development tax credits. These credits may be available to an eligible business that invests in developing new products or techniques, improving processes, or developing software for internal use, regardless of size. The federal “increasing research activities” credit is generally equal to 20% of the amount by which the business increases qualified research expenditures, compared to a base amount.

The credit is available even to businesses with no income tax liability and may be carried forward to offset taxable income in future years. If eligible, a start-up company can claim the federal research credit against up to $500,000 in employer-paid payroll taxes.

Empowerment zone incentives. Certain tax breaks are available to companies that operate in federally designated, economically distressed “empowerment zones.” Tax credits may be worth up to $3,000 for each eligible employee.

Industry-based and investment credits. Many states and other jurisdictions offer tax credits and other incentives to attract certain types of businesses, such as manufacturing or film and television production. Jurisdictions may also offer investment tax credits for capital investments within their borders.

2. Discretionary Incentives

Discretionary tax breaks must be negotiated with government representatives. Typically, these incentives are intended to persuade a business to stay in or relocate to a certain state or locality.

To secure these incentives, a business must show it’ll bring benefits to the jurisdiction, such as job creation and revenue generation. Discretionary incentives may include income and payroll tax credits, property tax abatements and utility rate reductions.

3. Sales Tax Exemptions

States with sales taxes provide exemptions for some business purchases. Common exemptions include purchases by:

Retailers for the purpose of resale,
Manufacturers of equipment, raw materials or components used in the manufacturing process,
Specific tax-exempt entities, and
Agricultural businesses that buy such items as farming equipment and fuel, feed, seeds, fertilizer, and chemical sprays.

Businesses should familiarize themselves with the exemptions available where they do business and what it takes to qualify. For example, they may need to prove to the sellers that they have a resale or exemption certificate.

Don't Miss These Opportunities

Every year, a vast amount of tax credits and incentives aren’t claimed because businesses are unaware of them or erroneously believe they’re ineligible. Many more examples exist. Contact the office for help ensuring that your business receives all the tax breaks it deserves.

How to Keep Control Over Inventory

Tue, 03 Sep 2024 00:40:59 GMT

Many businesses need to have some inventory available. But having too much inventory is expensive, not just to purchase but also to store, safeguard and insure. So, keeping your inventory as lean as possible is critical. Here are some ways to trim the fat from your inventory without compromising revenue and customer service.

Where to Begin

Effective inventory management starts with an accurate physical inventory count. This allows you to determine your true cost of goods sold and identify and remedy discrepancies between your physical count and perpetual inventory records.

Next, compare your inventory costs to those of other companies in your industry. Trade associations often publish benchmarks for:

Gross margin ([revenue — cost of sales] / revenue),

Net profit margin (net income / revenue), and

Days in inventory (annual revenue / average inventory × 365 days).

Try to meet or beat industry standards. For a retailer or wholesaler, inventory is simply purchased from the manufacturer. But for manufacturers and construction firms, the inventory account is more complicated. It’s a function of raw materials, labor and overhead costs.

The composition of your company’s cost of goods will guide you on where to cut. In a tight labor market, it’s hard to reduce labor costs. But it may be possible to renegotiate prices with suppliers.

Don’t forget the carrying costs of inventory, such as storage, insurance, obsolescence and pilferage. You can also improve margins by negotiating a net lease for your warehouse, installing antitheft devices and opting for less expensive insurance coverage.

More Steps to Take

Cut your days-in-inventory ratio based on individual product margins. The goal is to stock more products with high margins and high demand, and less of everything else. If possible, return excessive supplies of slow-moving materials or products to your suppliers.

Keep product mix sufficiently broad but still in tune with the needs of your customers. Before cutting back on inventory, try to negotiate speedier delivery from suppliers or give suppliers access to your perpetual inventory system. These precautionary measures can help prevent lost sales due to lean inventory.

Take Inventory of Inventory

It’s easy for inventory to get lost in the shuffle when you and your leadership team may be focused on big-picture strategic planning to grow the business. But if you don’t put some time into ensuring effective inventory management, your business likely won’t be able to achieve its strategic goals.

A Tax Break for Educators

Tue, 03 Sep 2024 00:35:58 GMT

Teachers who are getting ready for a new school year often pay for some of their classroom supplies out-of-pocket. They may be able to get some of that cost back by taking advantage of a special tax break for educators.

History of the Deduction

Before 2018, employees who had unreimbursed out-of-pocket expenses could potentially deduct them if they were ordinary and necessary to the “business” of being an employee. A teacher’s out-of-pocket classroom expenses could qualify and be claimed as a miscellaneous deduction, subject to a 2% of adjusted gross income (AGI) floor. That meant that only taxpayers who itemized deductions could enjoy a tax benefit, and then only to the extent that their eligible expenses exceeded the 2% floor.

