ERISA Record Retention: What Every Plan Sponsor Needs to Know

Missing ERISA plan documents can significantly increase costs and long-term risk for employers and plan sponsors. For example, a former employee or their heirs may file a claim for benefits they mistakenly believe are due. Here, the burden falls on the plan to provide records that prove the distribution was previously made to the employee — sometimes decades ago — or pay the claim. This scenario highlights the critical role of records retention policies.

Plan sponsors and other fiduciaries must understand their roles in preserving and maintaining plan records that help avoid duplicate distributions and ensure compliance with their fiduciary obligations. And, given that retirement plans are long-term commitments spanning many years of a participant’s work life, they inevitably generate extensive supporting documentation for plan sponsors to store and manage.

Read on to learn more about ERISA plan records retention guidelines, unusual circumstances that may complicate the plan sponsor’s role, and best practices for preserving and maintaining crucial records.

What Rules Apply to ERISA Records Retention?

Plan sponsors adhere to specific rules pertaining to record retention but may overlook some significant nuances. The following rules apply:

ERISA Section 107 requires that plans retain records in an easily accessible format for six (6) years from the date of filing (including supporting documentation).
The IRS requires most ERISA plans to keep records for three (3) years from the plan’s Form 5500 filing date.

However, ERISA Section 209 provides a more rigorous guideline, one that is key but often overlooked: Plan sponsors must keep plan records until all benefits have been paid out and the time for auditing the plan has passed. It is the plan sponsor’s responsibility to demonstrate that all due benefits have been paid to employees, as the burden of proof lies with them.

What Is Form 8955-SSA, and Why the Urgency?

Plan sponsors send a Form 8955-SSA to the Social Security Administration (SSA) when an employee leaves a job without taking their vested ERISA retirement plan benefit. When the employee reaches the plan’s normal retirement age (typically 65), sometimes decades after they accrued that benefit, the SSA will notify the employee that benefits may be available based on the Form 8955-SSA. The employee can then approach their former employer with a government letter indicating that money may be owed to them. The plan sponsor must then review plan records to answer the claim and pay the benefits unless the employer can prove that the money was already distributed.

The rules surrounding record retention and Form 8955-SSA have not changed; the circumstances have. An upcoming wave of baby boomer retirements could trigger a corresponding rise in benefit claims, leaving plan sponsors searching for records that may no longer exist.

Who Is Responsible for Maintaining ERISA Benefit Plan Records?

The responsibility for maintaining all plan records falls on the plan sponsor, whether the employer or a third-party administrator (TPA) stores them. Records of plan distributions may be the first line of defense against claims for benefits, but the following types of documents should also be kept for future reference:

Plan Distribution Documents to Reference

Plan document, adoption agreement, IRS letter, amendments, summary plan description, summary of material modification, trust documents, service agreements, and loan policies
Records supporting eligibility, vesting and benefits (census records for all employees)
Support and documentation for loans and distributions
Board resolutions and committee minutes related to the ERISA plan
Service agreements with service providers

Keeping track of records for decades remains a challenge for plan sponsors, especially considering common business events such as:

Implementation of standard record retention policies

Most companies develop record retention policies, and employees may follow them with the best of intentions. But, as noted above, ERISA benefit plan records need special handling and longer storage. Companies may unintentionally destroy the records needed to prove length of service, benefits accrued, and benefits paid from retirement plans to employees. Fixing this problem could be as simple as amending standard record retention policies to include specific guidance for benefit plan records.

Execution of business transactions such as sales, M&As, and closures

Due diligence should reveal ERISA benefit plans that pass from company to company during transactions and should be addressed. Occasionally, plan details don’t make it into the contracts, but it is more likely for records to be lost or destroyed after the transaction closes. These situations do not absolve the plan sponsor of its responsibility to retain plan records.

Termination of TPA contracts

Employers may transfer their business from one TPA to another or the provider may go out of business; either situation leaves the plan records vulnerable to loss or destruction. Unless the contract contained specific language regarding storage of the plan’s records, the TPA is not required to continue holding plan records. Here, again, the plan sponsor is responsible for the records whether they are housed with a TPA or with the employer’s HR department.

Protection of data

System migrations and conversions controlled by the employer, TPA, or other entity can result in data loss. Whether records were destroyed because an employee zealously followed the company’s record retention policy or were lost due to a glitch in an IT system is generally immaterial. As noted above, if the employer cannot prove that benefits were paid to a participant, the employer may have to pay even if it believes benefits were already distributed (including if the benefits were earned while the individual was employed at a previous entity that was acquired by the current plan sponsor).

What can plan sponsors do to protect and maintain ERISA plan records to mitigate these risks?

Records Retention Practice Tips for Plan Sponsors

Using the following best practices can help plan sponsors retain and maintain plan records essential to proving the status of a participant’s claim:
Verify that all documents are the executed versions (signed and dated), including evidence of electronic signature if signed electronically.
Implement a written record retention statement for plans that rely on electronic records and do not maintain original paper records.
Check TPA service contracts for language about records retention.
Retain all ERISA plan documents when changing recordkeepers or payroll providers, including records that are typically unavailable to plan sponsors.
Store and back up records, ensuring that other fiduciaries are aware of their location and can access them.
Verify that plan records are securely stored on current technology and protected from unauthorized use or loss.
Update the Form 8955-SSA when distributions have been made to plan participants.

When benefit claims arrive, robust records retention policies can help ensure that employees receive the benefits they deserve while avoiding overpayments.

Records Retention Is an Ongoing Process

Will a comprehensive review of your plan’s recordkeeping reveal missing documents or gaps in your retention protocols? Please consider asking our Employee Benefit Plan Audit team to review your plan and offer advice on how to improve your plan’s record management.

In many occupational fraud incidents, the perpetrator is a long-tenured, well-liked and high-performing employee. In part, that’s because many organizations ignore red flags when employees have impeccable records — which makes it easier for them to commit illegal activities. In such situations, misplaced trust becomes a vulnerability. How can you rely on your employees yet prevent theft and other crimes?

Correlation between tenure and losses

Employees who’ve been with an organization for years often develop strong relationships and may have earned performance and service awards. The trust they’ve built over time generally means they’re granted more autonomy than newer employees, and their actions are questioned less frequently. This can cause coworkers and supervisors to overlook warning signs.

Unfortunately, this level of trust can make it easier for fraud schemes to go undetected. And the longer they go undetected, the more likely losses will be heavy. According to the Association of Certified Fraud Examiners, employees with tenures of less than a year are responsible for a median fraud loss of $50,000. Those with tenures of more than 10 years cause median losses of $250,000.

Why they do it

In many fraud incidents involving long-term employees, warning signs are present but ignored. For example, long-tenured employees engaged in fraud often hesitate to take vacations or delegate tasks. Sometimes, they control multiple steps in a process that should involve more than one person. They may be protective of their work and resist audits or procedural changes. Of course, these can also be innocent signs of over-dedicated workers, which is why you should investigate red flags discreetly.

Some employees are inherently dishonest. But they typically make up a small minority among those who commit fraud. Instead, long-term employees who perform illegal acts may feel entitled, frustrated, or resentful about how they’re treated or compensated. They may live beyond their means or have a substance abuse or gambling problem. Some commit fraud simply because the opportunity presents itself. Others do so believing no one will suspect them.

A balancing act

Because sudden scrutiny of long-tenured workers can generate resentment and mistrust, apply your business’s antifraud policies fairly and consistently. Your oversight should emphasize that no one’s immune to suspicion. Here are several ways to improve oversight:

Implement job rotation and mandatory vacations. Cross-training employees in certain departments (such as accounting and shipping) makes it possible to mandate vacations without losing productivity. Workers who must take time off have a harder time perpetrating fraud.

