Accounting for Intellectual Property in Your Estate Plan

When most people think about estate planning, they focus primarily on tangible assets, such as real estate, investments and personal property. However, in some cases, intellectual property (IP) can make up a substantial portion of an individual’s wealth. Proper planning can help ensure that these assets are preserved, accurately valued and transferred according to your wishes.

Defining IP

IP generally falls into four main categories: patents, copyrights, trademarks and trade secrets. We’ll focus here only on patents and copyrights. They’re protected by federal law to promote scientific and creative endeavors by providing inventors and artists exclusive rights to benefit economically from their work for a certain period.

Patents protect inventions, and the two most common are utility and design patents. Under federal law, utility patents protect an invention for 20 years from the patent application filing date. (It typically takes at least a year to a year and a half from the date of filing to the date of issue.) Design patents last 15 years from the patent issue date.

Copyrights protect the original expression of ideas that are fixed in a “tangible medium of expression,” typically in the form of written works, music, paintings, film and photographs. Unlike patents, which must be approved by the U.S. Patent and Trademark Office, copyright protection kicks in as soon as a work is fixed in a tangible medium. And copyrights last much longer than patents. The specific term depends on various factors.

Valuing and transferring IP

Valuing IP is a complex process. Unlike physical assets, the value of IP often depends on future income potential. Valuation may consider factors such as licensing agreements, royalty streams, market demand, brand recognition and comparable sales. Often, a professional appraiser is needed to determine fair market value. Accurate valuation is particularly important for estate tax reporting and equitable distribution among heirs.

After you know the IP’s value, it’s time to decide whether to transfer the IP to family members, colleagues, charities or others through lifetime gifts or bequests after your death. The gift and estate tax consequences will likely affect your decision. But you also should consider your income needs, as well as who’s in the best position to monitor your IP rights and take advantage of their benefits.

If you’ll continue to depend on the IP for your livelihood, hold on to it at least until you’re ready to retire or you no longer need the income. You also might want to retain ownership of the IP if you feel that your children or other beneficiaries lack the desire or wherewithal to take advantage of its economic potential and monitor and protect it against infringers.

Whichever strategy you choose, it’s important to plan the transaction carefully to ensure your objectives are achieved. There’s a common misconception that when you transfer ownership of the tangible medium on which IP is recorded, you also transfer the IP rights. But IP rights are separate from the work itself and are retained by the creator.

Working with us

If you hold intangible assets, such as a patent or copyright, contact us. We can help ensure that these potentially valuable assets are properly accounted for in your estate plan.

Many time-consuming accounting and bookkeeping processes — from transaction coding to financial analysis — can now be handled more quickly and consistently with the help of artificial intelligence (AI). Rather than replacing humans, AI-powered automation helps finance and accounting teams work more efficiently, reduce manual workloads, and focus on higher-value analysis and decision-making.

What AI automation can (and can’t) do

Over the past few years, AI capabilities have advanced rapidly. They’ve also become more affordable and accessible for businesses of all sizes. Tools that use machine learning and generative AI can now categorize transactions, draft reports, summarize financial data and flag unusual activity. This can lead to faster reporting, fewer errors and clearer financial insights.

However, AI still struggles with areas that require professional judgment, interpretation, and deep knowledge of tax rules, regulations and business strategy. That’s why the most effective accountants and bookkeepers treat AI as a support tool rather than a replacement for human expertise.

For example, AI-powered systems can often handle repetitive bookkeeping processes such as:

Coding routine transactions,
Assisting with or generating routine journal entries,
Matching and reconciling bank transactions,
Identifying anomalies or duplicate payments, and
Assisting with forecasting models and budgeting inputs.

By automating these tasks, your team can spend less time on data entry and more time analyzing results, advising management and improving financial controls.

Where to start

For many businesses, the biggest challenge isn’t applying the technology — it’s knowing where to begin. Consider these practical tips to help ensure AI tools deliver real value:

Identify time-consuming manual work. Start by listing accounting and bookkeeping tasks that require significant manual effort. Examples include reconciliations, invoice processing, expense categorization and financial report preparation. Rank them based on time spent and complexity to identify the best candidates for automation.

Standardize workflows. Automation works best when processes follow consistent rules. Review how transactions are handled across your accounting system and create standardized procedures. The fewer exceptions and workarounds, the easier it will be to implement AI tools effectively.

Clean up and centralize financial data. AI systems rely on organized, consistent data. If information is stored across multiple spreadsheets, software platforms or formats, consider consolidating it within your accounting system. Clean data leads to better automation and more reliable insights.

Evaluate technology options carefully. AI features are now appearing in many accounting platforms, including bookkeeping software, accounts payable tools and financial analysis applications. Before adopting a solution, identify the specific capabilities you need — such as automated transaction categorization, anomaly detection or predictive forecasting.

Test results before relying on automation. Before fully implementing an AI-driven process, verify the system’s outputs. Review samples of automated journal entries, reconciliations or classifications to confirm accuracy. Ongoing monitoring helps ensure the technology continues to produce reliable results as your business evolves.

We can help

When implemented thoughtfully, AI can significantly improve the efficiency and accuracy of finance and accounting operations. However, adopting AI automation often requires changes to processes, internal controls and reporting procedures. It may also affect how your external accountant approaches audits, financial statement preparation or advisory services. Contact us to explore ways AI-enabled automation can streamline your bookkeeping, improve financial reporting and strengthen your business’s financial processes.

Did you know that you can claim tax deductions for animals that serve a bona fide business purpose? This benefit extends beyond agricultural operations. Working animals in many sectors may qualify. Here are the details.

Working animals vs. personal pets

A working animal must provide a clear and direct business benefit. Common examples include:

Dogs used to deter theft, vandalism or unauthorized entry at a business location,
Cats used to control rodents that could damage inventory, equipment or facilities, and
Animals used in agricultural operations.

In these cases, the animal’s presence directly supports business operations, making related expenses potentially deductible.

However, it’s important to distinguish bona fide working animals from those that provide personal companionship or emotional support. If an animal is a part-time worker and part-time pet, you can deduct only the percentage of expenses that correspond to the animal’s working time. For instance, if a dog spends approximately 60% of its time guarding a warehouse and 40% as a pet, only 60% of eligible expenses would typically be deductible.

The IRS will likely deny deductions for an animal that’s clearly primarily a household pet. Likewise, service animals for owners or employees aren’t eligible for business deductions.

Deductible expenses

Many costs associated with the care of a working animal may be deductible as ordinary and necessary business expenses. These include costs for raising, feeding, caring for, training and managing animals used in a trade or business. Examples include:

Food and treats,
Veterinary care and medications,
Grooming necessary for the animal’s role,
Training costs related to the animal’s work function, and
Supplies such as leashes, collars, bedding and shelter.

The deduction applies only to reasonable expenses connected to the animal’s business use. Luxury or purely personal costs may draw IRS scrutiny.

It’s important to note that different tax rules apply to farmers, ranchers and professional breeders. In general, farmers may deduct feed, veterinary care and other costs directly associated with the business use of animals. The costs associated with animals used for draft, breeding, sport or dairy purposes are typically capitalized and depreciated, rather than immediately deducted, unless they’re included in inventory.

Recordkeeping requirements

Proper documentation is key to supporting deductions for working animals. You’ll need to maintain records to demonstrate that the animal performs a legitimate business function, the expenses are ordinary and necessary for your industry, and any allocation between business and personal use is reasonable. Contact us to discuss your situation and assess your eligibility.

The many tax-related provisions that went into effect last year after the One Big Beautiful Bill Act (OBBBA) was signed into law are affecting 2025 federal income tax returns being filed now. However, some OBBBA provisions aren’t taking effect until this year. Plus, some changes under previous legislation are also taking effect in 2026. Here’s an overview of new tax provisions that individuals and businesses need to consider when conducting their 2026 tax planning.