For 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) has suspended miscellaneous itemized deductions subject to the 2% of AGI floor. Fortunately, qualifying educators can still deduct some unreimbursed out-of-pocket classroom costs using the educator expense deduction.

Back in 2002, Congress created this above-the-line deduction, which means the deduction is subtracted from your gross income to determine your AGI. It can be claimed even if you don’t itemize deductions.

For 2024, qualifying elementary and secondary school teachers and other eligible educators (such as counselors and principals) can deduct up to $300 of qualified expenses. (This limit will rise in $50 increments in future years, based on inflation adjustments.) Two eligible married educators who file a joint tax return can deduct up to $600 of unreimbursed expenses, limited to $300 each.

Qualified expenses include amounts paid or incurred during the tax year for books, supplies, computer equipment, related software, services, and other equipment and materials used in classrooms. The cost of certain professional development courses may also be deductible. However, homeschooling supplies and nonathletic supplies for health or physical education courses aren’t eligible.

Head of the Tax Class

Some additional rules apply to this deduction. If you’re an educator or you know one who might benefit from this tax break, feel free to contact the office for more details.

Tax Considerations When Choosing a Business Entity

Tue, 03 Sep 2024 00:33:14 GMT

Are you in the process of starting a business or contemplating changing your business entity? If so, you’ll need to decide how to organize your company. Should you operate as a C corporation or as a pass-through entity such as a partnership, limited liability company (LLC) or S corporation? Among the important factors to consider are the potential tax consequences.

Tax Treatment Basics

Currently, the corporate federal income tax is a flat 21% rate and individual federal income tax rates begin at 10% and go up to 37%. With a pass-through entity, income the business passes through to the owners is taxed at individual rates, which currently range from 10% to 37%. So, the overall rate, if you choose to organize as a C corporation, may be lower than if you operate the business as a pass-through entity.

But the difference in rates can be alleviated by the qualified business income (QBI) deduction, which is available to eligible pass-through entity owners who are individuals, and some estates and trusts.

The QBI deduction will expire Dec. 31, 2025, unless Congress acts to extend it. The 21% corporate rate is permanent, but Congress could still change it by passing new legislation.

More to Consider

There are other tax-related factors you should take into account. For example:

Will most of the business profits be distributed to the owners? If so, it may be preferable to operate as a pass-through entity because C corporation shareholders will be taxed on dividend distributions from the corporation (double taxation). Owners of a pass-through entity will be taxed only once on business income, at the personal level.

Does the business own assets that are likely to appreciate? If so, it may be better to operate as a pass-through entity because the owner’s basis is stepped up by an owner’s interest in the entity. That can result in less taxable gain for the owner when his or her interests in the entity are sold.

Is the business expected to incur tax losses for a while? If so, you may want to structure it as a pass-through entity, so that you can deduct the losses against other income. Conversely, if you have insufficient other income or the losses aren’t usable (for example, because they’re limited by the passive loss rules), it may be preferable to organize as a C corporation, because it’ll be able to offset future income with the losses.

Is the business owner subject to the alternative minimum tax (AMT)? If so, it might be better to organize as a C corporation, because only the very largest corporations are subject to corporate AMT. AMT rates on individuals are 26% or 28%.

Contemplate the Issues

Clearly, many factors are involved in determining which entity type is best for your business. This covers only a few of them. Contact the office to talk over the details in light of your situation.

Hiring? How to Benefit from the Work Opportunity Tax Credit

Tue, 16 Jul 2024 13:56:52 GMT

If you’re a business owner or manager who is seeking to hire, you should be aware of the details of a valuable tax credit for hiring individuals from one or more targeted groups. Employers can qualify for the Work Opportunity Tax Credit (WOTC), which is worth as much as $2,400 for most eligible employees (higher or lower for certain employees). The credit is limited to eligible employees who begin work for an employer before January 1, 2026.

Who is Eligible?

Generally, an employer is eligible for the WOTC only for qualified wages paid to members of a targeted group. These groups are:

Qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program,
Qualified veterans,
Qualified ex-felons,
Designated community residents,
Vocational rehabilitation referrals,
Qualified summer youth employees,
Qualified members of families in the Supplemental Nutritional Assistance Program (SNAP),
Qualified Supplemental Security Income recipients,
Long-term family assistance recipients, and
Long-term unemployed individuals.