Segregate duties. Never allow even long-term, trusted employees to control multiple parts of a financial or accounting process. If you don’t have enough staff to spread responsibilities around, consider outsourcing some of them.

Maintain a culture of accountability. All employees must understand that trust is earned through words and actions, not tenure. You and your executives must model ethical behavior and hold employees to the same high standards. Provide a confidential hotline for any stakeholder to report fraud suspicions.

Valuable assets

Long-term employees can be your organization’s most valuable assets. However, they aren’t immune to the pressures, temptations or rationalizations that can lead workers to commit fraud. By recognizing the risks of misplaced trust and applying internal controls fairly, your organization can help protect itself. Contact us with questions.

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4. The new law includes a number of favorable changes that will affect small business taxpayers, and some unfavorable changes too. Here’s a quick summary of some of the most important provisions.

First-year bonus depreciation

The OBBBA permanently restores the 100% first-year depreciation deduction for eligible assets acquired after January 19, 2025. This is up from the 40% bonus depreciation rate for most eligible assets before the OBBBA.

First-year depreciation for qualified production property

The law allows additional 100% first-year depreciation for the tax basis of qualified production property, which generally means nonresidential real property used in manufacturing. This favorable deal applies to qualified production property when the construction begins after January 19, 2025, and before 2029. The property must be placed in service in the United States or one of its possessions.

Section 179 expensing

For eligible assets placed in service in taxable years beginning in 2025, the OBBBA increases the maximum amount that can be immediately written off to $2.5 million (up from $1.25 million before the new law). A phase-out rule reduces the maximum deduction if, during the year, the taxpayer places in service eligible assets in excess of $4 million (up from $3.13 million). These amounts will be adjusted annually for inflation starting in 2026.

R&E expenditures

The OBBBA allows taxpayers to immediately deduct eligible domestic research and experimental expenditures that are paid or incurred beginning in 2025 (reduced by any credit claimed for those expenses for increasing research activities). Before the law was enacted, those expenditures had to be amortized over five years. Small business taxpayers can generally apply the new immediate deduction rule retroactively to tax years beginning after 2021. Taxpayers that made R&E expenditures from 2022–2024 can elect to write off the remaining unamortized amount of those expenditures over a one- or two-year period starting with the first taxable year, beginning in 2025.

Business interest expense

For tax years after 2024, the OBBBA permanently restores a more favorable limitation rule for determining the amount of deductible business interest expense. Specifically, the law increases the cap on the business interest deduction by excluding depreciation, amortization and depletion when calculating the taxpayer’s adjusted taxable income (ATI) for the year. This change generally increases ATI, allowing taxpayers to deduct more business interest expense.

Qualified small business stock

Eligible gains from selling qualified small business stock (QSBS) can be 100% tax-free thanks to a gain exclusion rule. However, the stock must be held for at least five years and other eligibility rules apply. The new law liberalizes the eligibility rules and allows a 50% gain exclusion for QSBS that’s held for at least three years, a 75% gain exclusion for QSBS held for at least four years, and a 100% gain exclusion for QSBS held for at least five years. These favorable changes generally apply to QSBS issued after July 4, 2025.

Excess business losses

The OBBBA makes permanent an unfavorable provision that disallows excess business losses incurred by noncorporate taxpayers. Before the new law, this provision was scheduled to expire after 2028.

Paid family and medical leave

The law makes permanent the employer credit for paid family and medical leave (FML). It allows employers to claim credits for paid FML insurance premiums or wages and makes other changes. Before the OBBBA, the credit was set to expire after 2025.

Employer-provided child care

Starting in 2026, the OBBBA increases the percentage of qualified child care expenses that can be taken into account for purposes of claiming the credit for employer-provided child care. The credit for qualified expenses is increased from 25% to 40% (50% for eligible small businesses). The maximum credit is increased from $150,000 to $500,000 per year ($600,000 for eligible small businesses). After 2026, these amounts will be adjusted annually for inflation.

Termination of clean-energy tax incentives

The OBBBA terminates a host of energy-related business tax incentives including:

The qualified commercial clean vehicle credit, effective after September 30, 2025.
The alternative fuel vehicle refueling property credit, effective after June 30, 2026.
The energy efficient commercial buildings deduction, effective for property the construction of which begins after June 30, 2026.
The new energy efficient home credit, effective for homes sold or rented after June 30, 2026.
The clean hydrogen production credit, effective after December 31, 2027.
The sustainable aviation fuel credit, effective after September 30, 2025.

More to come

In the coming months, the IRS will likely issue guidance on these and other provisions in the new law. We’ll keep you updated, but don’t hesitate to contact us for assistance in your situation.

In baseball, the triple play is a high-impact defensive feat that knocks the competition out of the inning. In business, you have your own version — three key financial statements that can give you a competitive edge by monitoring profitability, liquidity and solvency.

First base: The income statement

The income statement (also known as the profit and loss statement) shows revenue, expenses and earnings over a given period. It’s like an inning-by-inning scoreboard of your operations. While many people focus on the bottom line (profits or losses), it pays to dig into the details.

A common term used when discussing income statements is “gross profit,” or the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of labor, materials and overhead required to produce or acquire a product. Another important term is “net income.” This is the income remaining after all expenses (including taxes) have been paid.

Also, investigate income statement trends. Is revenue growing or declining? Are variable expenses (such as materials costs, direct labor and shipping costs) changing in proportion to revenue? Are you overwhelmed by fixed selling, general and administrative expenses (such as rent and marketing costs)? Are some products or service offerings more profitable than others? Evaluating these questions can help you brainstorm ways to boost profitability going forward.

Second base: The balance sheet

The balance sheet (also known as the statement of financial position) provides a snapshot of the company’s financial health. This report tallies assets, liabilities and equity at a specific point in time. It provides insight into liquidity (whether your company has enough short-term assets to cover short-term obligations) and solvency (whether your company has sufficient resources to succeed over the long term).

Under U.S. Generally Accepted Accounting Principles (GAAP), assets are usually reported at the lower of cost or market value. Current assets (such as accounts receivable and inventory) are reasonably expected to be converted to cash within a year, while long-term assets (such as plant and equipment) have longer lives. Similarly, current liabilities (such as accounts payable) come due within a year, while long-term liabilities are payment obligations that extend beyond the current year or operating cycle.

Intangible assets (such as patents, customer lists and goodwill) can provide significant value to a business. But internally developed intangibles aren’t reported on the balance sheet; instead, their costs are expensed as incurred. Intangible assets are only reported when they’ve been acquired externally.

Owners’ equity (or net worth) is the extent to which the book value of assets exceeds liabilities. If liabilities exceed assets, net worth will be negative. However, book value may not necessarily reflect market value. Some companies may provide the details of owners’ equity in a separate statement called the statement of retained earnings. It details sales or repurchases of stock, dividend payments and changes caused by reported profits or losses.

Third base: The statement of cash flows

The cash flow statement shows all the cash flowing in and out of your company. For example, your company may have cash inflows from selling products or services, borrowing money, and selling stock. Outflows may result from paying expenses, investing in capital equipment and repaying debt.

Typically, cash flows are organized on this report under three categories: operating, investing and financing activities. The bottom of the statement shows the net change in cash during the period. Watch your statement of cash flows closely to gauge your business’s liquidity. To remain in business, companies must continually generate cash to pay creditors, vendors and employees — and they must remain nimble to respond to unexpected changes in the marketplace.

What’s your game plan?

Financial reporting is more than an exercise in compliance with accounting rules. Financial statements can be a valuable management tool. However, many business owners focus solely on the income statement without monitoring the other bases. That makes operational errors more likely.