Tax provisions affecting individual taxpayers

Changes going into effect for individual taxpayers this year include:

New charitable contribution deduction for nonitemizers. For 2026 and future years, the OBBBA reinstates the COVID-era deduction for cash donations to qualified charities by taxpayers who claim the standard deduction, subject to an increased annual limit of $1,000, or $2,000 for joint filers. (The limits were $300 and $600, respectively, for 2021 when this nonitemizer deduction was last available.)

The definition of “cash donation” may be broader than you think. It includes gifts made by debit or credit card, check, electronic bank transfer, online payment platform, and payroll deduction. If you make such gifts in 2026, be sure to retain proper substantiation so you can deduct them when you file your return next year.

New floor on charitable deduction for itemizers. Under the OBBBA, if you itemize deductions rather than claiming the standard deduction, your otherwise allowable charitable deductions are limited to the amount that, in aggregate, exceeds 0.5% of your adjusted gross income (AGI). Put another way, your 2026 charitable deduction is limited to the amount that exceeds 0.5% of your 2026 AGI.

If you’ll be affected, you may want to “bunch” donations into alternating years to minimize the negative impact of the new floor. (If you won’t itemize deductions in the nonbunching years, consider making cash donations up to the nonitemizer charitable deduction limit in those years.)

New limit on itemized deductions for taxpayers in the 37% tax bracket. Generally, this OBBBA limitation for 2026 and subsequent years means that the tax benefit from itemized deductions for taxpayers in the 37% bracket will be treated as if they were in the 35% bracket. For 2026, the 37% bracket starts when taxable income exceeds $640,600 for singles and heads of households, $768,700 for married couples filing jointly, and $384,350 for married couples filing separately.

If you may be affected, factor this into your 2026 tax planning so you don’t overestimate the tax savings your itemized deductions will provide.

Alternative minimum tax (AMT) exemption changes. You must pay the AMT if your AMT liability exceeds your regular tax liability. The top AMT rate is 28%, compared to the top regular ordinary-income tax rate of 37%. But the AMT rate typically applies to a higher taxable income base. An AMT exemption is available, but it phases out when AMT income exceeds certain levels.

Under the OBBBA, those thresholds revert to their 2018 levels for 2026 (i.e., removing the inflation adjustments made for 2019–2025), and they’ll be adjusted annually for inflation in subsequent years. Also, the OBBBA effectively phases out the exemption twice as fast beginning in 2026. The 2026 phaseout ranges are $500,000–$680,200 for singles and heads of households and $1,000,000–$1,280,400 for joint filers (half those amounts for separate filers), compared to the 2025 ranges of $626,350–$978,750 and $1,252,700–$1,800,700, respectively. Both changes mean more taxpayers could be subject to the AMT in 2026.

If it’s looking like you’ll be subject to the AMT this year, consider accelerating income and short-term capital gains into 2026. This may allow you to benefit from the lower maximum AMT rate. Also consider deferring expenses you can’t deduct for AMT purposes until next year, such as state and local taxes (SALT). You may be able to preserve those deductions — but watch out for the annual limit on the SALT deduction. Additionally, if you defer expenses you can deduct for AMT purposes to next year, such as charitable donations, the deductions may become more valuable because of the higher maximum regular tax rate.

New tax-advantaged Trump Accounts. Created under the OBBBA, these accounts are available to U.S. citizens under 18. Contributions to a properly established account can begin on July 4, 2026. Generally, up to $5,000 per year can be contributed. Although contributions aren’t tax deductible, the account can grow tax-deferred until the child is 18, when it converts into a traditional IRA.

Eligible children born between January 1, 2025, and December 31, 2028, whose parents have elected to participate in a pilot program, will receive a one-time, tax-free $1,000 federal contribution to their accounts. The $1,000 government contribution doesn’t count against the annual limit. So, if your child (or grandchild) is born this year, up to $5,000 could be contributed to his or her Trump Account in 2026 on top of the $1,000 from the government.

Increase in tax-free 529 plan withdrawal limit for qualified elementary and secondary school expenses. Distributions used to pay qualified expenses are income-tax-free for federal purposes and potentially also for state purposes, making the tax deferral a permanent savings. In recent years, certain elementary and secondary school expenses of up to $10,000 per year per beneficiary have been considered qualified and thus eligible for tax-free treatment.

Only tuition qualified through July 4, 2025. Under the OBBBA, various additional expenses after July 4, such as books, instructional materials and certain fees, also qualify. Beginning in 2026, the annual limit increases to $20,000 per year per beneficiary.

So, you may be able to take advantage of more tax-free funds from your child’s 529 plan to pay his or her elementary and secondary school expenses in 2026. And you may want to increase your contributions to your child’s (or grandchild’s) 529 plan so that funds are available in the account to take advantage of the increased limit in the future.

New Roth requirement for higher-income taxpayers’ catch-up contributions. Beginning in 2026, new rules under the SECURE 2.0 Act (signed into law in 2022) require higher-income participants in 401(k), 403(b) and 457(b) retirement plans to make any catch-up contributions as after-tax Roth contributions. For 2026, this requirement applies to participants with 2025 Social Security wages exceeding $150,000. That threshold will be annually adjusted for inflation.

If you’re subject to this limit, no longer being able to make pretax catch-up contributions could increase your 2026 taxable income. This, in turn, could push you into a higher tax bracket and impact your eligibility for various tax breaks. You may want to consider other steps for reducing your income in 2026, such as minimizing sales of stock or other investments that would generate capital gains income (or offsetting gains by selling other investments at a loss).

Elimination of certain energy-efficiency credits for homeowners. The OBBBA repealed two credits for taxpayers who take steps to make their homes more energy efficient, such as installing energy-efficient windows or adding solar panels: 1) the Energy Efficient Home Improvement Credit for qualified improvements to an existing home and 2) the Residential Clean Energy Credit for both existing and newly constructed homes. The credits aren’t available for any property placed in service after December 31, 2025.

Tax provisions affecting businesses and their owners

Business-related changes going into effect this year include:

Expansion of the income ranges over which the Section 199A qualified business income (QBI) deduction limitations phase in. Under the OBBBA, for 2026 and beyond, instead of the distance from the bottom of the range (the threshold) to the top (the amount at which the limit fully applies) being $50,000, or, for joint filers, $100,000, it’s $75,000, or, for joint filers, $150,000. This will allow larger deductions for some taxpayers.

For 2026, the ranges are $201,750–$276,750 (up from $197,300–$247,300 for 2025), double those amounts for married couples filing jointly. The threshold amounts will continue to be annually adjusted for inflation.

Consider the potential impact of the limit phase-ins on your 2026 QBI deduction. There may be steps you can take to make the most of the significantly expanded phase-in ranges.

Reduction of the threshold for the excess business loss limitation. The deductions for current-year business losses incurred by noncorporate taxpayers generally can offset income from other sources, such as salary, self-employment income, interest, dividends and capital gains, only up to the annual limit. “Excess” losses are carried forward to later tax years and can then be deducted under the net operating loss rules.

The OBBBA makes the limit permanent and reduces the threshold at which the limitation goes into effect. For 2026, the threshold is $256,000 (down from $313,000 for 2025), double that amount for joint filers. The threshold will be adjusted for inflation annually going forward.

If you’ll be affected by this change, you may want to adjust your individual tax planning strategies to help make up for a reduced loss deduction. You also might consider making changes to your business strategy to avoid generating losses that would be suspended until later years because of the lower excess business loss limitation threshold.

