Make Smart Choices With a Sudden Windfall

Sarah B

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.

January 2026 Newsletter

By Sarah Bolton • January 7, 2026
Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often. Feature Articles Can You Claim a Tax Deduction for Tips or Overtime Income? Businesses: Act Soon to Take Advantage of Clean Energy Tax Incentives Make Smart Choices With a Sudden Windfall Tax Tips 2026 Tax Law Changes for Individuals Heavy Tax Breaks for Heavy Business Vehicles More Taxpayers May Qualify for the Casualty Loss Deduction

January 2026: Upcoming Tax Due Dates

By Sarah Bolton • January 7, 2026
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

By Sarah Bolton • January 7, 2026
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.