Play smart by keeping your eye on all three financial statements. We can help — not only by keeping score — but also by analyzing your company’s results and devising strategic plays to put you ahead of the competition. Contact us for more information.

The One Big Beautiful Bill Act (OBBBA) includes numerous provisions affecting the tax liability of U.S. businesses. For many businesses, the favorable provisions outweigh the unfavorable, but both kinds are likely to impact your tax planning. Here are several provisions included in the new law that may influence your business’s tax liability.

Qualified business income (QBI) deduction

The Tax Cuts and Jobs Act (TCJA) created the Section 199A deduction for QBI for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships. The deduction had been slated to expire after 2025, putting many business owners at risk of higher taxes.

The OBBBA makes the QBI deduction permanent. It also expands the deduction limit phase-in ranges for specified services, trades or businesses, and other entities subject to the wage and investment limitation. For these businesses, the deduction is reduced when taxable income falls within the phase-in range and is eliminated when taxable income exceeds the range. The new law expands the phase-in thresholds from $50,000 to $75,000 for individual filers and from $100,000 to $150,000 for joint filers.

The OBBBA also adds an inflation-adjusted minimum QBI deduction of $400, beginning in 2025. It’s available for taxpayers with at least $1,000 of QBI from one or more active businesses in which they materially participate.

Accelerated bonus depreciation

The OBBBA makes permanent 100% first-year bonus depreciation for the cost of qualified new and used assets acquired and placed into service after January 19, 2025. Under the TCJA, the deduction was limited to 40% for 2025, 20% in 2026 and 0% in 2027.

The new law also introduces a 100% deduction for the cost of “qualified production property” (generally, nonresidential real property used in manufacturing) placed into service after July 4, 2025, and before 2031. In addition, the OBBBA increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with each amount adjusted annually for inflation.

Together, the depreciation changes are expected to encourage capital investments, especially by manufacturing, construction, agriculture and real estate businesses. And the permanent 100% bonus depreciation may alleviate the pressure on companies that didn’t want to delay purchases due to a smaller deduction.

Research and experimentation expense deduction

Beginning in 2022, the TCJA required businesses to amortize Sec. 174 research and experimentation (R&E) costs over five years if incurred in the United States or 15 years if incurred outside the country. With the mandatory mid-year convention, deductions were spread out over six years. The OBBBA permanently allows the deduction of domestic R&E expenses in the year incurred, starting with the 2025 tax year.

The OBBBA also allows “small businesses” (those with average annual gross receipts of $31 million or less) to claim the deduction retroactively to 2022. Any business that incurred domestic R&E expenses in 2022 through 2024 can elect to accelerate the remaining deductions for those expenditures over a one- or two-year period.

Clean energy tax incentives

The OBBBA eliminates many of the Inflation Reduction Act’s clean energy tax incentives for businesses, including the:

Qualified commercial clean vehicle credit,
Alternative fuel vehicle refueling property credit, and
Sec. 179D deduction for energy-efficient commercial buildings.

The law accelerates the phaseouts of some incentives and moves up the project deadlines for others. The expiration dates vary. For example, the commercial clean vehicle credit can’t be claimed for a vehicle acquired after September 30, 2025, instead of December 31, 2032. But the alternative fuel vehicle refueling property credit doesn’t expire until after June 30, 2026.

Qualified Opportunity Zones

The TCJA established the Quality Opportunity Zone (QOZ) program to encourage investment in distressed areas. The program generally allows taxpayers to defer, reduce or exclude unrealized capital gains reinvested in qualified opportunity funds (QOFs) that invest in designated distressed communities. The OBBBA creates a permanent QOZ policy that builds off the original program.

It retains the existing benefits and also provides for investors to receive incremental reductions in gain starting on their investment’s first anniversary. In the seventh year, taxpayers must realize their initial gains, reduced by any step-up in basis, the amount of which depends on how long the investment is held. The first round of QOFs available under the permanent policy will begin on January 1, 2027.

The OBBBA also introduces a new type of QOF for rural areas. Investments in such funds will receive triple the step-up in basis.

International taxes

The TCJA added several international tax provisions to the tax code, including deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). It also established the base erosion and anti-abuse tax (BEAT) on U.S. corporations that 1) have average annual gross receipts greater than or equal to $500 million for the prior three tax years, and 2) have made deductible payments to related non-U.S. parties at or above 3% of all deductible payments.

The OBBBA makes permanent the FDII and GILTI deductions and adjusts the effective tax rates for FDII and GILTI to 14%. It also makes permanent the minimum BEAT, increasing the tax rate to 10.5%. These changes take effect beginning in 2026.

Employer tax provisions

The new law makes permanent the exclusion from gross income (for employees) and from wages for employment tax purposes (for employers) for employer payments of student loans. It also provides that the maximum annual exclusion of $5,250 be adjusted annually for inflation after 2026.

In addition, the OBBBA permanently raises the maximum employer-provided child care credit from 25% to 40% of qualified expenses, up to $500,000 per year. (For eligible small businesses, these amounts are 50% and up to $600,000, respectively.) The maximum dollar amount will be adjusted annually for inflation after 2026.

The OBBBA also makes permanent the employer credit for paid family and medical leave (FML) after 2025. Employers will also be allowed to claim the credit for a portion of premiums for paid FML insurance.

Employee Retention Tax Credit

If you filed an Employee Retention Tax Credit claim after January 31, 2024, you may not see your expected refund. The OBBBA bars the IRS from issuing refunds for certain claims submitted after that date. It also gives the IRS at least six years from the date of filing to challenge these claims.

Miscellaneous provisions

The OBBBA increases the limit on the business interest deduction by excluding depreciation, amortization and depletion from the computation of adjusted taxable income (ATI), starting in 2025. The deduction is generally limited to 30% of ATI for the year.

The new law also makes permanent the excess business loss limit, which was set to expire in 2029. And it permanently extends the New Markets Tax Credit, which was scheduled to expire in 2026.

What’s next?

Since the OBBBA is simply extending or making relatively modest modifications to existing tax law, it probably won’t result in the years-long onslaught of new regulations and IRS guidance that followed the TCJA’s enactment. But we’ll keep you informed about any new developments.

Ever since the Tax Cuts and Jobs Act (TCJA) was signed into law in 2017, estate planners have had to take into account a looming date: January 1, 2026. While the TCJA effectively doubled the unified federal gift and estate tax exemption to $10 million (adjusted annually for inflation), it also required the amount to revert to its pre-TCJA level after 2025, unless Congress extended it. This caused uncertainty for wealthy individuals whose estates may be exposed to gift and estate taxes if the higher exemption amount were to expire.

The One Big Beautiful Bill Act (OBBBA), recently signed into law, provides a great deal of certainty for affluent families. Beginning in 2026, it permanently increases the federal gift and estate tax exemption amount to $15 million ($30 million for married couples). The amount will continue to be adjusted annually for inflation. If your estate exceeds, or is expected to exceed, the exemption amount, consider implementing planning techniques today that can help you reduce or avoid gift and estate taxes down the road.

What if you’re not currently ready to give significant amounts of wealth to the next generation? Perhaps you want to hold on to your assets in case your circumstances change in the future.

Fortunately, there are techniques you can use to take advantage of the higher exemption amount while retaining some flexibility to access your wealth should a need arise. Here are two ways to build flexibility into your estate plan.

1. SLATs

If you’re married, a spousal lifetime access trust (SLAT) can be an effective tool for removing wealth from your estate while retaining access to it. A SLAT is an irrevocable trust, established for the benefit of your children or other heirs, which permits the trustee to make distributions to your spouse if needed, indirectly benefiting you as well.