New option for claiming the family and medical leave credit. The OBBBA permanently extended the employer tax credit for paid family and medical leave, which was scheduled to expire on December 31, 2025. For 2025, the credit amount ranged from 12.5% to 25% of eligible wages paid to qualifying employees for up to 12 weeks of paid leave.

Beginning in 2026, the OBBBA allows employers to claim the credit for the same percentage of insurance premiums paid or incurred during the tax year for active family and medical leave coverage. You can’t claim the credit for both wages and premiums, however.

If you don’t currently offer paid family and medical leave, consider whether funding it with insurance premiums eligible for the credit would make doing so feasible while helping to achieve other business goals, such as increasing employee retention. If you do offer paid family and medical leave, you’ll need to look at whether claiming the credit for actual wages paid to employees on leave or for insurance premiums will save you more tax. (If you offer paid leave but don’t fund it with insurance, you may want to revisit whether insurance would make sense for your business now that premiums are eligible for the credit.)

Elimination of certain clean energy incentives. The Section 179D deduction for energy-efficient commercial buildings 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 base deduction is calculated using a sliding scale, ranging for 2026 from $0.59 per square foot to $5.94 per square foot, depending on energy savings and whether specific prevailing wage and apprenticeship requirements have been met. The OBBBA eliminates the deduction for property that begins construction after June 30, 2026.

The Section 30C alternative fuel vehicle refueling property credit is for property that stores or dispenses clean-burning fuel or recharges electric vehicles. The credit is worth up to $100,000 per item (each charging port, fuel dispenser or storage property). The OBBBA eliminates the credit for property placed in service after June 30, 2026.

If you’re considering one of these clean energy investments, you may want to act soon so you can be eligible for the associated tax break before it’s eliminated.

Begin planning now

All the tax law changes can be overwhelming. If you need help understanding how these provisions might affect your tax strategies, contact us. We can help you develop a plan to reduce your tax liability so you can keep more of your hard-earned income while staying compliant.

Many businesses offer health care and dependent care flexible spending accounts (FSAs) as part of their employee benefits package. These plans provide valuable tax savings to employees and payroll tax savings to employers.

If your company operates a calendar-year FSA with a 2½-month grace period, employees have until March 15 to incur eligible expenses for their 2025 plan balances. After that, any unused 2025 funds may be forfeited under the “use-it-or-lose-it” rule. Here’s a refresher on how FSAs work and what employers can do with forfeited balances.

The basics

Under an employer-sponsored FSA plan, employees may be able to contribute a portion of their pay to a:

Health care FSA. These accounts may be used for qualifying out-of-pocket medical, dental and vision expenses for the employee and his or her spouse and/or qualified dependents. For 2026, the maximum employee contribution to a health care FSA increases to $3,400 (from $3,300 in 2025). (The limit is annually indexed for inflation.)

Dependent care FSA. These accounts may be used for qualifying child care or adult dependent care expenses. For 2026, under 2025 tax legislation, the dependent care FSA contribution limit increases to $7,500 per household ($3,750 for married couples filing separately). The limit for 2025 was $5,000 ($2,500 for separate filers). (The limit isn’t inflation-indexed, so it won’t go up in the future unless another increase is passed by Congress and signed into law.)

Employee contributions are made on a pretax basis, reducing federal income tax, Social Security tax and Medicare tax (and often state income tax). The FSA plan directly pays or reimburses employees for qualified expenses, and the payments or reimbursements are tax-free.

Use-it-or-lose-it rule

If employees don’t use their full FSA balances by the end of the plan year, leftover balances generally revert to the employer under the use-it-or-lose-it rule. However, there are two exceptions:

An FSA plan can allow a grace period of up to 2½ months. Most FSA plans operate on a calendar-year basis. For a calendar-year FSA plan, the grace period gives employees until March 15 of the following year to incur qualified expenses to drain their unused FSA balances from the previous year.
A health care FSA plan can allow employees to carry over up to an annually inflation-indexed amount of unused balances from one year to the next. The amount that can be carried over from 2026 to 2027 is $680 (up from the $660 that could be carried over from 2025 to 2026).

It’s important to note that a health care FSA plan can offer either the carryover or the grace period, but not both. Dependent care FSA plans can offer only the grace period, not the carryover.

Options for forfeited FSA funds

After any applicable grace period ends, or after applying any permitted health care FSA carryover, employers may retain forfeited balances under IRS cafeteria plan rules. Many businesses use the funds to offset plan administrative expenses.

Other permitted uses generally include, on a reasonable and uniform basis: 1) reducing the amount employees need to contribute in a future year to reach a certain FSA balance (for example, employees need to contribute only $950 to have a $1,000 FSA balance, with the extra $50 funded by forfeited balances from a previous year), or 2) returning amounts to participants (typically treated as taxable wages and subject to payroll taxes and income tax withholding).

Forfeitures can’t be returned to plan participants based on individual claims experience. Any allocation of returned funds must be nondiscriminatory and consistent with plan terms.

Natural check-in point

Around the grace-period deadline is a natural time for business owners to review how their FSA plans handle unused balances. It’s also a good opportunity to confirm that your current plan design, including grace period or carryover provisions, aligns with your employees’ needs and your administrative practices. Contact us to help review and modify your FSA plan provisions, handle forfeitures properly and prepare for next year’s enrollment cycle.

Materiality is a core concept that shapes the entire financial reporting process. In simple terms, materiality helps determine which financial information is significant enough to influence decisions — and which details likely won’t affect the overall picture. Understanding how experienced certified public accountants (CPAs) evaluate materiality can help you prepare reliable financial reports and avoid surprises when working with external advisors.

Materiality defined

Under U.S. accounting standards, financial information is “material” if omitting or misstating it could influence users’ decisions based on the financial statements. Auditing standards apply the same principle, focusing on whether misstatements — individually or in the aggregate — could reasonably influence users’ economic decisions.

Although wording varies slightly across reporting frameworks, the underlying principle remains consistent: Materiality is user-focused and requires professional judgment informed by both quantitative and qualitative factors. It’s not a mechanical percentage test.

How auditors set and apply materiality thresholds

An audit provides reasonable assurance that the financial statements are free from material misstatement. External auditors rely on their professional judgment to determine what’s material for each company, based on such factors as:

Size,
Industry,
Internal controls, and
Financial performance.

When planning an audit, the auditor establishes overall materiality for the financial statements as a whole, often using a benchmark such as a percentage of pretax income, revenue or total assets. The auditor also sets “performance materiality,” a lower threshold used to reduce the risk that undetected misstatements, in aggregate, exceed overall materiality. In some cases, auditors establish separate materiality thresholds for particular high-risk accounts or disclosures.

During fieldwork, materiality affects the nature, timing and extent of audit procedures. It influences sample sizes, risk assessments and which accounts receive more scrutiny. Auditors also evaluate significant year-over-year fluctuations and unexpected trends. For example, if shipping or direct labor costs increased by 30% in 2025, it may raise a red flag, especially if it didn’t correlate with an increase in revenue. Businesses should be ready to explain why costs increased and provide supporting documents (such as invoices or payroll records) for auditors to review.

Auditors may need to reassess materiality if circumstances change from year to year — or even during an engagement. Moreover, auditors must apply significant judgment when evaluating materiality. For instance, a relatively small misstatement may still be material if it masks a trend, affects compliance with loan covenants, triggers management bonuses or involves fraud.

Beyond audits

Materiality also plays a role in other types of accounting engagements. In a financial statement review, the CPA provides limited assurance that financial statements are free from material misstatement. The CPA performs inquiry and analytical procedures and reports whether anything came to his or her attention suggesting the financial statements may be materially misstated. Unlike an audit, a review doesn’t involve detailed testing of transactions or internal controls. However, materiality still plays an important role in designing review procedures and evaluating unusual fluctuations, significant estimates and financial statement disclosures.