To claim the WOTC, an employer must first get certification that the person hired is a member of one of the targeted groups above. An employer can do so by submitting Form 8850, Pre-Screening Notice and Certification Request for the WOTC, to their state agency within 28 days after the eligible worker begins work.

You Must Meet Certain Requirements

There are several requirements to qualify for the credit. For example, each employee must have completed a specific number of hours of service for the employer. Also, the credit isn’t available for employees who are related to or who previously worked for the employer.

There are different rules and credit amounts for certain employees. The maximum credit available for first-year wages generally is $2,400 per employee. But it’s $4,000 for long-term family assistance recipients, and it’s $4,800, $5,600 or $9,600 for certain veterans. Additionally, for long-term family assistance recipients, there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit, over two years, of $9,000.

For summer youth employees, the wages must be paid for services performed during any 90-day period between May 1 and September 15. The maximum WOTC credit available for summer youth employees is $1,200 per employee.

An eligible employer claims the WOTC on its federal income tax return. The credit value is limited to the business’s income tax liability.

A Valuable Credit

There are additional rules and requirements. In some cases, employers may elect not to claim the WOTC. And in limited circumstances, the rules may prohibit the credit or require an allocation of it. However, for most employers hiring from targeted groups, the credit can be worthwhile. Contact the office with questions or for more information about your situation.

Have You Recently Reviewed Your Life Insurance Needs?

Tue, 16 Jul 2024 13:54:39 GMT

At one time, life insurance played a much larger part in an estate plan than it does now. Why? Families would often use life insurance payouts to pay estate taxes. But with the federal gift and estate tax exemption at $13.61 million for 2024, far fewer families currently are affected by estate tax.

However, life insurance remains a powerful tool to help provide for your loved ones in the event of your death. The amount of life insurance that’s right for you depends on your personal circumstances, so it’s critical to review your life insurance needs regularly in light of changing circumstances.

Reasons to Reevaluate

In addition to watching for changes to the estate tax exemption amount, consider reevaluating your insurance coverage if you’re:

Buying a home or paying off a mortgage,
Getting married or divorced,
Having children,
Approaching retirement, or
Facing health issues.

The right amount of insurance depends on your family’s current and expected future income and expenses, as well as the amount of income your family would lose should you pass away. The events listed above can change the equation, so it’s a good idea to revisit your life insurance needs as you reach these milestones. For example, if you have kids, your current and future obligations are likely to increase significantly for expenses related not only to providing for their needs on a day-to-day basis but also potentially for childcare and college tuition.

As you get older, your expenses may go up or down, depending on your circumstances. For example, as your children become financially independent, they’ll no longer rely on you for financial support.

On the other hand, your health care expenses may increase. When you retire, you’ll no longer have a salary, but you may have new sources of income from retirement plans and Social Security. You may or may not have paid off your mortgage, student loans or other debts. And you may or may not have accumulated sufficient wealth to provide for your family.

Periodic Reassessment a Must

There are many factors that affect your need for life insurance, and these factors change over time. To make sure you’re not over- or underinsured, reassess your insurance needs periodically, especially when your life circumstances change. Also keep in mind that, absent Congressional action, the gift and estate tax exemption will drop to an inflation-adjusted $5 million in 2026. Contact the office for assessing whether you have an adequate amount of life insurance coverage.

A Strategy to Raise Your Medical Expense Deduction

Tue, 16 Jul 2024 13:52:38 GMT

With a little planning, you may be able to boost your itemized medical expense deduction when you file your 2024 tax return next year. Only eligible expenses exceeding 7.5% of your adjusted gross income are deductible. It’s not an easy hurdle to clear, short of a major medical disaster, which, of course, you want to avoid. But you can use a strategy called “bunching” medical expenses to exceed the 7.5% threshold.

Say, for example, that you’ve already scheduled surgery that will involve out-of-pocket expenses but you still fall short of the deductible threshold. Think about scheduling elective procedures, such as dental work or Lasik surgery, and making qualified purchases [ Topic no. 502, Medical and dental expenses | Internal Revenue Service (irs.gov) ] that will push you over the threshold for the year.

Remember, only the expenses over that amount and that aren’t covered by insurance or paid through a tax-advantaged account will be deductible. Contact the office for help running the numbers.

Handling Large Cash Transactions

Tue, 16 Jul 2024 13:49:24 GMT

A reminder for businesses: Within 15 days of a $10,000 transaction, you must use IRS Form 8300 to report the transactions. If you file electronically, forms are delivered to the Financial Crimes Enforcement Network. Paper forms are submitted to the IRS.