So long as you don’t serve as trustee, the assets will be excluded from your estate and, if the trust is designed properly, from your spouse’s estate as well. For this technique to work, you must fund the trust with your separate property, not marital or community property.

Keep in mind that if your spouse dies, you’ll lose the safety net provided by a SLAT. To reduce that risk, many couples create two SLATs and name each other as beneficiaries. If you employ this strategy, be sure to plan the arrangement carefully to avoid running afoul of the “reciprocal trust doctrine.”

Under the doctrine, the IRS may argue that the two trusts are interrelated and leave the spouses in essentially the same economic position they would’ve been in had they named themselves as life beneficiaries of their own trusts. If that’s the case, the arrangement may be unwound and the tax benefits erased.

2. SPATs

A special power of appointment trust (SPAT) is an irrevocable trust in which you grant a special power of appointment to a spouse or trusted friend. This person has the power to direct the trustee to make distributions to you.

Not only are the trust assets removed from your estate (and shielded from gift taxes by the current exemption), but so long as you are neither a trustee nor a beneficiary, the assets will enjoy protection against creditors’ claims.

Hold on to your assets

These strategies are just two that you can include in your estate plan to take advantage of the newly permanent exemption amount while maintaining control of your assets. Contact us for more details.

This webinar has concluded. You can watch the webinar on-demand here.

The One Big Beautiful Bill Act (OBBBA) is now law, ushering in sweeping tax changes. Join David Jewell, CPA, Principal and Tax & Consulting Service Line Leader at Yeo & Yeo, for a webinar covering key provisions of the OBBBA, what’s changing, and how to prepare.

You’ll gain insights into:

Overview of the OBBBA
Significant tax changes for individuals and businesses
How these changes may affect your 2025 tax filings
Planning strategies to consider now
Compliance considerations and potential challenges

Understanding the new provisions now can help you avoid costly missteps later. Don’t miss this opportunity to learn what the changes mean for your business or personal tax plan.

Watch the Webinar On-Demand

Presenter:

David Jewell, CPA, leads the firm’s Tax & Consulting Service Line. He specializes in tax strategy and planning for businesses and individuals. With deep expertise in navigating federal tax law changes, Dave helps clients understand complex legislation and apply it to real-world decisions.

Yeo & Yeo is pleased to announce the promotion of McKenzie Luria, CPA, to Manager. As a member of the Assurance Service Line, she helps school districts and organizations navigate audits and compliance requirements.

“While audits may follow a consistent framework, no two are the same,” Luria said. “I take pride in helping clients tackle the unique obstacles each engagement presents.”

Since joining the firm in 2023, Luria has built strong relationships with clients in the education and nonprofit industries. She brings extensive experience from her previous roles as a Controller, Financial Officer, and Assurance In-Charge, where she specialized in financial reporting and regulatory compliance. Luria is a Certified Public Accountant and holds a Bachelor in Accounting and Finance from Wittenberg University. She is a member of the American Institute of CPAs and the Michigan Association of CPAs.

Luria is based in Yeo & Yeo’s Ann Arbor office. In the community, she is a founding member of Ann Arbor Women for Good, a giving circle focused on empowering women through professional connections and philanthropy. She also volunteers with the Ladywood Legacy group, supporting Ladywood High School alumni initiatives.

“McKenzie is incredibly dedicated to her clients and has a thoughtful, collaborative mindset,” said Jamie Rivette, Principal and Assurance Service Line Leader. “She leads by example – building trust, fostering strong team dynamics, and helping those around her do their best work.”

Yeo & Yeo is pleased to announce the promotion of Kyle Richardson, CPA, to Senior Manager. Richardson is a member of the firm’s Tax & Consulting Service Line and specializes in business advisory services, and tax planning and preparation with an emphasis on trusts and estates.

In speaking of his promotion, Richardson said, “I’m passionate about supporting our clients and collaborating with such a dedicated team. I believe in leading with integrity and empathy, and am always striving to grow, listen, and make a meaningful impact in everything I do.”

Richardson is a member of Yeo & Yeo’s Trust and Estate Services Group, and he is passionate about helping businesses and individuals plan strategically for both current needs and long-term success. He joined the firm in 2018 after serving four years in the U.S. Army and earning his Bachelor of Accountancy from Walsh College. Based in the Troy office, he works closely with clients to simplify complex financial matters and guide them toward confident decision-making.

Richardson is active in the Troy Chamber of Commerce and the Auburn Hills Chamber of Commerce Next Generation group. He is a member of the Michigan Association of CPAs and the American Institute of CPAs. He is a proud graduate of the Auburn Hills Chamber I Lead program and was honored with the 2024 Auburn Hills Chamber of Commerce Tomorrow’s 20 Award, recognizing emerging leaders for their innovation, leadership, and community impact. Richardson serves the community through volunteer work with the Bottomless Toy Chest and Woodside Bible Church, and previously led Yeo & Yeo’s firm-wide service initiative supporting the American Cancer Society.

“Kyle brings genuine care to every client relationship,” said Dave Jewell, Managing Principal and Tax & Consulting Service Line Leader. “He’s thoughtful, creative, and always looking for the right solution to support clients through each stage of their journey.”

On July 4, President Trump signed into law the far-reaching legislation known as the One Big Beautiful Bill Act (OBBBA). As promised, the tax portion of the 870-page bill extends many of the provisions of the Tax Cuts and Jobs Act (TCJA), the sweeping tax legislation enacted during the first Trump administration. It also incorporates several of President Trump’s campaign pledges, although many on a temporary basis, and pulls back many clean-energy-related tax breaks.

While the OBBBA makes permanent numerous tax breaks, it also eliminates several others, including some that had been scheduled to resume after 2025. Here’s a rundown of some of the key changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning in 2025.

Key changes affecting 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. For 2025, the standard deduction increases 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 elimination of personal exemptions
Permanently increases the child tax credit 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, with a 1% increase each year through 2029, after which the $10,000 limit will return
Permanently reduces the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers) but includes mortgage insurance premiums as deductible interest
Permanently eliminates the deduction for interest on home equity debt
Permanently limits the personal casualty deduction for losses resulting from federally declared disasters and certain state declared disasters
Permanently eliminates miscellaneous itemized deductions except for unreimbursed educator expenses
Permanently eliminates the moving expense deduction (with an exception for members of the military and their families in certain circumstances)
Expands the allowable expenses that can be paid with tax-free Section 529 plan distributions
Makes permanent the TCJA’s increased individual alternative minimum tax (AMT) exemption amounts
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 an above-the-line deduction (meaning it’s available regardless of whether a taxpayer itemizes deductions) of up to $25,000 for tip income in certain industries, with income-based phaseouts (payroll taxes still apply)
For 2025–2028, creates an above-the-line deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, with income-based phaseouts (payroll taxes still apply)
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, with income-based phaseouts
For 2025–2028, creates a bonus deduction of up to $6,000 for taxpayers age 65 or older, with income-based phaseouts
Limits itemized deductions for taxpayers in the top 37% income bracket, beginning in 2026
Establishes tax-favored “Trump Accounts,” which will provide eligible newborns with $1,000 in seed money, beginning in 2026
Makes the adoption tax credit partially refundable up to $5,000, with annual inflation adjustments (no carryforwards allowed)
Eliminates several clean energy tax credits, generally after 2025, including the clean vehicle, energy-efficient home improvement and residential clean energy credits
Permanently eliminates the qualified bicycle commuting reimbursement exclusion
Restricts eligibility for the Affordable Care Act’s premium tax credits
Creates a permanent charitable contribution deduction for non-itemizers of up to $1,000 for single filers and $2,000 for joint filers, beginning in 2026
Imposes a 0.5% floor on charitable contributions for itemizers, beginning in 2026