In a financial statement compilation, the CPA provides no assurance. The accountant presents financial information in the proper format but doesn’t verify its accuracy. Professional standards require the CPA to consider whether the financial statements appear materially misstated or misleading. If information is incomplete, inconsistent or obviously incorrect, the CPA may need to request revisions — or, in some cases, withdraw from the engagement.

Why it matters

The concept of materiality also has strategic implications for business owners and their internal finance and accounting teams. Not every minor bookkeeping error requires immediate correction, and not every fluctuation deserves the same level of attention. Understanding materiality helps you focus attention where it matters most — on the accounts, estimates and risks that could meaningfully affect profitability, cash flow, debt covenant compliance and overall business value.

Rather than striving for perfection in every minor detail, management can use materiality as a decision-making filter. It supports smarter allocation of accounting resources, more effective internal controls and clearer financial reporting. A shared understanding of what’s truly material also strengthens discussions with lenders, investors and other stakeholders by keeping the focus on the issues that influence business outcomes.

Putting materiality to work for you

Materiality is more than an accounting concept — it’s a practical tool for better financial decision-making. Proactively evaluating significant changes in your financial statements and understanding what matters most to your stakeholders can strengthen your reporting. Contact us to learn more.

Employee benefits can quickly become outdated as tax laws change, new guidance is issued and workforce needs evolve. If your organization sponsors a cafeteria plan, regular checkups are essential to protect its tax-advantaged status and confirm that the plan continues to deliver meaningful value to your team.

Chief objective

Formally defined, a cafeteria plan is an employee benefits arrangement that meets the requirements of Section 125 of the Internal Revenue Code. Its chief objective is to give participants a choice between receiving taxable cash compensation or selecting from a menu of tax-free benefits, such as:

Group term life insurance (up to $50,000),
Accident and health coverage,
Health Flexible Spending Accounts (FSAs),
Dependent care assistance programs, and
Adoption assistance.

Benefits are typically funded through salary reductions, though employers may also provide nonelective contributions. Essentially, participants “buy” benefits with pretax compensation dollars, reducing their taxable income, and the employer-sponsor avoids payroll taxes on those purchases.

It’s a good idea to occasionally discuss with your leadership team and professional advisors whether your plan’s design still suits your organization’s strategic objectives and workforce demographics. After all, flexibility is a major advantage of cafeteria plans.

For example, premium-only plans allocate a portion of employees’ pretax earnings to pay for accident and health insurance. Alternatively, a cafeteria plan may allow employees to make pretax contributions to FSAs or Health Savings Accounts (HSAs). FSAs allow participants to set aside dollars for qualifying medical or dependent care expenses, while HSAs may be used to pay or reimburse qualified medical expenses.

Note: To be eligible to contribute to an HSA, an employee must be covered by a qualifying high-deductible health plan and meet other IRS requirements.

4 best compliance practices

Although cafeteria plans are governed primarily by Sec. 125, many of the underlying benefits they provide — such as health coverage and health FSAs — are generally subject to the reporting, disclosure and fiduciary requirements of the Employee Retirement Income Security Act (ERISA). With this in mind, here are four best compliance practices to follow carefully and emphasize with your staff:

Keep your plan document and, as applicable, summary plan description (SPD) updated and accessible. Sec. 125 requires a written cafeteria plan document. In addition, ERISA-covered benefits generally require an SPD and other disclosures. Participants must receive a current SPD when they first become eligible for coverage and when material changes occur.
Guard against providing benefits to ineligible parties. Only common-law employees may participate in a cafeteria plan on a pretax basis. Partners in partnerships and more-than-2% shareholders in S corporations, for instance, are considered self-employed and therefore ineligible. Allowing them or other ineligible parties to participate can disqualify your plan.
Conduct scheduled nondiscrimination testing. Sec. 125 requires cafeteria plans to satisfy nondiscrimination rules. That means the plan can’t discriminate in favor of highly compensated or key employees with respect to eligibility, contributions or benefits. Sponsors need to test for discrimination at least annually — and more frequently if circumstances change and create compliance risks.

Simplified nondiscrimination testing is available for small businesses (those with fewer than 100 employees) that set up “simple cafeteria plans.” These plans provide a minimum level of benefits to all eligible participants who aren’t highly compensated or key employees.

Keep up with all administrative requirements. Beyond being subject to nondiscrimination testing, cafeteria plans must comply with various recordkeeping, notice and reporting requirements. Depending on the structure of the underlying benefits, certain plan assets may also be subject to ERISA trust requirements. It’s critical to keep up with these requirements and any new or updated federal guidance.

Be a participant pleaser

A cafeteria plan can be a powerful tool for delivering tax-efficient benefits to employees, but it demands careful oversight. Many employers make the mistake of taking a “set it and forget it” approach. Contact us for help conducting a thorough review of your plan and

A comprehensive estate plan does more than simply distribute your assets after your death — it also protects your voice, your values and your loved ones during a difficult moment. One critical yet often overlooked component of an estate plan is a living will.

Living will vs. last will and testament

Many people confuse a living will with a last will and testament, but they aren’t the same. These separate documents serve different but vital purposes.

A last will and testament is what you probably think of when you hear the term “will.” This document details how your assets will be distributed upon your death. A living will (sometimes referred to as a “health care directive”) details your preferences for how life-sustaining medical treatment decisions should be made if you become incapacitated and unable to communicate them yourself.

While many people focus on wills and trusts to manage property after death, a living will addresses critical decisions during your lifetime. Including one as part of your estate plan offers significant personal and financial benefits, such as:

Easing emotional stress on family members. Few situations are more emotionally taxing than making end-of-life medical decisions for a family member. When loved ones are forced to make choices without clear guidance, feelings of guilt and doubt can arise.

A living will can provide clarity and reassurance. It relieves your family of the burden of guessing what you would have wanted. Instead of debating difficult choices, they can focus on supporting one another.

Helping to avoid family disputes. Unfortunately, disagreements over medical treatment can strain even the closest families. Different personal beliefs, religious views or interpretations of “quality of life” can lead to conflict.

By documenting your wishes in advance, you reduce the risk of disputes. Health care providers and family members can rely on a legally recognized document rather than differing opinions. This can help preserve family harmony.

Reducing unnecessary medical costs. End-of-life medical care can be expensive. While financial considerations shouldn’t drive medical decisions, unwanted or prolonged treatments can significantly impact your estate and your family’s financial security.

A living will helps ensure that you receive only the type of care you want — no more and no less. This clarity can prevent costly interventions that don’t align with your preferences, helping to protect the assets you’ve worked hard to build.

Don’t forget powers of attorney

Often, a living will is drafted in conjunction with two other documents: a durable power of attorney for property and a health care power of attorney.

A durable power of attorney identifies someone who can handle your financial affairs, such as paying bills and undertaking other routine tasks, should you become incapacitated. A health care power of attorney becomes effective if you’re incapacitated but not terminal or in a vegetative state. Your designee can make medical decisions on your behalf — for example, agreeing to a surgical procedure recommended by your physician — if you’re unable to do so. But this person can’t officially make life-sustaining choices. That requires a living will.

Seek professional help

Because laws governing living wills vary by state, it’s important to work with qualified professionals in your area to ensure your documents are properly drafted and integrated into your broader estate planning strategy. We can explain how a living will fits within your overall financial and legacy goals. Be sure to turn to your attorney to draft your living will.

If you’re contemplating a sale of your business, you probably know that any serious buyer will scrutinize your financial statements, operations, assets and legal agreements. Conducting your own due diligence now can smooth the buyer review process and ease deal negotiations. Working with financial and legal advisors, you’ll have the opportunity to fix any problems before your business goes on the market.