You also generally should provide written statements to parties whose names you’ve reported by January 31 of the year following the transactions. However, if a transaction you report is suspicious, don’t provide a statement to the individual involved.

Although you aren’t required to file Form 8300 for cash transactions of less than $10,000, the IRS encourages you to report suspicious transactions of any amount.

Erroneous Refund

Wed, 03 Jul 2024 16:51:39 GMT

Mistakes happen. What if you receive a refund from the IRS that you’re not entitled to? Or what if you receive one that’s more than you’re entitled to? How you must handle it depends on the details. A paper check refund should be voided and returned within 21 days of receipt to the address in the link below. But suppose you cashed the check. In that case, submit a personal check within 21 days to that address.

If the refund was by direct deposit, contact your bank to have them return the deposit. Also contact the IRS at the phone number in the link. Be aware that if the IRS intentionally changed your refund amount from what was on the return you filed, it will mail you a notice of explanation.

You can find more information here: https://www.irs.gov/taxtopics/tc161

Tax Due Dates for February 2024

Thu, 06 Jun 2024 16:51:45 GMT

March 15

Calendar-year S corporations: File a 2023 income tax return (Form 1120-S) and provide each shareholder with a copy of ScheduleK-1 (Form 1120S) or a substitute Schedule K-1 or file for an automatic six-month extension (Form 7004). Pay any tax due.

Calendar-year partnerships: File a 2023 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1 or request an automatic six-month extension (Form 7004).

Employers: Deposit Social Security, Medicare and withheld income taxes for February if the monthly deposit rule applies

Employers: Deposit nonpayroll withheld income tax for February if the monthly deposit rule applies.

April 1

Employers: Electronically file 2023 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and Form W-2G.

April 10

Individuals: Report March tip income of $20 or more to employers (Form 4070).

loriekenneycpa

January 2026 Newsletter

Feature Articles

Tax Tips

January 2026: Upcoming Tax Due Dates

January 15

February 2

February 10

More Taxpayers May Qualify for the Casualty Loss Deduction

Heavy Tax Breaks for Heavy Business Vehicles

2026 Tax Law Changes for Individuals

Make Smart Choices With a Sudden Windfall

Avoid Common Pitfalls

Use Your Windfall Wisely

Plan for the Long Term

Businesses: Act Soon to Take Advantage of Clean Energy Tax Incentives

Make Building Improvements

Look at Vehicle-Related Breaks

Don’t Wait

Can You Claim a Tax Deduction for Tips or Overtime Income?

Deducting Tips

Deducting Overtime

Reporting Requirements ﻿

December 2025 Newsletter

Feature Articles

Tax Tips

December 2025: Upcoming Tax Due Dates

December 15

January 12

What Are the Tax Consequences of Employee Gifts?

Last-Minute Tax Strategy: Accelerating Deductions

Simplify Expense Reporting With High-Low Travel Per Diem Rates

The Tax Implications of Remote Work

State Tax Issues for Employees

Tax and Compliance Burdens for Employers

Job-Related Expenses

Know the Consequences

NOL Deductions Can Ease the Pain of Business Losses

How to Qualify

Limits Apply

“Excess” Business Losses

Next Steps

How Does the New Tax Deduction for Car Loan Interest Work?

The Specifics

Loan-Related Requirements

Final Thoughts

November 2025 Newsletter

Feature Articles

Tax Tips

November 2025: Upcoming Tax Due Dates

November 17

December 10

Easier Reporting Rules for Some Forms

Making Tax-Free Gift in 2025 and 2026

Make Sure Every Donation Counts

Throwing a Party for Your Workforce? Know the Tax Rules

The Rules Before and Since the TCJA

Nonemployee Guests

Safeguarding Your Deductions

5 Smart Tips for Individual Year-End Tax Planning

1. Use Bunching to Maximize Deductions

2. Balance Gains and Losses

3. Gift Appreciated Assets to Loved Ones

4. Give Wisely to Charities

5. Use Your IRA for Donations

Final Thought

Bonus Depreciation and Other Year-End Tax-Saving Tools for Businesses

Assets Eligible for Bonus Depreciation

Beware of the Excess Business Loss Rule

Save Taxes by Saving for Retirement

Wrapping it Up

October 2025 Newsletter

Feature Articles

Tax Tips

October 2025: Upcoming Tax Due Dates

October 15

October 31

November 10

Dependent Care Flexible Spending Accounts for Your Business

Say Goodbye to Paper Checks

Reporting Requirements

SALT Deduction Expanded

What Is the QBI Deduction?