Key changes affecting businesses

Makes permanent and expands the 20% qualified business income (QBI) deduction for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships
Makes permanent 100% bonus depreciation for the cost of qualified new and used assets, for property acquired after January 19, 2025
Creates a 100% deduction for the cost of “qualified production property” for qualified property placed into service after July 4, 2025, and before 2031
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
Increases the cap on the business interest deduction by excluding depreciation, amortization and depletion from the calculation of “adjusted taxable income”
Permanently allows the immediate deduction of domestic research and experimentation expenses (retroactive to 2022 for eligible small businesses)
Makes permanent the excess business loss limit
Prohibits the IRS from issuing refunds for certain Employee Retention Tax Credit claims that were filed after January 31, 2024
Eliminates clean energy tax incentives, including the qualified commercial clean vehicle credit, the alternative fuel vehicle refueling property credit and the Sec. 179D deduction for energy-efficient commercial buildings
Permanently renews and enhances the Qualified Opportunity Zone program
Permanently extends the New Markets Tax Credit
Permanently increases the maximum employer-provided child care credit to $500,000 ($600,000 for small businesses), with annual inflation adjustments
Makes permanent and modifies the employer credit for paid family and medical leave
Makes permanent the exclusion for employer payments of student loans, with annual inflation adjustments to the maximum exclusion beginning in 2027
Makes permanent the foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) deductions and the minimum base erosion and anti-abuse tax (BEAT)
Expands the qualified small business stock gain exclusion for stock issued after the date of enactment

Buckle up

We’ve only briefly covered some of the most significant OBBBA provisions here. There are additional rules and limits that apply. Note, too, that the OBBBA will require a multitude of new implementing regulations. Turn to us for help navigating the new law and its far-reaching implications to minimize your tax liability.

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When employers’ leadership teams gather to discuss sponsoring a retirement plan, “How about a 401(k)?” is usually among the first questions asked. But it’s essential to consider other options as well. In fact, some alternatives may better suit small to midsize organizations that aren’t equipped to handle the heavy administrative burden of a 401(k).

One example is a Simplified Employee Pension (SEP) plan. This plan type is designed to enable employers to help employees accumulate funds for retirement with minimal paperwork for the employer-sponsors. Of course, SEP plans still have rules all their own that you’ll need to understand before jumping in.

Contribution requirement

In the eyes of the IRS, SEP plans are a type of qualified retirement plan. That means they offer tax advantages to both employer-sponsors and participants.

Essentially, you set up a SEP plan through a bank or other financial institution. This typically involves completing IRS Form 5305-SEP, “Simplified Employee Pension — Individual Retirement Accounts Contribution Agreement,” or using an IRS-approved prototype plan. In doing so, you create IRAs (called SEP-IRAs) for each participant.

And here lies an important point: Unlike traditional 401(k) accounts, SEP-IRAs set up for employees don’t allow them to contribute. Only you, the employer-sponsor, can contribute. This feature gives you control over the timing and amounts of contributions.

More specifically, you get to decide annually whether and how much to contribute to participants’ accounts. In 2025, you may contribute up to 25% of each eligible employee’s compensation with a maximum of $70,000 (an amount annually indexed for inflation). You need to make contributions at the same percentage of pay for all qualifying employees — including yourself if you’re self-employed.

Other key rules

There are other key rules to keep in mind. For example, IRS guidelines determine who can be a plan participant. Employees are generally eligible if they:

Are at least 21 years old,
Have worked for your organization in three of the past five years, and
Have earned at least $750 in 2025.

You may choose less stringent eligibility requirements, but you can’t impose more restrictive ones.

The good news is that, unlike many other qualified plans, SEP plans don’t require annual IRS filings for employers. However, if you choose to make contributions, you must do so by your organization’s tax-filing deadline (including extensions) for them to count for the previous year.

Please note that your contributions are immediately 100% vested, and participants own their SEP-IRAs outright. That means once you transfer the funds, those dollars belong to participants — even if they leave their jobs.

Potential advantages and risks

As mentioned, the biggest advantage of SEP plans over many other qualified plans is a much lighter administrative burden. Setup is relatively easy, the rules are straightforward, there are no annual tests or filings required, and you can opt out of making contributions in any given year.

When you do choose to make contributions, they’re tax deductible, which reduces your taxable income. What’s more, the plan itself can help you attract quality job candidates and retain good employees.

Naturally, there are risks to consider. As mentioned, you must contribute the same percentage for every eligible employee, which may include yourself. That means if you want to set aside substantial sums for your own retirement, you’ll have to do the same for participants.

The contribution requirement can also get expensive as an organization grows and more participants join the plan. That’s why SEP plans are usually best suited to smaller employers. In addition, because employees are immediately vested, you can’t set up a vesting schedule to use as a retention tool.

Low-maintenance vehicle

To sum up, a SEP plan may be a strong fringe benefit for your organization if you’re looking to sponsor a low-maintenance vehicle to help you and your staff save for retirement. However, you must ensure that the plan’s design aligns with your cash flow and strategic goals before implementing it. We can help you better understand the rules, costs and tax impact as they apply to your organization.

If your business occupies a large space and you’re planning to relocate, expand or renovate in the future, consider the potential benefits of the rehabilitation tax credit. This could be particularly valuable if you’re interested in historic properties.

The credit is equal to 20% of the qualified rehabilitation expenditures (QREs) for a qualified rehabilitated building that’s also a certified historic structure by the National Park Service. A qualified rehabilitated building is a depreciable building that has been placed in service before the beginning of the rehabilitation and is used, after rehabilitation, in business or for the production of income (and not held primarily for sale). Additionally, the building must be “substantially” rehabilitated, which generally requires that the QREs for the rehabilitation exceed the greater of $5,000 or the cost of acquiring the existing building.

Eligible expenses

A QRE is any amount chargeable to capital and incurred in connection with the rehabilitation (including reconstruction) of a qualified rehabilitated building. Qualified rehabilitation expenditures must be for real property (but not land) and can’t include building enlargement or acquisition costs.

The 20% credit is allocated ratably, to each year in the five-year period beginning in the tax year in which the qualified rehabilitated building is placed in service. Thus, the credit allowed in each year of the five years is 4% (20% divided by 5) of the QREs concerning the building. The credit is allowed against both regular federal income tax and alternative minimum tax.

Permanent changes to the credit

The Tax Cuts and Jobs Act, signed at the end of 2017, made some changes to the credit. Specifically, the law:

Now requires taxpayers to claim the 20% credit ratably over five years instead of in the year they placed the building into service, and
Eliminated the 10% rehabilitation credit for the pre-1936 buildings.

It’s important to note that while many individual tax cuts under the TCJA are set to expire after December 31, 2025, the changes to the rehabilitation tax credit aren’t among them. They’re permanent.

Maximize the tax benefits

Contact us to discuss the technical aspects of the rehabilitation credit. There may also be other federal tax benefits available for the space you’re contemplating. For example, various tax benefits may be available depending on your preferences regarding how a building’s energy needs will be met and where the building will be located. In addition, there may be state or local tax and non-tax subsidies available.

Beyond these preliminary considerations, we can work with you and construction professionals to determine whether a specific available “old” building can be the subject of a rehabilitation that’s both tax-credit-compliant and practical to use. And, if you find a building that you decide to buy (or lease) and rehabilitate, we can help you monitor project costs and substantiate the project’s compliance with the requirements of the credit and any other tax benefits.