Anticipate buyer scrutiny

The primary goal of presale due diligence is to evaluate the quality and sustainability of earnings, identify risks, and normalize financial results before giving prospective buyers access to the company’s books. Financial advisors look for anything that could be considered negative or inconsistent by a prospective buyer and, thus, potentially cause the buyer to reduce the offering price — or even terminate the deal.

Presale due diligence generally focuses on financial performance, tax exposure and other matters that buyers might scrutinize. So, your financial advisor may:

Analyze the last three years of financial statements to assess revenue recognition policies, margin trends and earnings before interest, taxes, depreciation and amortization (EBITDA),
Evaluate inventory accounting methods, costing practices and obsolescence risks,
Look for any “off-balance-sheet” liabilities,
Assess compliance with federal and state regulations, such as those related to environmental protection and employee-related taxes,
Review customer and vendor concentrations, related-party transactions, and key contracts,
Evaluate the strength of confidentiality and nondisclosure agreements, and internal control policies, and
Identify any outstanding lawsuits.

Addressing these issues now can reduce seller and buyer uncertainty later.

Evaluating IP issues

Presale due diligence also may require your attorney to assess ownership of key intellectual property (IP) such as patents, trademarks, logos and proprietary software. And your financial advisor may review IP documentation to identify gaps or inconsistencies that could affect asset values.

Such verification is critical to a company’s value, especially in industries such as technology, pharmaceuticals and manufacturing. If, say, your business has only a tenuous claim on an internally developed product, it’s better to learn — and possibly fix — this before a prospective buyer finds out.

Start early

The earlier you start planning and preparing for a sale, the better. Ideally, you should engage a professional with merger and acquisition experience to perform presale due diligence on your business at least six months before going to market. If you’d like to make major changes before selling, such as divesting noncore operations or significantly reducing your company’s debt, give yourself even more time. Contact us with questions.

If you used one or more vehicles in your business during 2025, you may be eligible for valuable tax deductions on your 2025 income tax return. Businesses can generally deduct expenses attributable to business use of a vehicle plus depreciation. However, the rules are complicated, and your deduction may be affected by factors such as the vehicle’s weight, business vs. personal use, and whether you use the actual expense method or the cents-per-mile rate.

Actual expenses plus depreciation

The year you place a vehicle in service, you can choose to deduct the actual expenses attributable to your business vehicle use or, if the vehicle is a car, SUV, van, pickup or panel truck, claim the cents-per-mile deduction (discussed later). Deductible expenses include gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. You’ll need to track and substantiate these expenses.

If you use the actual expense method, you also can claim a depreciation deduction for the vehicle by making a separate depreciation calculation for each year until the vehicle is fully depreciated. According to the general rule, you calculate depreciation over a six-year span for a percentage of the purchase cost as follows:

Year 1 — 20%
Year 2 — 32%
Year 3 — 19.2%
Year 4 — 11.52%
Year 5 — 11.52%
Year 6 — 5.76%

If a vehicle is used 50% or less for business purposes, you must use the straight-line method (10% in Years 1 and 6 and 20% in Years 2 through 5) to calculate depreciation deductions instead of the percentages listed above.

Depending on the cost of a passenger auto, your deduction may be less than the percentage of cost above because “luxury auto” annual depreciation ceilings apply. These are indexed for inflation and may change annually. For a passenger auto placed in service in 2025, generally the ceilings are as follows:

Year 1 — $20,200 ($12,200 if you don’t claim first-year bonus depreciation)
Year 2 — $19,600
Year 3 — $11,800
Each remaining year until the vehicle is fully depreciated — $7,060

These ceilings are proportionately reduced for any nonbusiness use.

More favorable depreciation rules apply to heavier SUVs, pickups and vans. For example, 100% bonus depreciation or the normal Section 179 expensing limit ($2.5 million for 2025) generally is available for vehicles with a gross vehicle weight rating (GVWR) of more than 14,000 pounds. A reduced Sec. 179 limit of $31,300 applies to vehicles (typically SUVs) rated at more than 6,000 pounds but no more than 14,000 pounds. Again, this favorable tax treatment is available only if the vehicle is used more than 50% for business.

The cents-per-mile method

The 2025 cents-per-mile rate for the business use of a car, SUV, van, pickup or panel truck is 70 cents (increasing to 72.5 cents for 2026). This rate applies to gasoline- and diesel-powered vehicles as well as electric and hybrid-electric vehicles. A depreciation allowance is built into the rate, so you can’t claim both the depreciation deductions discussed earlier and the cents-per-mile rate for the same vehicle.

The rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, including gas, maintenance, repairs and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the cents-per-mile rate midyear.

The cents-per-mile rate is beneficial if you don’t want to keep track of actual vehicle-related expenses or worry about depreciation calculations. Although you don’t have to account for all your actual expenses, you still must record certain information, such as the mileage for each business trip, the date and the destination.

Choosing or changing your method

There’s much to consider before deciding whether to use the actual expense method or cents-per-mile method to deduct expenses for a vehicle your business placed in service in 2025. For a vehicle placed in service earlier, if you previously deducted actual expenses for the vehicle, you can’t use the cents-per-mile rate for 2025 (or any other future year). However, if you previously used the cents-per-mile rate, you can switch to the actual expense method in a later year — but you can claim only straight-line depreciation.

If you lease a business vehicle, there also are deduction opportunities but the rules are different. Contact us if you’d like more information. We can also answer questions about claiming 2025 business vehicle expenses on your 2025 return or planning for and tracking 2026 expenses.

When your financial statements arrive, it’s tempting to glance at the bottom line and move on. After all, you’ve got customers to serve and employees to manage. But your income statement is more than a report card. It can be a strategic tool to help you spot growth opportunities, tighten your execution and make smarter decisions that move your business forward.

Measure what matters

The income statement is a good starting point for analyzing your financials and identifying inefficiencies and anomalies. The following ratios are commonly used to gauge profitability:

Gross profit margin. This is gross profit (revenue minus cost of goods sold) divided by revenue. It’s a good ratio to compare with industry statistics because it’s typically calculated on a consistent basis, though the definition of cost of goods sold can vary between companies.

Net profit margin. This is calculated by dividing net income by revenue. If the margin is rising, the company is generally doing something right. Often, this ratio is computed on a pretax basis to accommodate differing tax rates.

Return on assets. This is net income divided by the company’s total assets. The return shows how efficiently management is using its assets.

Return on equity. This is calculated by dividing net income by shareholders’ equity. The resulting figure shows how well the shareholders’ investment is performing compared to competing investments. However, private companies should use this ratio with caution because their equity levels can fluctuate due to owner withdrawals or tax strategies.

You can use these profitability ratios to compare your company’s performance over time and against industry norms.

Dig deeper into the details

If your company’s profitability ratios have deteriorated compared to last year or industry norms, it’s important to find the cause. If the whole industry is suffering, the decline is likely part of a macroeconomic trend. If the industry is healthy but your company’s margins are falling, it’s time to identify internal factors and take corrective measures.

Depending on the source of the problem, you might need to cut costs, reevaluate staffing levels, automate certain business functions, eliminate unprofitable segments or product lines, raise prices or possibly conduct a forensic accounting investigation. For instance, a hypothetical manufacturer might discover that its gross margin fell due to rising labor costs from excessive overtime or because supplier prices rose faster than the company adjusted its pricing.

Build a winning game plan

In today’s volatile economy, it’s easy to blame shrinking profit margins on external pressures. But assumptions can be costly. Your income statement provides insight into your team’s performance, from your operational efficiency to pricing and spending. A careful review of your income statement — including revenue trends, cost drivers and operating expenses — often uncovers actionable opportunities for improvement. We can help you develop strategies to boost profitability and keep your business competing at the highest level.