The U.S. Senate passed its version of the One Big Beautiful Bill (OBBBA) by a vote of 51 to 50 on July 1. (Vice President J.D. Vance provided the tiebreaking vote.) At its core, the massive bill is similar to the bill passed by the U.S. House of Representatives last May. It includes extensions of many provisions of the Tax Cuts and Jobs Act (TCJA) currently set to expire on December 31.

Both the House and Senate bills include some new and enhanced tax breaks. For example, they contain President Trump’s pledge to exempt tips and overtime from income tax for eligible taxpayers.

Trump also made a campaign promise to eliminate tax on Social Security benefits. That isn’t included in either version of the bill. However, the Senate bill temporarily provides a $6,000 deduction for those age 65 and older for 2025 through 2028 for those with modified adjusted gross income of under $75,000 ($150,000 for married joint filers). The House bill expands the standard deduction for seniors but caps it at $4,000.

In addition, the Senate’s version of the bill introduces other significant changes, including in the state and local tax (SALT) deduction cap and the Child Tax Credit (CTC).

SALT deduction cap

A major sticking point in both branches of Congress is the SALT deduction cap. It’s currently set at $10,000 by the Tax Cuts and Jobs Act. Lawmakers in high-tax states such as California and New York have long sought to increase (or even repeal) the cap.

The House’s version of the bill proposes to permanently increase the cap to $40,000 for those making under $500,000. The Senate-passed bill also calls for increasing the cap to $40,000 for 2025, with an annual 1% increase through 2029. In 2030, the cap would revert to $10,000. It also calls for phasing out the deduction for individuals who earn more than $500,000 in 2025 and then annually increasing the income amount by 1% through 2029.

Child Tax Credit (CTC)

Under current law, the $2,000 per child CTC is set to drop to $1,000 after 2025. The income phaseout thresholds will also be significantly lower. And the requirement to provide the child’s Social Security number (SSN) will be eliminated.

The House’s version of the OBBBA would make the CTC permanent, raise it to $2,500 per child for tax years 2025 through 2028 and retain the higher income phaseout thresholds. It would also preserve the requirement to provide a child’s SSN and expand it to require an SSN for the taxpayer (generally the parent) claiming the credit. After 2028, the CTC would return to $2,000 and be adjusted annually for inflation.

The Senate’s version of the bill would also make the CTC permanent, but would increase it to $2,200, subject to annual inflation increases. It would require SSNs for both the parent claiming the credit and the child.

Next steps

These are just a few of the provisions in the massive tax and spending bill. The proposed legislation is currently back with the House of Representatives for further debate and a vote. President Trump has set a deadline to sign the bill into law by July 4, but it’s currently uncertain if the House can pass the bill in time. Stay tuned.

There are numerous factors to consider when you decide to pull up roots and relocate to another state. Your estate plan likely isn’t top of mind, but it’s wise to review and update it when you move across state lines. Let’s take a closer look at a few areas you should consider as you reexamine your estate plan.

Will’s language

Before you begin, know that you won’t have to throw out your existing plan and start from scratch. However, you may need to amend or replace certain documents to ensure they comply with your new state’s laws and continue to meet your estate planning objectives.

Begin by having your estate planning advisor review the text of your will. So long as it was properly drafted according to your previous state’s requirements, it generally will be accepted as valid in most other states.

Nevertheless, it’s important to review your will’s terms to ensure they continue to reflect your wishes. For example, if you’re married and you move from a noncommunity property state to a community property state (or vice versa), your new state’s laws may change the way certain property is owned.

Health care powers of attorney and advance directives

Many estate plans include advance medical directives or health care powers of attorney. Advance directives (often referred to as living wills) communicate your wishes regarding medical care (including life-prolonging procedures) in the event you become incapacitated. Health care powers of attorney appoint a trusted agent or proxy to act on your behalf. Often, the two are combined into a single document. Given the stakes involved, it’s critical to ensure that these documents will be accepted and followed by health care providers in your new state.

Although some states’ laws expressly authorize out-of-state advance directives and powers of attorney, others are silent on the issue, creating uncertainty over whether they’ll be accepted. Regardless of the law in your new state, it’s a good idea to prepare and execute new ones. Most states have their own forms for these documents, with state-specific provisions and terminology. Health care providers in your new state will be familiar with these forms and may be more likely to accept them than out-of-state forms.

Financial powers of attorney

Like wills, out-of-state financial powers of attorney will be accepted as valid in most states. Still, to avoid questions and delays, it’s advisable to execute powers of attorney using your new state’s forms, since banks and other financial service providers will be familiar with them.

Review your plan regardless of your location

When moving out-of-state, reviewing your estate plan can help safeguard your intentions and ensure your loved ones are protected. And even if you’re not moving to a new state, you should review your estate plan regularly to ensure it continues to meet your needs. Contact us with questions.

Navigating the financial reporting requirements in the cannabis industry can be complex. One critical component is the Annual Financial Statement (AFS) reporting mandated by the Cannabis Regulatory Authority (CRA). As a cannabis business owner, understanding how Certified Public Accountants (CPAs) play a crucial role in this process can help you stay compliant, avoid costly mistakes, and strengthen your business’s credibility.

Why Working with a CPA Matters

Cannabis AFS reporting is not just about preparing numbers — it’s about ensuring those numbers withstand regulatory scrutiny. CPAs bring specialized knowledge and expertise to this process, helping you meet the CRA’s strict requirements and avoid common pitfalls. Their role is more than a formality; it’s a vital partnership that supports your business’s financial integrity and regulatory compliance. Retaining a CPA to assist with accounting and bookkeeping is an excellent way to ensure accurate data and can make your AFS process much less painful.

What Type of Engagement are CPAs Performing?

The reporting process for cannabis AFS involves what’s known as an “agreed-upon procedures” engagement. Unlike a full audit or review, CPAs perform only the specific procedures the CRA requires. This means the CPA focuses on checking and verifying particular areas without offering an overall opinion on your financial statements. The procedures are strictly defined and designed to ensure accuracy and transparency in your reporting.

How Do CPAs Verify Your Data?

During the engagement, CPAs request information directly from you as the licensee and compare various data sources. This includes:

The general ledger
The point of sale (POS) system
METRC (the state’s cannabis tracking system)
Underlying documentation to support transactions and activities

The licensee must explain any discrepancies or deviations found during these comparisons. This step is crucial because the CRA relies on these reports to confirm that cannabis products are appropriately tracked and that their financial records are truthful.

Behind the Scenes: Internal Controls and Standards

CPA firms don’t just check your numbers; they follow strict attestation standards set by the American Institute of Certified Public Accountants (AICPA). These standards require multiple levels of internal control and quality checks within the CPA firm itself. Much of this effort happens behind the scenes to ensure the integrity and reliability of the report you submit. This means that while the AFS report may seem straightforward, significant expertise and process rigor go into producing it.

Why Organized Records and a Trusted CPA Are Essential

The key takeaway for cannabis business owners is that keeping organized, accurate, and easily accessible records isn’t just good practice — it’s essential. However, it is equally important to partner with a CPA firm experienced in the cannabis industry. CPAs guide you through the complexities of AFS reporting, help interpret regulatory requirements, and ensure your financial data is correctly reconciled and reported.

When CPAs request documentation or explanations for any irregularities, having your records in order speeds up the process, reduces the risk of errors, and helps maintain good standing with regulatory authorities. A knowledgeable CPA partner can identify potential issues early, offering proactive advice that can save time and money in the long run.

Disorganized records or working without an experienced CPA can cause delays, increase scrutiny, and potentially lead to fines or other penalties. Investing in organized recordkeeping and a trusted CPA relationship sets your business up for smoother compliance and less stress during AFS reporting.

Additional Considerations for Cannabis Business Owners

Understand the Specific Requirements: Each jurisdiction may have nuances in how cannabis financial reporting is conducted. Stay informed and rely on your CPA’s expertise to navigate these complexities.
Leverage Technology: Tools that integrate your sales, inventory, and accounting can reduce manual errors and help maintain consistency across records.
Choose a CPA Firm That Knows Cannabis: Not all CPAs understand the unique challenges of this industry. Working with a CPA who specializes in cannabis accounting ensures that your reporting is accurate and compliant, and that you benefit from tailored advice.

The role of CPAs in cannabis AFS reporting is more than just crunching numbers — it’s about applying rigorous, standardized procedures to ensure your financial data is accurate and trustworthy. For cannabis business owners, working with a knowledgeable CPA and maintaining organized records are critical steps to protect your business’s reputation and position it for future success.

If you need assistance navigating these requirements or want to ensure your records and reporting are audit-ready, Yeo & Yeo’s team is here to help. Contact us to learn how we can support your cannabis business with tailored accounting and compliance solutions.

Cannabis businesses operating in highly regulated markets face rigorous financial reporting requirements, particularly when preparing their Annual Financial Statement (AFS). The AFS is not only a compliance obligation but a critical reflection of the business’s financial integrity, governance, and operational soundness. This article outlines the major elements cannabis operators must address to ensure a complete and accurate AFS, emphasizing the importance of maintaining proper accounting records, reconciliation practices, and supporting documentation.

1. Revenue Reconciliation

Accurate and detailed revenue reconciliation is foundational to any AFS. Cannabis businesses must reconcile revenue reported in their accounting system with point-of-sale (POS) data, bank deposits, and state-mandated seed-to-sale tracking systems such as METRC or BioTrack. Inconsistencies—whether due to timing differences, unrecorded transactions, or data entry errors—can trigger compliance concerns. To substantiate reported income, businesses should implement monthly reconciliation procedures and retain all supporting documentation, including POS summaries, cash logs, and deposit slips.

2. Contracts and Agreements

The AFS requires disclosure and examination of various contractual obligations and rights. Cannabis operators must ensure that all executed agreements are correctly recorded, maintained, and updated. These typically fall into four categories:

Real Property Agreements: Leases or other real property agreements must be retained. Details regarding lease terms, payment schedules, and leasehold improvements should be thoroughly documented.
Financing Agreements: Debt arrangements, including convertible notes, loans from private lenders, and seller-financed arrangements, must be supported by executed documents outlining principal, interest terms, repayment schedules, and any associated covenants.
Management Agreements: In many vertically integrated cannabis operations, management service agreements govern the relationship between licensed and unlicensed entities. These agreements clearly define the scope of services, fees, and control structures to ensure regulatory compliance and avoid ownership entanglement.
Licensing Agreements: Intellectual property licensing, whether for brand use, product formulations, or proprietary technologies, must be categorized appropriately and supported by signed agreements. These contracts may have significant implications for revenue recognition and expense allocation.

3. Vendor Testing

All vendors reflected in the AFS should undergo testing to confirm legitimacy, proper classification, and completeness of recorded transactions.

Service Vendors include consultants, contractors, and professional service providers. Cannabis businesses must obtain W-9 forms, verify EINs, and appropriately categorize expenses (e.g., General & Administrative vs. Cost of Goods Sold). Special attention should be paid to related-party transactions requiring disclosure and additional documentation.
Other Vendors include suppliers of cultivation materials, packaging, security systems, and other operational inputs. Businesses must retain purchase orders, invoices, and proof of payment to support reported expenditures. In states with strict inventory tracking, vendor testing may also intersect with compliance audits of product intake procedures.

4. Ownership and Employee Information

AFS preparation also necessitates clear documentation regarding ownership structure and human resources data. For cannabis licensees, this is particularly important due to regulatory scrutiny of ownership thresholds, funding sources, and employee background requirements.

A detailed ownership ledger should be maintained, disclosing all equity holders, their respective percentages, and any changes during the reporting period.
Employee records should be up-to-date and reconciled with payroll registers, including payroll summaries, job descriptions, and I-9 forms.

Additional Considerations for Cannabis Businesses

Given the unique regulatory and financial environment of the cannabis industry, operators should be aware of the following:

Cash Controls and Security: Many cannabis operators transact in cash due to limited banking access. Internal controls over cash handling, armored transport services, and secure storage procedures should be documented and evaluated regularly.
Audit Readiness: Even if a third-party audit is not mandated, preparing for an AFS engagement of high-level quality ensures readiness for regulatory reviews, licensing renewals, and investor due diligence.

The cannabis industry doesn’t get the luxury of making accounting mistakes without consequences. Regulatory bodies expect cannabis companies to maintain meticulous financial records and to be accessible at any time. Your AFS is the culmination of this discipline. If the numbers don’t tie out, or if your contracts and documents don’t match what’s on the books, you risk fines, audits, or even loss of licensure.

If you’re preparing for your next AFS or want to strengthen your internal accounting processes, contact Yeo & Yeo. We’re here to help you perform the agreed-upon procedures for the AFS so you can stay compliant, confident, and focused on growth.

If someone were to suggest that you should have your business appraised, you might wonder whether the person was subtly suggesting that you retire and sell the company.

Seriously though, a valuation can serve many purposes other than preparing your business for sale so you can head to the beach. Think of it as a checkup that can help you better plan for the future.

Strategic planning

Today’s economy presents both challenges and opportunities for companies across the country. Chief among the challenges is obtaining financing when necessary — interest rates have risen, inflation is still a concern and many commercial lenders are imposing tough standards on borrowers.

A business valuation conducted by an outside expert can help you present timely, in-depth financial data to lenders. The appraisal will not only help them better understand the current state of your business, but also demonstrate how you expect your company to grow. For example, the discounted cash flow section of a valuation report can show how expected future cash flows are projected to increase in value.

In addition, a valuator can examine and state an opinion on company-specific factors such as:

Your leadership team’s awareness of market conditions,
What specific risks you face, and
Your contingency planning efforts to mitigate these risks.

As you go through the valuation process, you may even recognize some of your business’s weaknesses and, in turn, be able to address those shortcomings in strategic planning.

Acquisitions, sales and gifts

There’s no getting around the fact that, in many cases, the primary reason for getting a valuation is to prepare for a transfer of business interests of some variety — be it an acquisition, sale or gift. Even if you’re not ready to make a move like this right now, an appraiser can help you get a better sense of when the optimal time might be.

If you’re able to buy out a competitor or a strategically favorable business, a valuation should play a critical role in your due diligence. When negotiating the final sale price, an appraiser can scrutinize the seller’s asking price, including the reasonableness of cash flow and risk assumptions.

If you’re thinking about selling, most appraisers subscribe to transaction databases that report the recent sale prices of similar private businesses. A valuator also can estimate how much you’d net from a deal after taxes, as well as brainstorm creative deal structures that minimize taxes, provide you with income to fund retirement and meet other objectives.

In the eyes of a potential buyer, a formal appraisal adds credibility to your asking price as well. And if you want to gift business interests to the next generation in your family, a written appraisal is a must-have to withstand IRS scrutiny.

Going the extra mile

You probably have plenty of other things on your plate as you work hard to keep your business competitive. But obtaining an appraisal is a savvy way to go the extra mile to get all the information you need to wisely plan for the future. We can support your company throughout the valuation process and help you make the most of the information you receive.

The U.S. Census Bureau reports there were nearly 447,000 new business applications in May of 2025. The bureau measures this by tracking the number of businesses applying for an Employer Identification Number.

If you’re one of the entrepreneurs, you may not know that many of the expenses incurred by start-ups can’t currently be deducted on your tax return. You should be aware that the way you handle some of your initial expenses can make a large difference in your federal tax bill.