If your organization sponsors a retirement plan for employees, you’ve probably noticed that compliance hasn’t been easy over the last few years. Whether the SECURE Act, the CARES Act and other pandemic-era legislation, or SECURE 2.0, employers have had to deal with significant changes.

The IRS apparently sympathizes. In its recently issued Notice 2026-9, the tax agency has extended the general deadline for amending certain IRA-based plans.

Key point

The key point of Notice 2026-9 is that the deadline for making required written amendments to certain retirement plans has been extended to December 31, 2027. (According to the notice, the deadline could be extended further if necessary.) For employers, the two arrangements chiefly in question are:

Simplified Employee Pension (SEP) plans, under which sponsors provide participants with SEP-IRAs, and
Savings Incentive Match Plans for Employees (SIMPLEs), under which sponsors provide participants with SIMPLE IRAs.

The notice also covers traditional and Roth IRAs, but these are generally individually owned.

The two plans mentioned are popular with many small and midsize employers because they’re generally easier and less expensive to maintain than, say, a traditional 401(k) plan. The IRS extension aims to help such organizations catch up and avoid compliance issues from outdated paperwork — a credible threat given how frequently the rules have changed.

Indeed, it’s important to note that the deadline extension applies to amendments required under not only the most recent SECURE 2.0, but also the earlier SECURE Act, CARES Act and even the largely forgotten Relief Act of 2020. In other words, Notice 2026-9 addresses the cumulative effect of several years’ worth of legislative updates.

Timely opportunity

Like many employers, your organization may have already implemented some or all of the operational changes required by these laws. But have you formally updated your plan document? Many employers have fallen behind on this crucial compliance matter.

Although the deadline has been pushed to the end of next year, don’t let procrastination win the day if your plan document still needs to be updated. In fact, you might think of IRS Notice 2026-9 as a timely opportunity to both review and revise your plan document and assess how well your retirement arrangement is working.

The truth is, while the deadline extension applies to the timing of written amendments, employers are still expected to operate their plans in compliance with applicable laws as the various changes take effect. The distinction matters. The IRS can deem a plan out of compliance even if the employer-sponsor intends to fix it later — especially if improper administration has occurred. For example, rules regarding eligibility, contributions or distributions may have changed in ways that materially affect employee-participants’ benefits.

Bottom line: The extended amendment deadline provides breathing room, but it doesn’t eliminate the need for proper administration. Now’s a good time to confirm that your organization or its third-party administrator is tracking and implementing the required updates, and that your plan document has been amended accordingly.

Sound move

Sponsoring an IRA-based retirement plan can be a sound move for many small and midsize employers. But even seemingly minor compliance mistakes can lead to big headaches. If you have a SEP or SIMPLE IRA plan, we can help evaluate its operation and identify required amendments. We can also assist you in deciding whether another type of retirement plan may now be a better fit for your organization.

If you made large gifts to family members or heirs last year, you may need to file a 2025 gift return by April 15. So, it’s important to understand whether you’re required to file a federal gift tax return — and when it might be beneficial to file one even if not required.

When filing a return is required

Generally, you must file a gift tax return (Form 709) if, during the 2025 tax year, you made gifts (other than to your U.S. citizen spouse) that exceeded the $19,000-per-recipient annual gift tax exclusion. If you split gifts with your spouse to take advantage of your combined $38,000 annual exclusion, both you and your spouse must file separate gift tax returns.

You also need to file a gift tax return if you made gifts to a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($95,000) into 2025. Other times filing is required include when you made gifts:

That exceeded the $190,000 annual exclusion amount (for 2025) for gifts to a noncitizen spouse,
Of future interests (such as remainder interests in a trust), regardless of the amount, or
Of community property.

Keep in mind that you’ll owe gift tax only to the extent that an exclusion doesn’t apply and you’ve used up your lifetime gift and estate tax exemption ($13.99 million for 2025). As you can see, some gifts require filing a return even if you don’t owe tax.

When filing a return isn’t required

Generally, no gift tax return is required if you:

Paid qualifying education or medical expenses on behalf of someone else directly to the educational institution or health care provider,
Made gifts of present interests that fell within the annual exclusion amount,
Made outright gifts, in any amount, to a spouse who’s a U.S. citizen, including gifts to marital trusts that meet certain requirements, or
Made charitable gifts and aren’t otherwise required to file Form 709 — if a return is required, charitable gifts should also be reported.

If you gifted hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the gift on a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.

In some cases, it’s even advisable to file a gift tax return to report nongifts. For example, suppose you sold assets to a family member or a trust. Again, filing a return triggers the statute of limitations and prevents the IRS from claiming, more than three years after you filed the return, that the assets were undervalued and, therefore, are partially taxable.

Questions? We can help

Gift and estate tax rules are complex. Determining whether you must file a gift return (or whether you should file one even if not required) isn’t always easy. If you need help, please contact us.

Some customers naturally require more time and resources than others. But when certain relationships consistently consume more of your and your employees’ time than they generate in profit, it may be time to reassess. Taking a closer look at customer‑level profitability can help you understand where resources are going and ensure that high‑value relationships receive the attention they deserve.

Estimate their value to your business

Before you do anything else, determine individual customer profitability. If your business software tracks customer purchases and your accounting system has adequate cost-accounting or decision-support capabilities, this process will be easier. Even if you don’t maintain cost data, you can sort the good from the bad by reviewing customer purchase volume and average sale price. Often, such data can be supplemented by general knowledge of the relative profitability of different products or services.

Don’t ignore indirect costs. High marketing, handling, service or billing costs for individual customers or customer segments can significantly affect their profitability even if they purchase high-margin products.

Give them a grade

After you’ve assigned profitability levels to customers or customer categories, sort them into the following groups:

Group A. These customers are highly profitable. To further increase their value to your business, spend time learning what motivates them. Your proprietary products? Your prices? Your customer care? Developing a good understanding of this group will help you grow these relationships and provide insight into attracting similar customers.

Group B. Customers in this group may not be extremely profitable, but they positively contribute to your bottom line. There’s a good chance that, with the right mix of product, service and marketing resources, you can turn some of them into A customers. But be sure to monitor them closely to prevent them from slipping into the C group.

Group C. These customers tend to be unprofitable. They may also be difficult to work with and perpetually dissatisfied. They may expect special pricing or services, or pay invoices late. Fortunately, eliminating C customers probably won’t require a formal breakup. You can start by reducing the level of attention they receive. Remove them from marketing lists and tell your salespeople to stop contacting them. After a while, most C customers who are ignored will leave on their own.

When a strategic overhaul is warranted

It’s normal for businesses to have a mix of highly and less profitable customers. The key is making intentional decisions about where to invest your time and resources. Reallocating attention away from consistently unprofitable customer relationships — and toward your A and B groups — can boost your company’s financial performance. However, if C customers make up a large portion of your customer base, you may need to consider broader strategic changes. These could include reviewing pricing, refining service offerings, adjusting processes or rethinking which markets and customer segments you want to serve. Contact us to learn more.

An advance payment is one received by a business before it provides whatever is being paid for. For federal income tax purposes, generally advance payments must be reported as taxable income in the year received. This treatment always applies if your business uses the cash method of accounting for tax purposes. But, if your business uses the accrual method, it may qualify for favorable tax deferral treatment.

Tax deferral privilege

Accrual-basis businesses can elect to postpone including all or part of an eligible advance payment in taxable income until the year after it’s received. To be eligible for the deferral election, among other requirements, an advance payment must:

At least partially be included in revenue for a later year according to your business’s applicable financial statement (AFS) or, if your business doesn’t have an AFS, treated as earned in a later year, and
Be received for goods, services or other eligible items listed in IRS guidance.

If your accrual-basis business received eligible advance payments in 2025, you potentially can elect to defer reporting some or all of that income until 2026 for federal tax purposes.