How to treat expenses for tax purposes

If you’re starting or planning to launch a new business, here are three rules to keep in mind:

Start-up costs include those incurred or paid while creating an active trade or business or investigating the creation or acquisition of one.
Under the tax code, taxpayers can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs in the year the business begins. As you know, $5,000 doesn’t go very far these days! And the $5,000 deduction is reduced dollar-for-dollar by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months on a straight-line basis.
No deductions, including amortization deductions, are allowed until the year when “active conduct” of your new business begins. Generally, this means the year when the business has all the necessary components in place to start generating revenue. To determine if a taxpayer meets this test, the IRS and courts generally ask questions such as: Did the taxpayer undertake the activity with the intention of earning a profit? Was the taxpayer regularly and actively involved? And did the activity actually begin?

Expenses that qualify

In general, start-up expenses are those you incur to:

Investigate the creation or acquisition of a business,
Create a business, or
Engage in a for-profit activity in anticipation of that activity becoming an active business.

To qualify for the limited deduction, an expense must also be one that would be deductible if incurred after the business began. One example is money you spend analyzing potential markets for a new product or service.

To be eligible as an “organization expense,” an expense must be related to establishing a corporation or partnership. Some examples of these expenses are legal and accounting fees for services related to organizing a new business, and filing fees paid to the state of incorporation.

Plan now

If you have start-up expenses you’d like to deduct this year, you need to decide whether to take the election described above. Recordkeeping is critical. Contact us about your start-up plans. We can help with the tax and other aspects of your new business.

Almost all (98%) of respondents to a recent survey conducted by Creditsafe expressed concern about being victimized by vendor fraud. Unfortunately, most business owners and managers aren’t well informed about the signs of this type of scam. However, familiarizing yourself with criminal methods, training employees to spot suspicious activities and working with your financial advisors can help prevent losses.

Price fixing and bid rigging

Vendor fraud can take several forms:

Price fixing is an agreement among competitors to set the same price for goods or services. It also refers to competitors jointly establishing a price range or minimum price. Such agreements violate the Sherman Antitrust Act, regardless of whether the prices are unreasonable.
A similar scheme is bid rigging, where two or more vendors agree to steer a company’s purchase of goods or services. Bid-rigging schemes might include:

Bid rotation, where dishonest vendors take turns as the low bidder,
Bid suppression, where two or more vendors illegally agree that at least one of them will withdraw a previously submitted bid (or not bid at all), and
Complementary bidding, where participants submit token bids with a high price or special terms that will make them unacceptable to the company.

Another way vendors might cheat is through market division. This occurs when competitors agree not to compete in a specific segment of a market. For example, if bids are solicited by a customer in a certain geographic region, the competitors either won’t bid or will submit complementary bids. This drives up the price for the soliciting company.

Bribery and invoice shenanigans

You’ve almost certainly heard of kickbacks, where suppliers bribe employees. Generally, these individuals or businesses pay for workers to submit or authorize payment of fraudulent invoices. They typically incorporate kickback payments in the invoice, thus compounding the amount companies are overbilled.

Vendors might also submit inflated invoices in more subtle ways. For instance, the price charged may exceed prices agreed upon in the contract or an invoice might reflect charges for more goods than the customer actually received. In other cases, a vendor could alter the date on a genuine invoice and submit it for duplicate payment.

Minimize fraud risk

It’s probably impossible to avoid every rogue vendor, but there are ways to minimize risk. Carefully screen new vendors to ensure they’re who they say they are and have good references. Also, watch employees who have regular contact with vendors. If their relationships seem unusually close or something doesn’t look right, investigate further. Contact us for help. We can conduct a vendor audit.

Although footnote disclosures appear at the end of reviewed or audited financial statements, they’re far more than a regulatory formality. They provide critical insight into a company’s accounting policies, unusual transactions, contingent liabilities and post-reporting events. The Financial Accounting Standards Board’s conceptual framework says footnotes “are intended to amplify or explain items presented in the main body of the statements.”

Here are answers to some questions that business owners and managers may have about complying with the disclosure requirements under U.S. Generally Accepted Accounting Principles (GAAP).

What are footnote disclosures?

Footnote disclosures are explanatory notes that accompany financial statements. They offer readers the clarity needed to assess risks and financial viability. The level of disclosure varies depending on the level of assurance provided.

Footnotes aren’t exclusive to audited financial statements. Under the American Institute of Certified Public Accountants’ Statements on Standards for Accounting and Review Services, full footnote disclosures are also required for reviewed financial statements under GAAP.

Footnotes aren’t required for compiled financial statements unless management requests them. If full disclosure is requested, the CPA assists in drafting them based on management’s representations. If footnotes are omitted, compiled financial statements must clearly communicate that management accepts responsibility for the omission.

Who’s responsible for the disclosures?

Management provides the underlying financial information for disclosures and is ultimately responsible for the content of footnotes. However, the CPA who prepares a company’s financial statements plays a critical role in drafting and reviewing them and ensuring they comply with applicable accounting frameworks.

For audited and reviewed statements, the CPA helps translate management’s data into clear, accurate disclosures that comply with GAAP or other applicable standards. When preparing compiled financials, the CPA drafts them only when they’re requested and approved by management.

Why do footnotes matter?

Footnote disclosures help readers “read between the lines.” They offer crucial information not readily apparent in the core financial statements and can alert users to hidden risks. Consider the following examples:

Going-concern issues. Financial statements are prepared under the general assumption that the business is a viable going-concern entity. Disclosures are required if management or the CPA believes the company may not survive the next 12 months. For example, a footnote might say, “Management has evaluated the company’s ability to continue as a going concern and determined that recurring operating losses and negative cash flows raise substantial doubt about its ability to continue operations beyond December 31, 2025. Management plans to secure additional funding to address this risk.”

Related-party transactions. Companies may give preferential treatment to, or receive it from, individuals or entities with close ties to the company’s management. Footnotes must disclose such related-party transactions to ensure users are aware of any favorable or non-arm’s-length arrangements. If these disclosures are omitted, the financial results may be misleading, especially if such arrangements are temporary or subject to change. For example, if a company rents property from the owner’s relatives at a below-market rate and fails to disclose this, it could appear more profitable than it truly is.

Accounting changes. Any switch in accounting methods must be disclosed, including the rationale and financial impact. While such changes may be required due to regulatory shifts, they can also be used to manipulate results. Transparent footnotes ensure stakeholders can discern whether changes are justified or opportunistic.

Contingent and unreported liabilities. Not all obligations show up on the balance sheet. Footnotes should disclose contingent liabilities, such as pending lawsuits, IRS inquiries and warranty obligations. Auditors often confirm contingent liabilities by reviewing legal correspondence and contracts, and proper disclosure helps prevent surprises that could derail financial performance.

Subsequent events. Significant events occurring after the balance sheet date but before financial statement issuance — such as a major customer loss or regulatory enforcement action — must be disclosed if they could materially affect the business. For instance, a company’s 2024 financial statement footnotes might say, “On February 20, 2025, the company’s largest customer filed for bankruptcy. The outstanding accounts receivable balance of $180,000 has been written off as uncollectible.” Such disclosures help users assess the company’s performance and avoid being blindsided by sudden downturns.

Transparency equals trust

Clear, tailored footnotes — free from boilerplate language — demonstrate that a business isn’t hiding anything. This fosters trust and credibility with external stakeholders, such as investors, lenders, and regulators, while equipping management with vital context to make strategic decisions.

In today’s high-risk marketplace, transparency isn’t just good practice; it can provide a competitive advantage. Contact us to learn more. We can help refine your company’s footnote disclosures and evaluate those of potential partners or competitors.