What is an AFS?

An AFS can be an audited financial statement used for credit or financial reporting purposes or certain reports submitted to federal or state agencies. A form filed with the Securities and Exchange Commission, such as a 10-K or annual report, also can be an AFS.

If your business doesn’t have an AFS and elects to use the deferral method for advance payments, the payment must be included in taxable income in the year received to the extent of the amount that is treated by your business as earned in that year. The remaining portion of the advance payment must be included in taxable income the following year.

What types of payments are eligible?

Advance payments that may be eligible for deferral include payments for:

Services,
The sale of goods,
Gift cards,
The use of intellectual property,
The sale or use of computer software,
Warranty contracts, and
Subscriptions.

Other payments specified in IRS guidance also may be eligible.

Eligible advance payments don’t include rents (with some exceptions), certain insurance premiums, payments for financial instruments, payments for certain service warranty contracts, and other payments specified in IRS guidance.

Some examples

The following examples illustrate how eligible advance payments can be deferred for federal income tax purposes:

Taxpayer has an AFS. A calendar-year accrual method S corporation provides tennis facilities and lessons. On November 15, 2025, it received payment for a one-year contract for 48 one-hour tennis lessons beginning on that date. Eight lessons were given in 2025. On its AFSs, the business recognizes one-sixth (8/48) of the advance payment as revenue for 2025 and five-sixths (40/48) as revenue for 2026. Making the advance payment deferral method election, the business includes only one-sixth of the advance payment in taxable income for 2025. The remaining five-sixths must be included in taxable income for 2026.

Taxpayer doesn’t have an AFS. A calendar-year accrual method LLC provides online security protection services for computers, tablets and cell phones. On September 1, 2025, it received payment for two years of protection services beginning on that date. The business determines that four months of its services should be treated as earned in 2025. Making the advance payment deferral election, the business includes only one-sixth (4/24) of the advance payment in taxable income for 2025. The remaining five-sixths (20/24) must be included in taxable income for 2026.

Can you benefit?

We’ve only scratched the surface of complicated tax rules and regulations that apply to the treatment of advance payments. Contact us for help determining if your business is eligible to defer 2025 advance payments. We can also calculate the possible current tax savings.

You understand how important customer lists are to your business’s financial success. So do employees. In fact, some dishonest workers may be tempted to take lists with them when they leave — or even sell them while still employed by your company.

Employees bent on fraud may misuse legitimate access to download or forward customer data. Others may use more underhanded methods, such as copying unsecured files left on a desk. To keep your customer details confidential and out of the hands of dishonest employees, ask and answer the following ten questions:

1. Who has access to your customer list? Ideally, only employees with a defined business need should have access. Formal access controls also help prove that the company did its part to keep the customer list confidential.

2. Are there tiers of access? Not every element of your customer list may be needed by every employee granted access. Consider blocking sensitive data on a role-based or need-to-know basis.

3. Do you review access regularly? Many companies conduct quarterly reviews, but the right frequency depends on your risk level. Be sure to update access immediately when employees change roles or leave.

4. Who has edit rights? Look at who’s allowed to change customer data — and how. For example, can anyone update or delete customer records? If so, is there an audit log that records such activity, and do you routinely review it?

5. Can employees export the list? Depending on your software, employees may be able to print, download or email the list. Is it possible to block such activities? Can you prevent screenshots? If not, consider prevention tools or restricting on-screen views to limit what can be captured in a single screenshot.

6. Are workers trained to protect customer data? Without training, some employees may inadvertently share customer data with unauthorized parties, such as vendors. Make sure staffers know your data-sharing policies.

7. Have you thought about mobile device access? If workers can access customer data on their own or work-provided mobile phones, that data could be vulnerable to theft. Consider prohibiting certain types of access or installing stronger security on devices.

8. What about independent contractor access? Providing short-term access to customer data is sometimes necessary. Ensure you have a strict access review policy in place for contractors and other external parties.

9. Have some employees signed customized agreements? Consult legal counsel about whether key employees should sign confidentiality or nondisclosure agreements, and whether noncompetes are enforceable in your state. Such agreements can strengthen your ability to pursue legal remedies if an employee steals data.

10. Do you follow a formal offboarding process? When an employee leaves your company, collect all company owned devices and secure their data. Remove the terminated worker’s admin rights to your systems and deactivate logins and passwords. It might also make sense to audit their recent network activity to identify any unusual access or downloads.

To keep customer relationships under your control, establish strong access policies and follow them. Contact us for help with internal controls or if you suspect data theft.

As an employer, have you noticed it’s been harder to keep employees motivated, focused or fully invested in their work? If so, you’re not alone. A recent Gallup survey found that U.S. employee engagement has yet to recover from a notable decline in the last few years. Even more concerning, the drop has been most pronounced among younger workers.

Survey says

In late January, Gallup published an article on its website detailing the results of its latest employee engagement survey. The data showed that, on average, only 31% of U.S. employees were actively engaged at work in 2025. That figure was unchanged from 2024. However, it’s well below the 36% engagement rate recorded in 2020, which was the culmination of a decade of steady gains.

Although a five-point drop may not seem like a big deal, Gallup estimates that this represents approximately eight million fewer engaged employees nationwide. And the decline has been especially noticeable among younger workers — specifically, Generation Z (typically defined as people born from 1997 through 2012) and younger millennials (generally, those born around 1990 to 1996).

Start with clarity

Among the most concerning findings of the Gallup survey is that employees increasingly feel uncertain about what’s expected of them. In many industries, job responsibilities can shift quickly in response to staffing changes and evolving technology. And this is causing considerable stress for workers.

You may occasionally need to ask team members to take on additional duties without much advance notice or formal training. Yet clear expectations are the basis for job stability and, in turn, engagement. Strive to help employees understand:

What success looks like in their respective roles,
Which objectives should take priority, and
How you’ll evaluate their performance.

Communication on these topics should be consistently worded and applied from the C-suite on down.

Strengthen supervisors’ skills

Another important point raised by the Gallup survey is that many employees, particularly younger ones, lack a sense that anyone at work genuinely cares about them. This is where your supervisors play a frontline role.

Unfortunately, in many small and midsize organizations, employees are often promoted to supervisory roles because they excel technically — not because they’ve received formal leadership training. As a result, communication and recognition may unintentionally take a back seat to task completion.

Be sure to support your supervisors with robust initial training and ongoing upskilling. They should provide their teams with consistent feedback, acknowledge strong performances and show genuine interest in each employee’s distinctive challenges. Generally, many younger employees tend to expect more frequent feedback and guidance. So, this could become a more pressing issue in the years ahead.

Offer learning and growth

The Gallup survey also found a decline in employees’ sense of learning and growth. Often, once workers are trained, they have little to no opportunity to learn new skills or grow professionally unless they pursue management roles. And those may be few and far between at smaller organizations. The result: Engagement can fade quickly.

Remember, “growth” doesn’t necessarily have to be synonymous with “promotion.” To the extent feasible, give employees opportunities to grow within their roles. This can mean gradually assuming more responsibilities, undergoing cross-training, taking on project leadership or participating in strategic planning. When employees see a path to more interesting, varied job duties, they’re more likely to stay engaged.

Seize the opportunity

Employee engagement influences productivity, retention, hiring costs and overall financial performance. So, the national trends raised by the Gallup survey represent valid concerns for employers. But they offer an exciting opportunity, too. By responding thoughtfully and proactively, your organization can strengthen its culture and differentiate itself from competitors who may be slower to respond. We’d be happy to help you evaluate engagement strategies from a cost-benefit perspective to ensure they align with your budget and strategic objectives.

Pay equity is the philosophy and practice of “equal pay for equal work.” Employers known for fair pay practices stand out in today’s competitive labor market. Fostering pay equity can also help reduce the risk of employment law litigation. But what does pay equity mean in practice?

What it does and doesn’t mean

First and foremost, pay equity doesn’t mean all employees receive the same amount of compensation. Instead, companies that embrace pay equity make compensation decisions free of unjust biases related to protected characteristics such as age, race, gender, disability, national origin and sexual orientation. Employees’ pay, both when workers are hired and when they receive raises, is determined according to objective, job-related factors, including:

Education and training,
Experience,
Skills,
Responsibilities,
Performance, and
Tenure.

Determining whether pay inequities currently exist within your business requires a careful, honest assessment. Many companies conduct a formal pay equity audit. This is a thorough statistical analysis of compensation history, policies and structure. The audit’s objective is to identify any inconsistencies, gaps and incongruities that can’t be explained rationally.

Consider these policies

If you discover signs of pay inequity in your company, put in place policies to help eliminate them. For example, you might want to use only initials or random ID numbers during early screenings of job candidates, such as resumé reviews. This practice minimizes the chance that hiring managers will distinguish candidates by ethnicity, gender or other protected identities.

Also, during candidate interviews, refrain from asking about pay history. Many states and municipalities prohibit such questions, so ask your attorney what applies in your situation. (You might also want to take that opportunity to ensure you understand all antidiscrimination laws that affect hiring decisions.) But even if your state or local law doesn’t forbid past salary questions, it’s a well-established best practice to avoid them. Women and people of color are more likely to have been paid less in their previous positions. By using historical compensation to set their current salaries, you risk compounding pay disparities.

More ideas

Here are some other ideas that can help your organization achieve pay equity:

Set standard pay ranges. Generate objective criteria for recruiting, hiring, compensating, evaluating and promoting employees. Then set standard pay ranges that reflect each position’s value to the business.

Avoid individual decision-making. Limit managers’ ability to single-handedly adjust pay for specific employees. These decisions can lead to pay inequities and other problems, such as accusations of favoritism.

Provide training. To help managers and supervisors understand pay equity, conduct information sessions. Such training will help them recognize potential issues and discuss compensation with their reports.

Prioritize transparency. Let staffers know how you set compensation. Also, reassure them that they can discuss pay with their supervisors without fear of retaliation.

Fair work culture

The best talent is typically drawn to companies that prioritize employee well-being and cultivate a fair, transparent work culture. Pay equity can help communicate such principles to potential job candidates. Contact us if you’d like help analyzing compensation data or coordinating with legal counsel on a pay equity audit.

The deadlines for filing 2025 tax returns (or extensions) are fast approaching. Although most tax planning moves must be completed by December 31 of the tax year, there are some decisions you can make when filing your return that can save taxes now or in the future. One such decision is whether to claim accelerated depreciation breaks.

Depreciation basics

For assets with a useful life of more than one year, the cost generally must be depreciated over a period of years (unless accelerated depreciation breaks are available). In other words, taxpayers can deduct only a portion of the asset’s cost each year over the depreciation period.

The depreciation period depends on the type of asset, ranging from three years (such as for software and small tools) to 39 years (for commercial real estate). The Modified Accelerated Cost Recovery System (MACRS) provides larger deductions in the early years of an asset’s life than the straight-line method.

In many cases, assets can be depreciated much more quickly under special tax breaks. Some of these breaks were enhanced by last year’s One Big Beautiful Bill Act (OBBBA).

First-year bonus depreciation

Under the OBBBA, 100% first-year bonus depreciation can be claimed on 2025 tax returns for qualified assets that were acquired after January 19, 2025, and placed in service in 2025.

Eligible assets include:

Depreciable personal property, such as equipment, computer hardware and peripherals,
Transportation equipment, including certain passenger vehicles, and
Commercially available software.

First-year bonus depreciation can also be claimed for real estate qualified improvement property (QIP). QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the date the building was placed in service. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP and usually must be depreciated over 39 years.

The first-year bonus depreciation percentage is 40% for qualified assets acquired on or before January 19, 2025, and placed in service in 2025.

Bonus depreciation is automatically applied to eligible assets unless you elect out of it. However, you can elect out of it only on an asset class basis. For example, you can elect out of it for all three-year property, but you can’t elect out of it for just one specific three-year asset.

Section 179 expensing election

Sec. 179 expensing allows small businesses to write off the full cost of 2025 eligible assets. For tax years beginning in 2025, the maximum Sec. 179 deduction is $2.5 million (double the pre-OBBBA limit).

Eligible assets include:

Depreciable personal property, such as equipment, computer hardware and peripherals,
Transportation equipment, including certain passenger vehicles,
Commercially available software, and
Real estate QIP.

For nonresidential real property, Sec. 179 deductions are also allowed for qualified expenditures for:

Roofs,
HVAC equipment,
Fire protection and alarm systems, and
Security systems.

Finally, eligible assets include depreciable personal property used predominantly to furnish lodging, such as furniture and appliances in a property rented to transients.

In addition to the annual expense limit, Sec. 179 expensing is subject to a couple of other limits that don’t apply to bonus depreciation. First, the deduction is phased-out dollar for dollar if you put more than $4 million of qualifying assets into service last year. Second, Sec. 179 deductions can’t cause an overall business tax loss. The Sec. 179 deduction limits can be tricky if you own an interest in a pass-through business entity.

That said, claiming Sec. 179 expensing can be beneficial for assets not eligible for 100% bonus depreciation or if you want to immediately deduct the cost of some, but not all, assets in a particular asset class that is also eligible for bonus depreciation.

Depreciation deduction strategies

Claiming the maximum depreciation deductions you can on your 2025 income tax return will generally provide the greatest 2025 tax savings. Among other benefits, this can boost cash flow and provide more funds for further investment in the business.

But there are circumstances where it may be better to depreciate assets over a period of years. For example, the Section 199A qualified business income (QBI) deduction for pass-through businesses can be up to 20% of an owner’s QBI. Because of the income limitations on this deduction, claiming big first-year depreciation deductions can reduce QBI and lower or even eliminate your allowable QBI deduction.

Depreciating assets over a period of years can also be beneficial if you expect to be subject to higher tax rates in the future, such as if you may be in a higher tax bracket or lawmakers increase rates. When you claim 100% bonus depreciation or Sec. 179 expensing today, you’re eliminating your depreciation deductions for those assets in the future. And deductions save more tax when tax rates are higher.

Time to get started

We can identify which depreciation breaks you’re eligible for, review your overall tax situation and help determine whether it will be beneficial for you to maximize depreciation-related breaks on your 2025 tax return. We can also strategize with you on tax planning for 2026 asset investments. Please contact us to get started.

HR problems rarely announce themselves ahead of time. Instead, they show up as employee complaints, inconsistent decisions, documentation gaps, and situations that pull you away from patient care and daily operations.

In this 12-minute on-demand webinar, Amy Cell, President of Yeo & Yeo HR Advisory Solutions, breaks down the most common HR challenges medical practices face and what you can do now to prevent them from becoming ongoing distractions.

What You’ll Learn:

The HR issues that most often create recurring problems in medical practices
Where policies, documentation, and processes commonly fall short
Practical steps to reduce HR-related interruptions
Tips to help you address issues proactively instead of reacting later

Why Watch:
If HR issues tend to surface at the worst possible time—or linger longer than they should—this webinar will help you understand what’s driving them and how to reduce risk, protect your time, and keep your focus where it belongs: patient care.

Watch the Webinar

Get Practical Resources for Your Practice

Yeo & Yeo’s Smart Medical Practice Toolkit is your go-to resource for navigating the financial, operational, and regulatory complexities of practice management. This collection includes brief, high-impact webinars, downloadable tools, and practical guidance—all built around the real challenges physicians and practice managers face.

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